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In contrast to a recent move by Bank of New York Mellon Corp., Northern Trust Corp. will not charge its institutional clients a fee for increasing their balances on deposit accounts.
September 13
Northern Trust Corp. is expected to unveil a major cost-cutting initiative next week and one analyst is predicting that the Chicago custody bank will aim to slash its annual expenses by $175 million.
With persistently low interest rates starting to eat into profits, Northern Trust and other custody banks have been telling investors that significant expense cuts are coming. State Street Corp. announced over the summer that it was laying 850 staffers and Bank of New York Mellon Corp. has said it intends to trim overhead by $700 million over the next four years.
Northern Trust has said that it would provide details of its cost-cutting plan when it announces earnings Jan. 18. In a research note published Monday and cited in several news reports, Keefe, Bruyette & Woods Inc. analyst Robert Lee said that he came away from a recent meeting with Northern Trust's leadership expecting the bank to cut its noninterest expense by 6%. Lee estimates that its noninterest expense in 2011 was $2.78 billion.
Northern Trust officials have been mum on where the cuts would come from, though most observers expect layoffs to be part of the equation.
In the third quarter, Northern Trust reported a profit of $170.4 million, an increase of nearly 10% from the same period in 2010, thanks largely to increased fee income and lower funding costs. But the company also said that its noninterest expense rose 13% year over year and that employee compensation accounted for a large chunk of the increase.
