Oct 18 - Northern Trust Corporation (NTRS) reported third quarter 2012 (3Q'12) net income of $178.8 million, essentially unchanged from the sequential quarter. This equated to a 0.77% return on assets (ROA) and 9.59% return on equity (ROE), which were also both essentially unchanged from the sequential quarter. Fitch continues to view these results as satisfactory, but notes that they remain below NTRS' historical averages. In 3Q'12, NTRS' total revenue declined 2% from the sequential quarter, as lower foreign exchange trading income and lower net interest income was partially offset by higher other income which included some gains on foreign exchange contracts and higher leasing revenue. Asset servicing and investment fee revenue, NTRS largest revenue line item, was flat from the linked quarter. The line item did benefit from lower money market fee waivers on the quarter as well. Despite the challenging revenue environment for NTRS, the company continued to make progress on its expense initiatives, as total expenses were down 3% from the sequential quarter. This helped keep earnings flat on the quarter. NTRS realized some savings in its employee benefits area as well as its technology spend on equipment and software. Fitch would expect continued expense management over the next few quarters. Total assets under custody (AUC) increased to $4.7 trillion, up from $4.5 trillion in 2Q'12. This was due to a mix of some new business wins as well as higher markets. Similarly, total assets under management (AUM) increased to $749 billion, up from $704 billion in 2Q'12. Fitch would expect both AUC and AUM to increase over time, but at uneven rates given volatile markets and uncertain economic environment. NTRS non-performing asset (NPA) ratio modestly ticked up during the quarter due to the addition of some commercial real estate and residential real estate loans moving to non-performing status. Fitch would note, however, that NTRS credit quality still remains very good, with an overall NPA ratio of a low 0.98% at 3Q'12. NTRS' capital position remains solid. The company's Tier 1 common ratio at 3Q'12 was essentially unchanged from the sequential quarter at 12.3%. These flattish capital ratios were due to some dividends during the quarter as well as $49.6m of share buybacks. Additionally, NTRS estimates that its Tier 1 common ratio under Basel 3 proposals would have been 13.1% at 3Q'12. Additional information is available at www.fitchratings.com.