Northern Trust Corporation (NASDAQ:NTRS) Q2 2016 Earnings Conference Call - Final Transcript

Jul 20, 2016 • 12:00 pm ET


Northern Trust Corporation (NASDAQ:NTRS) Q2 2016 Earnings Conference Call - Final Transcript


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Good day everyone and welcome to the Northern Trust Corporation Second Quarter 2016 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Director of IR, Mark Bette for opening remarks and introductions. Please go ahead, sir.

Mark Bette

Thank you, Derek. Good morning everyone and welcome to Northern Trust Corporation's second quarter 2016 earnings conference call. Joining me on our call this morning are Biff Bowman, our CFO; Jane Karpinski, our Controller; and Kelly Mullen from our IR team. For those of you who did not receive our second quarter earnings press release and financial trends report via e-mail this morning, they are both available on our website at

Also on our website you will find our quarterly earnings review presentation, which we will use as a guide for today's conference call. This July 20th call is being webcast live on The only authorized rebroadcast of this call is the replay that will be available on our website through August 17th. Northern Trust disclaims any continuing accuracy of the information provided in this call after today.

(Forward-Looking Cautionary Statements) During today's question-and-answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits.

Thank you again for joining us today. Let me turn the call over to Biff Bowman.

Biff Bowman

Good morning, everyone. Let me join Mark in welcoming you to the Northern Trust's second quarter 2016 earnings conference call. Starting on page 2 of our quarterly earnings review presentation, this morning we reported second quarter net income of $261 million. Earnings per share were $1.09 and our return on common equity was 12.2%. As outlined in our press release, our results for the second quarter included five items which I would to like to highlight for you today.

First, we recorded a pretax gain of $118.2 million on the sale of 1.1 million Class B Visa shares, net of swap expense. This gain is reflected on our income statement in the other operating income line. The sale reduces our ownership position in Visa Class B shares to 4.13 million shares as of the end of the second quarter.

At the current conversion rate, that is the equivalent of two 6.81 million Class A shares of Visa. These shares are recorded on our balance sheet at their original cost basis of zero. The $118.2 million net gain included $5 million in costs relating to the mark-to-market of the swap on last year's sale of 1 million Class B shares.

Second, we recorded a $46.5 million charge in connection with an agreement, subject to court approval, to certain long-standing securities lending litigation. This charge is reflected within the other operating expense line of our income statement. The charge covers settlements in cases related to client losses from the 2008 financial crisis. With this agreement, we are pleased