Northern Trust Sees 17% QoQ Decline in Foreign Exchange Trading Income in Q3 2022

Northern Trust, a leading financial services company, has released its third quarter 2022 financial results, showing a decrease of 17% in foreign exchange trading income on a QoQ basis.

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The net income per diluted common share for Q3 2022 was $1.80, down 3% comparing to $1.86 in the previous quarter and equal to $1.80 in Q3 2021. Net income reached $394.8 million during the period, compared to $396.2 million in the prior quarter and $395.7 million in the prior-year quarter.

Beginning in the first quarter of 2022, Trust, Investment and Other Servicing fees were impacted by the change in classification of certain fees that were previously recorded in Other Operating Income or as a reduction of Other Operating Expense but resulted in no impact to net income. The accounting reclassification increased Trust, Investment and Other Servicing fees in the third quarter of 2022 by $15.6 million, with a $6.2 million decrease in Other Operating Income and a $9.4 million increase in Other Operating Expense. Prior-year amounts have not been reclassified.

Net interest income on an FTE (Fully Taxable Equivalent) basis was $523.3 million, increasing 12% compared to $469.8 million in Q2 2022 and up 47% compared to $357.1 million in Q3 2021. The net interest margin on an FTE basis was 1.58%, 23 bps higher than 1.35% in last quarter and 60 bps higher than 0.98% in Q3 2021. However, the average earning assets down 6% from $139.902 billion in Q2 2022 to $132.147 billion in Q3 2022. The decline in the size of the average balance sheet was primarily the result of lower levels of client deposits.

Foreign exchange trading income was $64.7 million, 17% lower than $77.6 million in the previous quarter and 3% lower than the same period last year. This was primarily driven by lower client volumes and decreased foreign exchange swap activity in Treasury. Security commissions and trading income was $32.1 million, a sightly decrease of 2% comparing to $32.8 million in Q2 2022 and a decrease of 12% comparing to $36.5 million in Q3 2021. Other operating income increased 26% from $45.6 million to $ 57.3 million on a QoQ basis, but dropping 8% compared to $62.3 million in Q3 2021.

Michael O'Grady, Chairman and Chief Executive Officer at Northern Trust, said: "Northern Trust's third quarter results reflected consistent execution in the face of challenging macroeconomic and market conditions. Revenue grew 7% compared to last year, as the elimination of money market fee waivers and the favorable impact from higher interest rates more than offset market and currency-related declines in trust fees. Expenses increased 9% due to higher head count and continued inflationary cost pressures. We approach the end of the year on solid footing and remain focused on serving the needs of our clients and the communities of which we are a part, while generating value for our shareholders."