We are downgrading our recommendation on Northern Trust (NTRS) to Underperform from Neutral. The company’s fourth quarter earnings came in better than the Zacks Consensus Estimate, benefiting primarily from lower provisions.

The low interest rate environment is reducing the profitability of the company’s balance sheet as earning asset yields are contracting faster than its cost of funds. We expect its net interest income, securities lending revenue and money market fees to remain under pressure until interest rates rise.

Also, credit quality remains a concern. However, with a growing network of clients, the company is poised to benefit from changing demographic trends. Moreover, adequate financial strength positions it for suitable acquisitions.Zacks Investment Research