We have downgraded the recommendation for Northern Trust Corporation (NTRS) to Underperform from Neutral given uncertain prospects related to changes within the financial services industry and regulatory environment.
Low interest rates continue to restrain earnings, impacting net interest income and securities lending fees. Moreover, the recent Dodd-Frank Act will ring in numerous regulatory changes over the next several years.
Our six-month target price of $44.00 per share equates to about 15.2x our estimate for 2010. Combined with the $1.12 per share annual dividend, this target price implies an expected negative return of 8.0% over that period.