UPDATE 2-Northern Trust profit, revenue down but beat view

* EPS 82 cents vs Street view 74 cents

* Servicing fees, foreign exchange income up from Q1

* Shares down 1 pct (Recasts, adds analyst, investor and CEO comment, details on sequential gains, fee increases, details on competitors)

BOSTON, July 21 (Reuters) - Northern Trust Corp (NTRS.O) posted higher-than-expected second-quarter profit as servicing fees and foreign exchange income increased from the first quarter.

Chicago-based Northern Trust, whose services include asset management and record-keeping, reported a profit of $199.6 million, or 82 cents per share, down from $314.2 million, or 95 cents, a year earlier.

Analysts' average forecast was a profit of 74 cents per share, according to Thomson Reuters I/B/E/S.

The year-earlier results were boosted by several one-time items that increased earnings by $85.7 million.

Second-quarter revenue fell to $974 million from $1.05 billion a year earlier but was up from the first quarter's $907.6 million.

Improvements from the first quarter included higher servicing fees and foreign exchange income, lower noninterest expense, and a decline in fee waivers on money market funds.

"The quarter was generally positive," said Jefferies & Co analyst Dan Fannon, though he is keeping his "hold" rating on the shares.

In a statement, Northern Trust Chief Executive Frederick Waddell said the company's profit in the quarter came "despite the low interest rate environment and prolonged economic recovery."

He said Northern Trust is among the strongest U.S. banks, with a Tier 1 Capital ratio of 13.7 percent.

Gerard Cassidy, bank analyst for RBC Capital Markets in Portland, Maine, said he worries that the bank's nonperforming assets rose slightly from the first quarter, compared with declines at other banks.

But he said of Northern Trust as a whole, "Their basic core business was strong."

Northern Trust shares were down 1 percent at $48.80 in morning trade. Through Tuesday, the shares had fallen 7 percent this year, compared with a drop of 14 percent in the Dow Jones U.S. Asset Manager index.

The shares have been insulated partly by the company's custody business, which competes with State Street Corp (STT.N) and Bank of New York Mellon Corp (BK.N). Both rivals reported higher earnings on Tuesday as rising stock prices improved profits.

Chris Lowe, a portfolio manager for Portland Investment Council in Ontario, who owns about 100,000 shares of Northern Trust and stock worth a similar amount in State Street and BNY Mellon, said he is keeping his allocation similar among the group. All three seem to be gaining business compared to the first quarter and have survived the worst of the low-interest environment, he said. (Reporting by Ross Kerber, editing by Gerald E. McCormick and John Wallace)