Northern Trust Joining Trust Bank Layoffs? (NTRS, BK, STT)

Northern Trust Corporation (NASDAQ: NTRS) is supposed to be one of the premier trust bank operations that caters to the wealthy and to pension funds.  The current economy and low rate environment appears to be forcing the outfit to join in our Layoff Kings. We have already seen some previous layoffs out of competitors like Bank of New York Mellon Corporation (NYSE: BK) with 1,500 most recently and from State Street Corporation (NYSE: STT).  The difference is that many investors, and clients and market watchers, have believed that Northern Trust was more immune to these job cut pressures.  Apparently that isn’t so.

Crain’s Chicago Business is highlighting a CEO presentation yesterday at the Barclays Capital Global Financial Services Conference investor conference, and the publication also made the reminder that Northern closed three branches in Chicago and cut some jobs in Europe earlier this year.  The CEO discussed how the bank expected a better economy and higher interest rates, but admitted that now the outlook for rates remains low for two more years.  Rick Waddell, CEO of Northern Trust, said that the bank will be releasing details of its cost cutting measures early in 2012.  When banks of any sort announce cost cuts, this almost always includes a headcount reduction even though the CEO said that this was a combination of revenue AND expense initiatives.

The return on equity in the banking sector has been under pressure due to such low net interest margins and other metrics, but if the rates are going to remain low like for two more years then what hope is there?

Where these cuts will come is anyone’s guess as the bank is into investment management, asset and fund administration, banking solutions and fiduciary services. As of June 30, 2011, its banking assets were listed as $97 billion, assets under custody were $4.4 trillion, and assets under investment management were $684.1 billion.  Northern Trust is based in Chicago, but it has offices in 18 states and 16 international locations in North America, Europe, the Middle East and the Asia-Pacific region.

Northern Trust Corporation (NASDAQ: NTRS) has had a rough 2011.  At $35.75, its 52-week trading range is $34.68 to $56.86 and its market capitalization is now back down to $8.6 billion.  The drop in the stock price has also given this an accidentally high yield of 3.1%, and it should be noted that the current $0.28 quarterly dividend rate has been the same dividend since December 2007.

Here is the saddest thing of all… Look at the 5-year chart.  Northern Trust is currently trading in line with its prices during the late-2008 market panic and under the early-2009 market panic levels.

JON C. OGG