Image Source: Northern Trust
Man, the returns of the stock market as of late have been en Fuego!
It seems like even terrible stocks are getting some love from investors as of late.
The market action as of late got me thinking about asset managers. Asset managers are companies that, well, manage financial assets like stock and bond portfolios for wealthy individuals and businesses. The goal of an asset manager is to grow and preserve the wealth of the funds entrusted to them. The better an asset manager does with increasing resources to create wealth, the higher the likelihood the asset manager will make money from doing so.
The idea above brings me to Northern Trust NASDAQ: NTRS. Northern Trust has been in the business of banking and asset management for over 125 years. Northern Trust is a successful financial services firm because of the importance of values such as service, expertise, and integrity.
The latest quarterly results should give support to how good Northern Trust is at managing assets.
The last report on Northern Trust's quarterly earnings per share came in at $1.18, which was $.05 shy of analyst estimates. Their trailing-twelve-month earnings per share growth came in at just over 7%.
The problem with their growth in earnings has been on the expense side of the ledger. Northern Trust recently had some costs associated with leasing assets they had to write down, as well as expenses related to legal issues due to some stock lending activities they performed. These and other charges have slowed their quarterly earnings a bit.
Northern Trust, however, continues to grow their income and fees from investing activities. According to their latest earnings release, the company raised their investment and servicing fees last quarter by 9% while their interest income increased by 14%. This growth is due in no small part to the rise of both the stock and bond markets earlier this year.
Northern Trust also grew their assets under management by 15% from the same period last year. The growth in assets is due again to the investment strategies the company employs in growing wealth for their corporate and individual clients.
Investing in an asset manager like Northern Trust, however, does have a few risks, though.
For starters, when market-driven events push stock and bond prices down, this could impact the fees and income Northern Trust earns from their investments.
Also, if key personnel leave the firm, the departure of top performing talent can impact the company's bottom line.
The company, however, is well capitalized to weather any storm in the stock or bond markets. The company's provision for credit losses declined in the latest quarter as the credit quality of its commercial loans improved. Northern Trust's Tier 1 capital ratios also grew from 11.6% in June of 2016 to 13.3% in the same quarter this year.
All in all, Northern Trust is a company to watch over the next few weeks as they get set to release their next quarterly earnings report on October 18th. Hopefully, the company will deliver a pleasant surprise to the upside for investors in the stock. For more information about the stock as an investor, click here.
Thanks for reading @ellofinance today. Your time spent here is always appreciated.
P.S. - I hold no position in Northern Trust stock. I do not work for Northern Trust nor do any members of my family. The note above is solely the opinion of the author and note that my opinion on Northern Trust could be wrong. So please, do your due diligence on the stock and ask a registered investment advisor for help in understanding the company's fundamentals and future outlook. Thank you!