Northern Trust Reports a Lackluster Third Quarter

Northern Trust reported a mediocre third quarter. Northern Trust reported revenue of $1.77 billion and EPS of $1.80 which compares with the FactSet consensus of $1.77 billion and $1.84, respectively. Despite the benefit of higher rates, expense growth of 9% and market-related revenue headwinds meant that the firm saw its pre-tax margin decline to 30.4% from 31.0%. We will maintain our wide moat rating but expect to reduce our $108 fair value estimate on Northern Trust's shares by 5% to 15%. While we regard the firm's shares as undervalued, we believe peers State Street and BNY Mellon have a more compelling valuation.