What happened

Shares of the large custodian bank Northern Trust (NTRS -0.50%) had fallen roughly 9.5% as of 12:53 p.m. ET today after the company reported earnings results for the third quarter of the year this morning.

So what

Northern Trust reported diluted earnings per common share of $1.80 on total revenue of roughly $1.77 billion. Earnings missed analyst estimates for the quarter, while revenue came in line with estimates.

"Northern Trust's third-quarter results reflected consistent execution in the face of challenging macroeconomic and market conditions," CEO Michael O'Grady said in an earnings statement. "Revenue grew 7% compared to last year, as the elimination of money market fee waivers and the favorable impact from higher interest rates more than offset market and currency-related declines in trust fees."

While revenue is up 7% year over year, expenses are up 9%, as the bank has hired more employees and dealt with other inflationary pressures. Furthermore, total assets under custody/administration in the quarter were roughly $12.8 trillion, which is down 19% year over year and 7% from the previous quarter.

This hurt Northern Trust's largest revenue source, which is trust, investment, and other servicing fees. Fees from this business came in at the lowest level seen in five quarters.

Now what

Investors were likely upset with the rising expenses in the quarter, as well as the drop-off in fees. Still, custodian banks are typically less risky than other kinds of banks, and Northern Trust is now trading much lower than pre-pandemic levels, so I think the stock still presents a good long-term opportunity.