J.P. Morgan Neutral On Northern Trust

J.P. Morgan Chase & Co. is out with a research report on Northern Trust NTRS and it has a Neutral rating and a $51.50 price target on shares. In a note to clients, J.P. Morgan Chase & Co. writes, "NTRS finally turned in an improved 2Q operating EPS of $0.70 (ex $0.08 merger and integration costs), above our estimate of $0.67 and consensus of $0.69, after four consecutive quarters of EPS misses, with upside primarily from lower than expected credit provisioning. 2Q was marked by very strong growth qoq in custody and fund administration fees, well above peers. However, total AUC grew modestly by 1.4% qoq after strong recent growth, with slow growth in both C&IS and PFS AUC despite new business wins. Total AUM growth was better, up 4.6%, ex securities lending collateral. In contrast, FX trading was below peer trends, down from weak 1Q levels. PFS fees were moderate, partly hurt by money market fee waivers. NTRS also recorded roughly $17m in OTTI charges, but partly offset by higher miscellaneous income. Credit quality continues to improve, but reserve releases likely to slow. Similar to peers, expenses remained elevated with very high efficiency ratio, but NTRS is in the beginning stages of an expense rationalization initiative, with details expected during 2H11. GIIPS exposure is manageable, with no direct exposure to all but Spain." Shares of NTRS gained 55 cents yesterday to close at $44.19, a gain of 1.26%.