AMG, Northern shares dip on weak earnings, mkt drop

* AMG shrs fall 8.4 pct on profit tumble, outlook worries

* AMG may cut full year cash EPS estimate, analyst says

* Northern Trust loss worse than expected, shares drop

(Wraps up AMG, Northern Trust with stock price, analyst comments)

BOSTON (Reuters) - Top money managers Affiliated Managers Group Inc (AMG) (AMG.N) and Northern Trust Corp (NTRS.O) reported that quarterly results were hit hard by the credit crisis, sending their shares sharply lower.

AMG reported a 42 percent drop in third-quarter profit and one analyst said he expected the U.S. holding company for money managers to slash its full-year earnings estimates.

Although the results beat expectations, AMG's shares sank 8.4 percent to $45.87 by mid-morning in a weak overall market as investors fretted about its sober outlook and fund outflows.

Shares in Northern Trust lost 5.6 percent after the U.S. custody bank and asset manager reported a larger-than-expected quarterly loss as it spent millions to support ailing portfolios, including money-market funds.

Michael Kim, an analyst at Sandler O'Neill and Partners, said he expected AMG, which owns stakes in value equities firm Third Avenue Management, hedge fund AQR Capital Management and 26 others, to cut the range of its 2008 forecast for cash earnings per share at a conference call later on Wednesday.

In July, the company forecast 2008 cash earnings of $6.40 to $7.00 per share.

"I suspect that they are going to take their prior guidance range down pretty significantly," he said.

The weak results at AMG and Northern Trust come after BlackRock Inc (BLK.N), the biggest publicly traded U.S. asset manager, reported a 14.7 percent drop in third-quarter profit on Tuesday due to slumping markets and the credit crisis.

AMG's third-quarter net income fell to $24.8 million, or 69 cents a share, from $42.6 million, or $1.07 a share, in the year-earlier quarter.

Cash earnings per share, a measure used by analysts and preferred by the company, fell to $1.31 from $1.56 in the year-ago quarter. Analysts on average were expecting $1.24.

Cash earnings are made up of net income plus amortization and deferred taxes related to intangible assets, plus affiliate depreciation, according to AMG.

Northern Trust posted a net loss of $129.4 million, or 58 cents a share, compared with net income of $208.3 million, or 93 cents a share, a year earlier. Analysts had expected a net loss of 43 cents a share.

For AMG, assets under management fell to $219.3 billion, including pending investments, at the end of September from $286 billion reported a year ago and $241.8 billion at the end of June. Assets are the main drivers of revenue and profit at money managers.

Outflows from AMG's group's funds were $5.9 billion in the third quarter, higher than some analysts were expecting.

"Certainly that's a negative as it relates to their ability to hold on to their assets in this type of an environment," said Kim of Sandler O'Neill.

Northern Trust said it took an after-tax accounting charges of $353.2 million, or $1.59 per share. The company previously said it would take charges to support cash investment funds, to buy illiquid auction-rate securities purchased by a number of clients, and for other steps.

On Wednesday, it said it also took charges related to the impairment of two asset-backed securities and another matter.

"The (earnings) miss was due to higher charges than we were expecting," Merrill Lynch said in a client note.

(Reporting by Muralikumar Anantharaman; Editing by Derek Caney and Steve Orlofsky)