(Bloomberg) -- Northern Trust Corp., the third- biggest independent U.S. custody bank, said second-quarter profit rose a smaller-than-expected 6.2 percent as stock-market gains boosted the value of assets the company oversees.
Net income increased to $187.9 million, or 78 cents a share, from $176.9 million, or 73 cents, a year earlier, the Chicago-based company said today in a statement. Results missed the 83-cent average estimate of 15 analysts surveyed by Bloomberg.
With the continued movement in the markets, coupled with customer growth, I expect them to see a nice uptick in revenue, Marty Mosby, an analyst at Guggenheim Securities LLC in Memphis, Tennessee, said in an interview before results were released.
Custody banks, under pressure to improve profitability hurt by record-low interest rates, are benefiting as global equity markets climb for the second straight year. Northern Trust, led by Chairman and Chief Executive Officer Frederick H. Waddell, followed larger rivals Bank of New York Mellon Corp. and State Street Corp. with job cuts in 2012 that, combined with technology initiatives, are designed to lift annual pretax income by $250 million by the end of this year.
The Standard & Poors 500 Index of U.S. stocks rose 18 percent in the 12 months ended June 30, and global stocks, as measured by the MSCI ACWI Index, advanced 14 percent.
Low interest rates hurt custody banks by reducing the returns they make on lending and on their own investments. The U.S. Federal Reserve has held its benchmark interest rate at zero to 0.25 percent since December 2008 in an attempt to stimulate borrowing and economic growth.
Custody banks keep records, track performance and lend securities for institutional investors, including mutual funds, pension funds and hedge funds. Northern Trust also manages investments for individuals and institutions.
Results were announced before the start of regular U.S. trading. Northern Trust gained 21 percent this year through yesterday, compared with a 27 percent advance by the Standard & Poors 20-company index of asset managers and custody banks.