Northern Trust Corporation (NTRS): Why This Company Is The Clear Choice In Asset Management

Alternative: Ameriprise Financial

Ameriprise Financial, Inc. (NYSE:AMP) manages just over $700 billion in assets and offers such products as mutual funds, life insurance policies, and annuities. The company operates through five segments, the largest of which are the Advice and Wealth Management segment and the Asset Management segment, which combine for over half of the company’s revenues, and provide full service brokerage and banking services to clients.

Ameriprise Financial, Inc. (NYSE:AMP) looks much cheaper at just 12.2 times this year’s expected earnings, but this can be deceiving. There is significant added risk and less projected growth than there is with Northern Trust. Unlike Northern Trust Corporation (NASDAQ:NTRS), which has some of the most consistent earnings history in the entire market, Ameriprise Financial, Inc. (NYSE:AMP)’s profitability has been very reactive to the health of the economy, and the company actually lost money in 2008.

Should we go bigger? Bank of America’s U.S. Trust

United States Trust Company, known as U.S. Trust, is the oldest trust company in the country and provides personal wealth management to some of the wealthiest individuals and families. Since 2007, U.S. Trust is part of Bank of America Corp (NYSE:BAC), which is a much more volatile company than either of the others listed here. As a result of exposure to bad mortgages, Bank of America was hit very hard by the financial crisis and their shareholders were diluted significantly as a result of government bailouts. The company is just barely turning a profit, but is expected to grow its earnings significantly as a result of the improving economy. If the projections are correct, Bank of America Corp (NYSE:BAC) is trading at just 9.8 times next year’s earnings (2014), but this is far from certain.

Conclusions

While Bank of America Corp (NYSE:BAC) may indeed provide the greatest growth potential of the group, it is still far too speculative (and recession-prone) to be considered as a core long-term investment. Of the other two, the defensive nature of Northern Trust Corporation (NASDAQ:NTRS) combined with their ability to grow nicely in good times as well as bad make them the clear choice.

The article Why This Company Is The Clear Choice In Asset Management originally appeared on Fool.com and is written by Matthew Frankel.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America Corp (NYSE:BAC). Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.