Northern Trust Corp. will announce a cost savings program next week that one analyst projects will trim $175 million, or 6%, from the annual expenses of Chicago's largest locally based bank.
Northern Trust, which like other large asset-custody and trust banks is posting declining earnings due to ultra-low interest rates, has told investors to expect a substantial cost-cutting program when it announces fourth-quarter earnings Jan. 18.
Its primary competitors, Boston-based State Street Corp. and New York-based Bank of New York Mellon Corp., already have unveiled reductions, including significant layoffs. This will be Northern's first major cost-cutting effort since the credit crisis and recession bit into profits.
Analysts expect layoffs to be part of the initiative. Northern's executives have given few clues as to the makeup of the reductions.
“While ($175 million) is a smaller number relative to peers, (Northern) also has a much smaller expense base compared to both (State Street and Bank of New York Mellon), and we think may also have fewer opportunities to realize cost savings from combining or eliminating redundant systems acquired in acquisitions,” Robert Lee, analyst with Keefe Bruyette & Woods Inc. in New York, wrote in a Jan. 9 note.
Mr. Lee wrote that he met with Northern Trust executives in early December to discuss the bank's performance and outlook. He estimated that Northern's non-interest expenses totaled $2.78 billion in 2011. A $175-million cost-cutting initiative would be 6% of that figure.
A Northern Trust spokesman declined to comment.
The bank employs about 14,000 worldwide, and 6,660 of those workers are in Illinois, the company said. Job cuts are relatively rare at Northern Trust. The last time the bank cut deeply into its workforce was 2003, when it laid off 700 people, 7% of its headcount at the time.
Steve Daniels is a writer for Crain's Chicago Business, a sister publication of Pensions & Investments