Northern Trust (NASDAQ:NTRS) and Truist Financial (NYSE:TFC) Critical Analysis

Northern Trust (NASDAQ:NTRS) and Truist Financial (NYSE:TFC) are both large-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, profitability, earnings, risk, institutional ownership and analyst recommendations.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Northern Trust and Truist Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northern Trust	3	7	2	0	1.92
Truist Financial	0	6	12	2	2.80

Northern Trust presently has a consensus price target of $114.50, suggesting a potential downside of 8.83%. Truist Financial has a consensus price target of $48.72, suggesting a potential upside of 9.01%. Given Truist Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Truist Financial is more favorable than Northern Trust.

Dividends

Northern Trust pays an annual dividend of $3.00 per share and has a dividend yield of 2.4%. Truist Financial pays an annual dividend of $2.08 per share and has a dividend yield of 4.7%. Northern Trust pays out 28.0% of its earnings in the form of a dividend. Truist Financial pays out 56.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Earnings & Valuation

This table compares Northern Trust and Truist Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northern Trust	$16.06 billion	1.52	$2.03 billion	$10.72	11.72
Truist Financial	$24.25 billion	2.41	$4.82 billion	$3.67	12.18

Truist Financial has higher revenue and earnings than Northern Trust. Northern Trust is trading at a lower price-to-earnings ratio than Truist Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Northern Trust and Truist Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northern Trust	13.93%	13.73%	1.03%
Truist Financial	16.82%	8.69%	0.95%

Volatility and Risk

Northern Trust has a beta of 1.26, suggesting that its stock price is 26% more volatile than the S&P 500. Comparatively, Truist Financial has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500.

Institutional and Insider Ownership

83.2% of Northern Trust shares are held by institutional investors. Comparatively, 71.3% of Truist Financial shares are held by institutional investors. 0.8% of Northern Trust shares are held by insiders. Comparatively, 0.1% of Truist Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Truist Financial beats Northern Trust on 9 of the 17 factors compared between the two stocks.

About Northern Trust

Northern Trust Corporation, a financial holding company, provides wealth management, asset servicing, asset management, and banking solutions for corporations, institutions, families, and individuals worldwide. It operates in two segments, Asset Servicing and Wealth Management. The Asset Servicing segment offers asset servicing and related services, including custody, fund administration, investment operations outsourcing, investment management, investment risk and analytical services, employee benefit services, securities lending, foreign exchange, treasury management, brokerage services, transition management services, banking, and cash management services. This segment serves corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors. The Wealth Management segment offers trust, investment management, custody, and philanthropic; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking services. This segment serves high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately held businesses. The company also provides asset management services, such as active and passive equity; active and passive fixed income; cash management; muti-asset and alternative asset classes comprising private equity and hedge funds of funds; and multi-manager advisory services and products through separately managed accounts, bank common and collective funds, registered investment companies, exchange traded funds, non-U.S. collective investment funds, and unregistered private investment funds. In addition, it offers overlay and other risk management services. Northern Trust Corporation was founded in 1889 and is headquartered in Chicago, Illinois.

About Truist Financial

Truist Financial Corporation, a financial services company, provides banking and trust services in the Southeastern and Mid-Atlantic United States. The company operates through three segments: Consumer Banking and Wealth, Corporate and Commercial Banking, and Insurance Holdings.Its deposit products include noninterest-bearing checking, interest-bearing checking, savings, and money market deposit accounts, as well as certificates of deposit and individual retirement accounts. The company also provides funding; asset management; automobile lending; credit card lending; consumer finance; home equity and mortgage lending; other direct retail lending; insurance; investment brokerage; mobile/online banking; payment solutions; point-of-sale lending; retail and small business deposit products; small business lending; and wealth management/private banking services. In addition, it offers asset based lending, investment banking and capital market, institutional trust, insurance premium finance, derivatives, commercial lending, international banking, leasing, merchant, commercial deposit and treasury, floor plan, mortgage warehouse lending, real estate lending, and supply chain financing services. Further, the company provides insurance brokerage, retail and wholesale brokerage, securities underwriting and market making, loan syndication, and investment management and advisory services. The company was formerly known as BB&T Corporation and changed its name to Truist Financial Corporation in December 2019. Truist Financial Corporation was founded in 1872 and is headquartered in Charlotte, North Carolina.