Northern Trust's Organic Growth on Track - Analyst Blog

On Mar 10, 2014, we issued an updated research report on one of the major regional banks – Northern Trust Corporation NTRS. Though the company recently reported disappointing fourth-quarter 2013 results, we remain encouraged owing to its sound asset quality and strong capital position.

Due to higher operating expenses, Northern Trust's fourth-quarter 2013 adjusted earnings per share of 75 cents missed the Zacks Consensus Estimate by a penny. However, the quarter witnessed top-line growth and improved asset management and servicing fees.

Northern Trust's consistent efforts toward successfully executing its organic growth strategy are commendable. Revenues grew at a CAGR of 2.9% over the last four years (2010–2013).

Further, the company's focus on new business looks promising. Northern Trust undertook several measures that led to about $270 million in pre-tax profit improvements in 2013, surpassing the target of $250 million. The company is continuing these measures in 2014, which are expected to prove more accretive to the company's earnings in the near term.

However, we remain cautious owing to mounting non-interest expenses, declining net interest margin due to the low interest rate environment, volatile market conditions and the stringent regulatory landscape that may pose threats to the company's financials in the near term.

Over the past 60 days, the Zacks Consensus Estimate advanced 0.3% for 2014 and 2015 to $3.44 per share and $3.86 per share, respectively.

Northern Trust currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Stocks in the finance sector worth considering include The PNC Financial Services Group, Inc. PNC, Fifth Third Bancorp FITB and JMP Group Inc. JMP. All of these have a Zacks Rank #2 (Buy).