Northern Trust Q3 Clouded By $43M Processing Error

Northern Trust (NASDAQ:NTRS) Q3 net income of $294.5M includes a pretax charge of $43.4M related to a corporate action processing error.

Q3 GAAP EPS of $1.32 misses the average analyst estimate of $1.38; compares with $1.46 in Q2 and $1.69 in Q3 2019.

The pretax charge, though, translates to ~16 cent reduction to EPS; excluding the charge, NTRS Q3 EPS would be $1.48, according to Jefferies analyst Ken Usdin.

NTRS rises 2.3% in early trading.

And while the EPS excluding charge comes in better than the consensus, the processing error “could raise questions regarding controls/need for additional investments/spending,” writes Wolfe Research analyst Steven Chubak in a note to clients.

Q3 net interest income (fully taxable equivalent) of $336.5M exceeds $324M consensus; still, FTE NII declined 11% Q/Q and 21% Y/Y; net interest margin (“FTE”) contracts to 1.03% compares from 1.22% in Q2 and 1.61% in Q3 2019.

The bank’s $0.5M provision for credit losses also came in much lower than the $20M consensus; compares with $66.0M in Q2 and a $7.0M benefit in Q3 2019.