Core Insights - Northern Trust Corporation (NTRS) shares have increased by 18% over the past six months, outperforming the industry which declined by 4.3% [1] - The company's performance is supported by steady organic growth, improving return on equity, manageable debt levels, and impressive capital distribution activities [5][7][9][10] Performance Analysis - NTRS has shown consistent revenue growth with a compound annual growth rate (CAGR) of 7.8% from 2020 to 2024, and net interest income (NII) and non-interest income have continued to grow in the first quarter of 2025 [5] - The loan and lease balance also experienced a CAGR of 6.7% over the last four years, although a reversal was noted in the first quarter of 2025 [6] - The return on equity (ROE) reached 13% in the first quarter of 2025, aligning with the company's long-term target of maintaining ROE between 10% and 15% [7] Financial Health - As of March 31, 2025, Northern Trust held $52 billion in Federal Reserve and Central bank deposits against $12 billion in total debt, indicating a strong liquidity position [9] - The company has a capital distribution strategy that includes a share repurchase program and quarterly dividends, with a current dividend yield of 2.7% [10][11][12] Market Position - NTRS is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 13.2X, which is above the industry average of 10.7X and higher than peers M&T Bank and Fifth Third Bancorp [16] - Analysts have revised earnings estimates for 2025 and 2026 upward, reflecting positive sentiment and encouraging prospects for the company [15] Investment Consideration - Given the premium valuation of NTRS, it is suggested that investors wait for a better entry point to optimize returns, while those who already own the stock may consider holding it for long-term growth [19]

Industry Overview - The Zacks Major Regional Banks industry includes the largest banks in the U.S. by assets, operating globally and heavily influenced by the nation's economic health [3] - These banks provide a wide array of financial services, including traditional banking, credit and debit cards, mortgage banking, wealth management, and investment banking, generating revenue from fees and commissions [3] Current Challenges - Weak asset quality is anticipated due to higher inflation from tariffs and modest economic expansion, leading to a marginal rise in loan demand [1][7] - Concerns over economic health and policy impacts are causing banks to build additional reserves to counter potential defaults and payment delays [7] Future Outlook - Once tariff-related uncertainties are resolved, net interest income (NII) and margins are expected to improve, benefiting the industry [1][4] - The Federal Reserve's cautious stance on interest rates may lead to lower deposit costs and a gradual improvement in lending scenarios [4] Growth Initiatives - Major banks are focusing on business restructuring and digitization to enhance profitability and reduce dependence on spread income [2][6] - Investments in artificial intelligence and partnerships with tech providers are part of the strategy to expand operations domestically and globally [6] Performance Metrics - The Zacks Major Regional Banks industry currently holds a Zacks Industry Rank of 98, placing it in the top 40% of over 250 Zacks industries, indicating an optimistic outlook [8][10] - The industry has outperformed the S&P 500, with a collective stock increase of 17.4% over the past year compared to the S&P 500's 9.1% [12] Valuation Insights - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.18X, significantly lower than the S&P 500's 12.74X, indicating a discount compared to the broader market [15][17] Key Players - **U.S. Bancorp (USB)**: Market cap of $67 billion, with an expected earnings growth of 8.3% for 2025 and 8.8% for 2026, driven by solid loan and deposit growth [23][20] - **BNY Mellon (BK)**: Market cap of $63.4 billion, with anticipated earnings growth of 12.8% for 2025 and 13.1% for 2026, supported by strategic acquisitions and digitization efforts [29][26] - **Truist Financial (TFC)**: Market cap of $51 billion, with expected earnings growth of 5.7% and 12.9% for 2025 and 2026, respectively, aided by loan growth and strategic restructuring [35][32] - **Northern Trust (NTRS)**: Market cap of $21 billion, with projected earnings growth of 5.2% and 8.3% for 2025 and 2026, focusing on organic growth and expense management [41][38]

Summary of Northern Trust (NTRS) 2025 Conference Call Company Overview - **Company**: Northern Trust (NTRS) - **Event**: 2025 Conference Call - **Date**: June 10, 2025 Key Points Strategic Priorities and Organizational Changes - Theresa Parker, President of Asset Servicing, emphasized the importance of client service as a differentiator and the focus on driving profitable growth through new client acquisition and existing client retention [6][9][16] - The organization is undergoing changes aimed at enhancing resiliency and productivity in service delivery [6][7] - The focus is on leveraging new technologies, including AI and digital solutions, to improve operational efficiency [9][27][55] Profitability and Growth Opportunities - Northern Trust is targeting profitable growth by focusing on high-margin products in banking and capital markets, as well as enhancing service offerings to existing clients [9][12] - The company is exploring synergies between asset servicing and wealth management, particularly in alternative markets [10][12] - The asset servicing segment is expected to benefit from the growth in private markets and alternatives, which are becoming a larger part of the business [12][84] Financial Performance and Outlook - Deposits saw a spike due to tariff volatility, but levels have remained elevated despite some normalization [35][36] - The net interest income (NII) outlook for 2025 is projected to grow in the low to mid-single digits year-on-year, supported by higher deposit levels and interest rates remaining stable [42][43] - Expense growth is expected to be managed at 5% or less, with a focus on productivity improvements to offset investments [50][52] Technology and Digital Assets - Northern Trust is investing in digital assets and exploring the implications of recent regulatory changes that may accelerate the digitalization of assets [25][26][27] - The company is preparing for potential changes in cash management and settlement systems due to tokenization [27][28] Capital Management and Return Priorities - Northern Trust maintains a strong capital position with a CET1 ratio of 12.9%, above the target range of 11-12% [63][65] - The company is cautious about capital allocation, viewing excess capital as a buffer rather than surplus [62][64] - Dividend policy is aligned with earnings sustainability, with a current payout ratio around 39% [68][69] M&A and Growth Strategy - While M&A opportunities are not a primary focus, Northern Trust is open to potential acquisitions in the wealth and asset management space if they align with strategic goals [72][74] - The company is prioritizing organic growth and enhancing its service offerings to drive future growth [72][73] Conclusion - Northern Trust is strategically positioned to leverage its strengths in client service and technology to drive profitable growth in asset servicing and wealth management, while maintaining a strong financial position and preparing for future market changes [6][9][12][42][63]

Financial Performance - Total revenue for Q1 2025 increased to $1.94 billion, an 18% increase from $1.65 billion in Q1 2024[14] - Net income for Q1 2025 was $392.0 million, representing an 83% increase compared to $214.7 million in Q1 2024[14] - Noninterest income rose to $1.37 billion, a 23% increase from $1.12 billion in the previous year[8] - Net interest income increased to $568.1 million, an 8% rise from $528.1 million in Q1 2024[14] - Noninterest expense for Q1 2025 was $1.42 billion, a 4% increase from $1.36 billion in Q1 2024[14] - Return on average common equity improved to 13.0% in Q1 2025, up from 7.3% in Q1 2024[9] Asset Management - Total Assets Under Custody/Administration reached $16,924.0 billion, a 1% increase from the prior quarter and a 3% increase year-over-year[27] - Total Assets Under Management stood at $1,607.8 billion, unchanged from the prior quarter but up 7% from the prior-year quarter[32] - Wealth Management fee income rose due to favorable markets, with Global Family Office fee income increasing from asset inflows[22] - Total Asset Servicing Trust, Investment and Other Servicing Fees increased to $1,213.8 million in Q1 2025, up 6% from $1,142.9 million in Q1 2024[19] Credit and Provisioning - Provision for credit losses was $1.0 million, compared to a negative provision of $8.5 million in the prior-year quarter[16] - The negative Provision for Credit Losses was $0.9 million for the quarter ended March 31, 2025, compared to a negative $1.7 million in the prior-year quarter[81] - Net recoveries in the current quarter were $0.2 million, compared to $10.4 million net charge-offs in the prior-year quarter[58] Liquidity and Capital - The Common Equity Tier 1 capital ratio for Northern Trust Corporation was 12.9% as of March 31, 2025, up from 12.4% at December 31, 2024[127] - Northern Trust's liquidity position remained strong, with 66% of total assets consisting of highly liquid assets as of March 31, 2025, compared to 62% at December 31, 2024[131] Interest Income and Rates - Net Interest Income (NII) for Q1 2025 was $568.1 million, an increase from $528.1 million in Q1 2024, reflecting a year-over-year growth of 7.5%[152] - The average interest rate on Loans decreased to 5.68% from 6.34% in the prior-year quarter[46] - Average Interest-Bearing Deposits rose by $3.3 billion, or 4%, to $99.0 billion compared to the prior-year quarter[55] Market Performance - The S&P 500 index increased by 18% year-over-year, contributing positively to the Corporation's results[24] - Other Noninterest Income totaled $158.1 million, a significant increase from a loss of $24.2 million in the prior year[38] Cash Flow - Net cash provided by operating activities for the three months ended March 31, 2025, was $2,749.8 million, a significant improvement from a net cash used of $1,452.6 million in the same period of 2024[116][117] - Net cash used in investing activities rose to $10,285.4 million for the three months ended March 31, 2025, compared to $4,793.4 million in the same period of 2024, indicating increased investment activity[119][120] Securities and Investments - Total Debt Securities amounted to $51.3 billion as of March 31, 2025, with 87% rated AAA and 8% rated AA[95] - The total available for sale debt securities amounted to $29,001.5 million as of December 31, 2024, with U.S. Government securities comprising 96% of the total[96] Other Income - Total Other Noninterest Income for Q1 2025 was $158.1 million, a significant increase of $182.3 million compared to a loss of $24.2 million in Q1 2024[38] - Foreign Exchange Trading Income rose to $58.7 million, reflecting a 3% increase from $57.0 million in the prior year[38]

Financial Data and Key Metrics Changes - The company reported a first quarter net income of $392 million and earnings per share (EPS) of $1.90, with a return on average common equity of 13% [22][24] - EPS, excluding notable items, increased by 13% year-over-year, while expenses rose by 3% sequentially and 4.8% year-over-year [8][26][34] - The company generated a return on common equity of 13% and returned $435 million to shareholders through dividends and stock repurchases [8][38] Business Line Data and Key Metrics Changes - Trust investment and other servicing fees totaled $1.2 billion, reflecting a 1% sequential decline but a 6% increase compared to the previous year [24] - Asset servicing fees amounted to $672 million, with custody and fund administration fees up 4% year-over-year [27][28] - Wealth management assets under management were $447 billion, up 6% year-over-year, with trust investment and other servicing fees increasing by 8% [30] Market Data and Key Metrics Changes - Assets under custody and administration increased by 1% sequentially and 3% year-over-year, while assets under management were flat sequentially but up 7% year-over-year [24][29] - The company experienced a healthy increase in deposit levels as clients adopted a risk-off approach, leading to positive liquidity flows [15][32] Company Strategy and Development Direction - The company is focused on optimizing growth through collaboration between business units and advancing enterprise-wide growth initiatives, particularly in alternative investment solutions and family office services [10][11] - The launch of Family Office Solutions aims to enhance service offerings for ultra-high-net-worth clients, targeting individuals with over $100 million in net worth [13][60] - The company is also investing in technology to improve operational efficiency and productivity, including the deployment of machine learning and automation [100][101] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a challenging macroeconomic environment, highlighting the strength of the balance sheet and the ability to meet evolving client needs [20][19] - The company anticipates continued strong deposit levels and stable deposit mix, raising its full-year net interest income guidance from low single-digit growth to low to mid-single-digit growth [39][40] Other Important Information - The company reported a common equity Tier 1 ratio of 12.9%, indicating strong capital levels well above regulatory minimums [37] - The unrealized pretax loss on available-for-sale securities was $527 million, with a payout ratio of 116% reflecting the company's commitment to returning capital to shareholders [38] Q&A Session Summary Question: NII guidance and deposit beta assumptions - Management indicated that deposit betas remain stable, with institutional business closer to 100% and wealth business around 60-70% [44][45] Question: Fee outlook and expense management - Management reaffirmed the commitment to keep expense growth below 5%, with flexibility to adjust discretionary spending as needed [47][48] Question: Capital markets activity and its continuation - Management noted that increased market volatility has driven capital markets activity, particularly in foreign exchange and brokerage services [55][56] Question: Family Office Solutions and its market potential - Management highlighted the large addressable market for ultra-high-net-worth clients and the ongoing hiring to support growth in this segment [80][81] Question: Impact of market volatility on new business and client attrition - Management acknowledged that market volatility can influence client decision-making, but noted no significant impacts observed yet [136][137]

Core Viewpoint - Northern Trust Corporation (NTRS) reported strong first-quarter 2025 adjusted earnings per share (EPS) of $1.90, exceeding the Zacks Consensus Estimate of $1.85, and up from $1.70 in the prior-year quarter [1][2] Financial Performance - NTRS's net income on a GAAP basis was $392 million, reflecting an 82.5% increase from the prior-year quarter [2] - Total revenues on a GAAP basis reached $1.94 billion, a 17.6% year-over-year increase, although it slightly missed the Zacks Consensus Estimate by 0.3% [3] - Net interest income (NII) was $573.7 million, up 7% year over year, with a net interest margin of 1.69%, an increase of 8 basis points from the prior-year quarter [3] - Trust, investment, and other servicing fees totaled $1.21 billion, marking a 6% year-over-year increase [3] Non-Interest Income and Expenses - Other non-interest income was $158.1 million, a significant recovery from a loss of $24.2 million in the year-ago quarter, driven by increases in all components except for other operating income [4] - Non-interest expenses rose 4% to $1.42 billion, primarily due to increases in compensation, employee benefits, and equipment and software expenses [4] Assets Under Custody and Management - As of March 31, 2025, total assets under custody (AUC) increased 4% year over year to $13.3 trillion, while total assets under management (AUM) rose 7% to $1.6 trillion [5] Credit Quality - The total allowance for credit losses was $207.3 million, up 3% year over year, with total non-accrual assets increasing to $73.1 million from $37 million in the prior-year period [6] - Provisions for credit losses were reported at $1 million in the first quarter, compared to a negative provision of $8.5 million in the year-ago quarter [6] Capital and Profitability Ratios - The Common Equity Tier 1 capital ratio improved to 12.9% from 11.4% in the prior-year quarter, while the total capital ratio rose to 15.7% from 14.2% [7] - The Tier 1 leverage ratio increased to 8% from 7.8%, and the return on average common equity was 13%, compared to 7.3% in the year-earlier quarter [7] Capital Distribution - In the reported quarter, Northern Trust returned $435.4 million to shareholders through share repurchases and dividends [8] Overall Assessment - The rise in fee income and NII contributed positively to the company's performance, with increasing AUC and AUM likely to support future financials. However, concerns remain regarding weakening asset quality and rising expenses [9][10]

NORTHERN TRUST CORPORATION First Quarter 2025 Quarterly Earnings Review northerntrust.com / © 2025 Northern Trust 135 years of strength, stability & stewardship Disciplined, client-centric strategy Highest standards of client service Product leadership & innovative services Solutions-focused technology & integrated operating platform northerntrust.com / © 2025 Northern Trust 2 FINANCIAL HIGHLIGHTS northerntrust.com / © 2023 Northern Trust northerntrust.com / © 2025 Northern Trust 33 Financial Highlights & K ...

Core Insights - Northern Trust Corporation (NTRS) reported revenue of $1.94 billion for Q1 2025, a year-over-year increase of 17.8% and an EPS of $1.90 compared to $1.70 a year ago [1] - The revenue was slightly below the Zacks Consensus Estimate of $1.95 billion, resulting in a surprise of -0.34%, while the EPS exceeded the consensus estimate of $1.85 by +2.70% [1] Financial Performance Metrics - Tier 1 Leverage Ratio was reported at 8%, slightly below the estimated 8.1% [4] - Net interest margin (FTE) was in line with estimates at 1.7% [4] - Average balance of total earning assets was $138.01 billion, exceeding the estimate of $134.09 billion [4] - Nonaccrual loans and leases were reported at $73.10 million, higher than the average estimate of $55.64 million [4] Wealth Management and Servicing Fees - Wealth Management Trust, Investment and Other Servicing Fees for Global Family Office were $103.80 million, a +9% year-over-year change, exceeding the estimate of $100.76 million [4] - Total Wealth Management Trust, Investment and Other Servicing Fees were $541.90 million, representing a +7.7% change year-over-year, slightly above the estimate of $539.37 million [4] - Asset Servicing Trust, Investment and Other Servicing Fees for Custody and Fund Administration were $453.30 million, a +3.8% year-over-year change, surpassing the estimate of $447.04 million [4] - Total Asset Servicing Trust, Investment and Other Servicing Fees were $671.90 million, reflecting a +5.1% year-over-year change, above the estimate of $667.50 million [4] Stock Performance - Northern Trust shares have returned -14.5% over the past month, compared to the Zacks S&P 500 composite's -8.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Northern Trust (NTRS) Q1 2025 Earnings Call April 22, 2025 09:00 AM ET Company Participants Jennifer Childe - Senior VP & Director of Investor RelationsMichael O'grady - Chairman & CEODavid Fox - Chief Financial OfficerSteven Chubak - Managing DirectorBetsy Graseck - Managing DirectorMike Mayo - Managing DirectorEbrahim Poonawala - Managing Director - Head of North American Banks ResearchGerard Cassidy - Managing DirectorDavid Smith - Vice President Equity ResearchAlex Blostein - Managing Director Conferenc ...

Core Viewpoint - Northern Trust Corporation reported quarterly earnings of $1.90 per share, exceeding the Zacks Consensus Estimate of $1.85 per share, and showing an increase from $1.70 per share a year ago, indicating a positive earnings surprise of 2.70% [1] Financial Performance - The company posted revenues of $1.94 billion for the quarter ended March 2025, which was slightly below the Zacks Consensus Estimate by 0.34%, but an increase from $1.65 billion year-over-year [2] - Over the last four quarters, Northern Trust has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - Northern Trust shares have declined approximately 15.3% since the beginning of the year, compared to a decline of 12.3% for the S&P 500 [3] - The current Zacks Rank for Northern Trust is 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2 on revenues of $1.95 billion, and for the current fiscal year, it is $7.88 on revenues of $7.79 billion [7] - The estimate revisions trend for Northern Trust is mixed, and future changes in estimates will be closely monitored following the recent earnings report [6][7] Industry Context - The Banks - Major Regional industry, to which Northern Trust belongs, is currently ranked in the top 28% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8]