Northern Trust Corporation’s (NTRS) first quarter earnings of $0.64 per share were below the Zacks Consensus Estimate attributed to lower net interest income and higher non-interest expenses. Low interest rates, which appear poised to stay for much of 2010, continue to restrain earnings, impacting net interest income, securities lending and mutual fund fees.
Credit quality also continues to remain a concern. The company continues to suffer from weakness in the broader economic environment. Credit metrics such as non-accrual loans, nonperforming assets and net charge-offs have increased over the prior-year levels.
Our six-month target price of $45.00 per share equates to about 15.3X our estimate for 2010. Combined with the $1.12 per share annual dividend, this target price implies an expected negative return of 7.7% over that period. This is consistent with our Underperform recommendation on the shares.Zacks Investment Research
