Northern Trust Corporation (NTRS) is actively seeking opportunities to expand its geographic reach and portfolio through acquisitions. Management of the company said at its recent investor conference that the company is looking for strategic opportunities to develop the company’s business on both U.S. coasts.
The company also believes that it has sufficient capital to support such endeavors, considering the disruption in the financial market to have created ample opportunities for acquisitions. However, the company did not mention eyeing any particular company.
Northern Trust’s first quarter earnings came in at 64 cents per share, ahead of the prior-year quarter’s earnings of 61 cents, primarily due to a decrease in loan loss provisions.
After falling for four straight quarters, Northern Trust’s assets under management (AUM) have shown an increase since the second quarter of 2009. The same trend was seen during the 2010 first quarter, with AUM experiencing an increase of 3% sequentially and 24% year over year to $647.2 million. A modest increase in overall equity values led to the growth. Assets under custody increased 2% sequentially and 31% annually to $3.7 billion.
Northern Trust’s risk-based capital ratios remained strong at the end of the last reported quarter, with Tier 1 capital ratio of 13.4%, total risk-based capital ratio of 15.5%, and leverage ratio of 8.9%, each exceeding the regulatory requirements of 6%, 10%, and 5%, respectively, for classification as a well-capitalized institution. The ratio of Tier 1 common equity to risk-weighted assets, a non-GAAP financial measure, was 12.8%, up from 9.6% in the prior-year period.
While low interest rates, which appear set to stay for much of 2010, continue to loom over the earnings of Northern Trust, restricting net interest income, securities lending and money market mutual-fund fees, we expect increased asset management and servicing fees amid improved equity markets and higher volumes. Moreover, we believe that adequate financial strength positions it for suitable acquisitions.
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