Messy Quarter and Elevated Expenses for Northern Trust

Northern Trust reported a mixed end to 2022. Revenue of $1.53 billion for the fourth quarter missed the FactSet consensus estimate of $1.75 billion, although revenue would have been in line excluding a $0.21 billion loss on available-for-sale securities. As interest rates rose, we saw similar securities repositioning at peer BNY Mellon. Excluding charges, earnings per share would have been $1.65, below the FactSet consensus estimate of $1.81. Expenses were $1.32 billion, up 13%. Even excluding some elevated severance and occupancy charges, expenses were still up 9% by our calculations. As we temper our operating income forecasts, we expect to lower our fair value estimate for wide-moat Northern Trust by 5%-15%.