Northern Trusts revenue from custody and fund administration rose 29% in the third quarter this year to $205.6 million from $159.2 million the same quarter last year.
Total revenues were up on the quarter as well, with an 8% increase of $15.7 million on last quarters $189.9 million. However, a drop in investment management securities lending fees for the quarter meant the firms C&IS division revenue remained flat since the second quarter.
The firm attributes the rise in custody and fund administration fees to new business won as well as assets under custody (AuC) and administration (AuA) added from recent acquisitions. Northern Trust acquired fund administrator Omnium from Citadel as well as Bank of Ireland Securities Services earlier this year.
Total assets under custody for the Corporate & Institutional Services (C&IS) division totaled $3.8 trillion, up 7% from the prior year quarter. That figure includes Northern Trusts $2.3 trillion of global custody assets, which is 10% higher compared to the prior year quarter.
The 63% drop in securities lending revenue between the third quarter of 2010 ($56.4 million) and the third quarter of 2011 ($20.7 million) resulted from the recovery of previously recorded unrealized asset valuation losses of approximately $39 million in a mark-to-market investment fund used in securities lending activities, Northern Trust said in a statement. As of Sept. 30, 2010, securities in the mark-to-market fund had been sold with the proceeds reinvested into a short duration fund, eliminating the mark to-market impact on securities lending revenue in periods subsequent to the date of sale.
Foreign exchange income was up by 8% on the quarter to $87.2 million, compared to $80.8 million in the second quarter this year, but down slightly from $88.9 million in the third quarter of 2010.
Across the company, return on average common equity was 9.5% in the third quarter this year, compared to 9.2% in the third quarter of 2010 and 8.8% in the second quarter of 2011. Net income was $170.4 million in the current quarter, compared with $155.6 million in the third quarter of 2010 and $152.0 million in the second quarter of 2011.
Our third-quarter results reflect strong earnings growth despite the persistent challenges of a difficult global economic environment, says Frederick H. Waddell, chairman and CEO of Northern Trust. New business, across the company, was excellent as was our continued focus on the balance between revenue and expense growth. Our balance sheet strength continued to position Northern Trust distinctively with our clients amidst a challenging environment.
State Street, which also released its third-quarter financial results this week, said asset servicing fees rose 10% year-on-year to the third quarter this year.
(CG)