Northern Trust reported net income of $203 million ($0.84 per diluted share) for the third quarter, which included a $32.6 million gain on the sale of an office building. Excluding this, earnings per share would have been $0.76 per share, down 3% sequentially but up 4% quarter over quarter.

Underlying return on equity was 9.6%, just south of the bank’s 10% cost of equity. Like Bank of New York Mellon, Northern Trust continues to struggle with flat or declining revenues despite good growth in client assets. In large part, this is due to the low interest rate environment–net interest margin was just 1.14% compared with 1.21% a year ago–and money market fee waivers hit $32.4 million (compared with $22.7 million in the trailing quarter).

It is also due to client risk aversion; excluding the one-time gain, noninterest revenue was down 3% sequentially, led by a fall in foreign exchange trading. Northern is reporting good progress on its Driving Performance initiative, claiming $190 million in year-to-date benefits, but lower revenues mean that they are failing to show up in the bottom line.

Still, we think the bank is well positioned to take advantage of a stronger environment, and we plan to maintain our fair value estimate and moat rating.