Northern Trust reports sharp increase in securities lending revenues

Northern Trust recorded USD82 million of securities lending revenues during the third quarter of 2009, a sharp increase from the negative USD4.6 million recorded during the same period of 2008.

The increase was mainly caused by a positive mark-to-market adjustment of around USD 57 million, part of previously unrealised asset valuation losses in an investment fund used in the firm’s securities lending business, along with a negative mark-to-market adjustment of around USD 96 million in the third quarter of 2008.

As a result, the firm saw lending fees overall decrease by roughly USD66 million compared to the previous year as a result of “significantly reduced” volumes and lower spreads on cash collateral reinvestment.

The figures from Northern Trust suggest that the reinvestment issues of the past year may be abating.

During the quarter, Northern Trust had USD110.7 billion of securities lending collateral, down 39% on the previous year.

Northern Trust recorded total net income of USD187.9 million over the quarter, far superior to the USD148.3 million net loss recorded in the third quarter of 2008.

Frederick H Waddell, president and chief executive officer, commented: "Although equity markets improved compared with the second quarter, they remain well below year-ago levels and interest rates have fallen dramatically year-over-year.

“Amidst these crosscurrents, we experienced strong growth in client assets, with assets under custody increasing 11% and assets under management increasing 9% in the quarter.”