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]

Financial Performance - Northern Trust Corporation reported a net income of $392.0 million for Q1 2025, a decrease of 17% compared to the previous year[4]. - Basic earnings per share (EPS) for Q1 2025 was $1.91, down from $2.27 in Q1 2024, reflecting a decline of 16%[4]. - The return on average common equity for Q1 2025 was 13.0%, compared to 17.4% in Q1 2024, indicating a significant drop in profitability[4]. - Total revenue for Q1 2025 reached $1,945.6 million, an increase of 18% compared to $1,654.1 million in Q1 2024[5]. - Net income surged to $392.0 million, reflecting an 83% increase from $214.7 million in the same quarter last year[5]. - Earnings per share (EPS) increased significantly to $1.91, up 99% from $0.96 in Q1 2024[5]. - Total revenue (GAAP) for 2023 was $6,773.5 million, compared to $6,761.2 million in 2022, indicating a slight increase[28]. - Income before income taxes (GAAP) for 2023 was $1,464.8 million, down from $1,766.3 million in 2022, representing a decrease of about 17.1%[28]. Revenue Composition - Noninterest income as a percentage of total revenue was 70.5% in Q1 2025, down from 73.5% in Q1 2024[4]. - Trust fees accounted for 62.4% of total revenue in Q1 2025, a decrease from 65.1% in Q1 2024[4]. - Total Noninterest Income for 2023 was $4,791.5 million, compared to $4,874.0 million in 2022, indicating a decline of approximately 1.7%[7]. - Noninterest income to total revenue is expected to be 73.7% GAAP in 2024, up from 70.7% in 2023[32]. Tax and Expenses - The effective tax rate for Q1 2025 was 24.8%, slightly up from 24.5% in the previous quarter[4]. - Total taxes (FTE) increased by 62% to $135.0 million, compared to $83.2 million in Q1 2024[5]. - Provision for income taxes (FTE) for 2023 was $415.0 million, compared to $475.9 million in 2022, showing a decrease of approximately 12.8%[28]. - Total Noninterest Expense for 2023 was $5,284.2 million, an increase from $4,982.9 million in 2022, indicating a rise of approximately 6.1%[7]. Capital and Equity - The total capital ratio for Q1 2025 was 15.7%, up from 15.1% in Q4 2024, indicating improved capital strength[4]. - Cash dividends declared per common share remained steady at $0.75 for Q1 2025, with a dividend payout ratio of 39%[4]. - Common equity increased by 7% to $11,993.6 million compared to $11,216.9 million last year[11]. - Total stockholders' equity grew by 6% to $12,878.5 million from $12,101.8 million[11]. Asset and Liability Management - Total assets increased by 6% to $165,071.2 million from $156,111.0 million year-over-year[11]. - Total liabilities rose by 6% to $152,192.7 million from $144,009.2 million[11]. - Loans decreased by 14% to $40,833.3 million, down from $47,342.6 million[11]. - Total interest-bearing deposits increased by 11% to $109,120.3 million from $98,614.8 million[11]. Future Outlook - The company expects Total Revenue to increase to $8,322.2 million by 2024, representing a projected growth of about 21.8%[7]. - The company anticipates an increase in Net Interest Income to $2,208.9 million in 2024, up from $2,039.5 million in 2023, reflecting a growth of about 8.3%[7]. - The company expects continued growth in Assets Under Management, projecting an increase to $16,472.5 billion in 2025[23]. - Future outlook includes continued focus on market expansion and potential new product developments[16]. Credit Quality - Provision for credit losses was $1.0 million, a significant improvement from a provision of $(8.5) million in Q1 2024[5]. - The allowance for credit losses was $(175.6) million in Q4 2024, slightly improved from $(192.9) million in Q4 2023[13]. - The total allowance for credit losses at the end of the first quarter of 2024 was $206.1 million, slightly down from $220.4 million at the end of 2023[21]. - The ratio of nonaccrual assets to loans and leases was 0.39% in the first quarter of 2024, compared to 0.31% in the previous quarter[21].

Core Viewpoint - Northern Trust Corporation (NTRS) is expected to report improved revenues and earnings for the first quarter of 2025, with a positive earnings surprise history and a consensus estimate indicating growth compared to the previous year [1][2][3]. Financial Performance Expectations - The Zacks Consensus Estimate for NTRS' first-quarter earnings is $1.85 per share, reflecting an 8.8% increase year-over-year [3]. - The consensus estimate for revenues is $1.95 billion, indicating an 18.2% year-over-year rise [3]. Key Factors Influencing Results - Net Interest Income (NII) is estimated at $561.3 million, showing a sequential decline of 0.5% due to higher funding costs amid unchanged interest rates [4]. - Average earning assets are projected at $134.1 billion, indicating a marginal rise from the previous quarter [6]. Non-Interest Income Insights - Custody and fund administration fees are estimated at $447 million, reflecting a 2% sequential decline, while investment management fees are pegged at $153 million, indicating a decline of 1.9% [7]. - Total wealth management fees are estimated at $543.4 million, showing a sequential fall of 1.3% [8]. Expense and Asset Quality Considerations - Expenses are expected to be high due to increased compensation and investments in equipment and software [9]. - Non-performing assets are estimated at $65.1 million, indicating a 16.2% rise sequentially [10]. Earnings Prediction Model - The current model does not predict an earnings beat for Northern Trust, with an Earnings ESP of 0.00% and a Zacks Rank of 3 [11][12].

Core Insights - Northern Trust Corporation (NTRS) has consistently beaten earnings estimates, with an average surprise of 12.59% over the last two quarters [1][2] - The company reported earnings of $2.26 per share for the most recent quarter, exceeding the expected $2.02 per share, resulting in a surprise of 11.88% [2] - For the previous quarter, Northern Trust reported $1.96 per share against an estimate of $1.73 per share, achieving a surprise of 13.29% [2] Earnings Estimates and Predictions - Estimates for Northern Trust have been trending higher due to its history of earnings surprises, indicating positive analyst sentiment [5] - The stock has a positive Zacks Earnings ESP of +1.90%, suggesting analysts are optimistic about the company's earnings prospects [8] - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) indicates a strong possibility of another earnings beat in the upcoming report [8] Earnings ESP and Market Behavior - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [6] - The Earnings ESP metric compares the Most Accurate Estimate to the Zacks Consensus Estimate, reflecting the latest analyst revisions [7] - A negative Earnings ESP does not necessarily indicate an earnings miss, but it does reduce predictive power [9]

Industry Overview - The Zacks Major Regional Banks industry is facing challenges with poor asset quality due to Trump's tariff plans, which are expected to lead to higher inflation and modest economic expansion [1][4][7] - The financial performance of these banks is heavily influenced by the nation's economic health and stringent regulations from the Federal Reserve [3] Economic Factors - A modest rise in loan demand is anticipated as the central bank's monetary policy has impacted loan demand amid recession risks, with NII and NIM expected to rise slightly [4][5] - Tariffs are likely to result in higher prices, affecting inflation forecasts, which are projected to be 2.8% for 2025, up from 2.5% [5] Restructuring and Growth Initiatives - Major regional banks are focusing on business restructuring and digitization to enhance profitability and reduce reliance on spread income [2][6] - Investments in artificial intelligence and digital platforms are being made, along with strategic acquisitions to expand market presence [6][25] Asset Quality Concerns - Economic uncertainty and rising prices are affecting clients' ability to repay loans, leading banks to build additional reserves for potential defaults [7] - Several asset quality metrics have surpassed pre-pandemic levels, indicating a gradual deterioration in asset quality [7] Industry Performance - The Zacks Major Regional Banks industry ranks 48, placing it in the top 19% of over 250 Zacks industries, indicating positive prospects [8][10] - The industry has outperformed the S&P 500 with a collective stock increase of 14.1% over the past year, compared to 9.1% for the S&P 500 [12] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book ratio (P/TBV) of 2.24X, significantly lower than the S&P 500's 12.95X, suggesting a discount compared to the broader market [15][22] Key Companies - **U.S. Bancorp**: With a market cap of $66.7 billion, it has shown solid growth in loans and deposits, with a Zacks Consensus Estimate indicating earnings growth of 9.1% for 2025 [21][19] - **BNY Mellon**: Operating in 35 countries, it has a market cap of $60 billion and is expected to see earnings growth of 15.4% for 2025, driven by new service launches and digitization efforts [28][25] - **Truist Financial**: With a market cap of $54.1 billion, it is focusing on strategic restructuring to bolster fee income, with a projected earnings growth of 8.4% for 2025 [33][31] - **Northern Trust**: Holding total assets of $155.5 billion, it has a market cap of $19.3 billion and is expected to see earnings growth of 7.1% for 2025, supported by strong capital distributions [39][38]

Financial Performance and Assets - As of December 31, 2024, Northern Trust Corporation had consolidated total assets of $155.5 billion and stockholders' equity of $12.8 billion[16]. - Total assets under custody/administration (AUC/A) for Asset Servicing were $15.6 trillion, with assets under custody at $12.2 trillion and assets under management (AUM) at $1.2 trillion[19]. - Wealth Management reported AUC/A, assets under custody, and AUM of $1.1 trillion each, with a total AUM of $450.7 billion as of December 31, 2024[21]. - Northern Trust managed $1.6 trillion in assets as of December 31, 2024, including $1.2 trillion for Asset Servicing clients and $450.7 billion for Wealth Management clients[23]. Business Strategy and Goals - The company aims to develop recurring and scalable sources of fee-based income while maintaining a strong, conservative balance sheet[25]. - Northern Trust's business strategy focuses on providing exceptional quality financial services to targeted market segments[25]. - Northern Trust aims to differentiate itself by providing exceptional quality financial services and developing scalable sources of fee-based income[25]. Regulatory Environment and Compliance - Northern Trust is subject to extensive regulation and supervision, which has increased in response to recent financial crises and market changes[29]. - The company expects its business to remain under extensive regulation and heightened supervision in the future[29]. - The Corporation is subject to enhanced prudential standards as a Category II banking organization, requiring annual capital plans and stress tests to evaluate capital adequacy[33]. - The Corporation must submit a resolution plan to the Federal Reserve Board and FDIC for orderly resolution in case of financial distress, with the next submission due by October 1, 2025[35]. - The Bank is required to submit a full resolution plan to the FDIC every three years, with the first interim supplement due July 1, 2025, and the full plan due July 1, 2026[36]. - The Corporation's capital distributions are subject to the Federal Reserve Board's capital plan rules, which require annual submissions for review[44]. - The Corporation is required to undergo regulatory stress tests conducted by the Federal Reserve Board annually, with results made publicly available[46]. - The proposed Basel III Endgame Proposal would introduce a new method for calculating risk-weighted assets, which has not yet been finalized[49]. - The Corporation's ability to pay dividends depends on the Bank's capacity to pay sufficient dividends, which is subject to regulatory consent and capital adequacy standards[42][43]. - The Volcker Rule prohibits the Bank and its affiliates from engaging in proprietary trading, maintaining compliance through an enterprise-wide program[40]. - The Corporation's risk-based and leverage capital ratios at December 31, 2024, were well above the regulatory requirements established by U.S. banking regulators[53]. - The minimum capital buffer requirement for advanced approaches banking organizations is 2.5%[56]. - The Corporation's stress capital buffer and effective Common Equity Tier 1 capital ratio minimum requirement remain constant at 2.5% and 7.0%, respectively, for the annual capital plan cycle starting October 1, 2024[58]. - As of December 31, 2024, Northern Trust was in compliance with the U.S. liquidity coverage ratio (LCR) requirements[59]. - The Corporation's net stable funding ratio (NSFR) also met applicable requirements as of December 31, 2024[60]. - The FDIC's Deposit Insurance Fund (DIF) reserve ratio is at risk of not reaching the statutory minimum of 1.35% by September 30, 2028, without increasing deposit insurance assessment rates[74]. - In November 2023, the FDIC issued a final rule for a special assessment to recoup losses to the DIF, with an initial collection period of eight quarters[75]. - The Corporation recorded $84.6 million to Other Operating Expense in Q4 2023 due to the special assessment, which was later reassessed to $99.3 million in 2024[75]. Community Reinvestment Act (CRA) and Ratings - Northern Trust received an "outstanding" CRA rating from the Federal Reserve Board in its most recent CRA examination[76]. - The U.S. banking agencies issued a final rule to amend CRA regulations, significantly increasing the thresholds for large banks to receive "outstanding" ratings in the future[77]. - The new rule will take effect on April 1, 2024, with most provisions applicable from January 1, 2026, and data reporting required starting in 2027[79]. - The new CRA rule, effective April 1, 2024, will absorb banks designated as "wholesale" into a "limited purpose" designation, impacting evaluation methods and thresholds for ratings[78]. Technology and Innovation - Northern Trust utilizes machine learning and AI solutions to enhance transaction processing efficiency and mitigate risks, including digitizing documents and detecting fraudulent transactions[84]. Data Privacy and Security Regulations - The GDPR imposes fines of up to €20 million or 4% of annual worldwide revenue for violations, emphasizing the importance of data privacy compliance[81]. - The CCPA allows California residents to access, delete, and opt out of the sale of their personal information, with civil penalties of up to $7,500 for intentional violations[82]. - Northern Trust maintains a regulatory change framework to monitor and respond to changes in data privacy and security regulations[87]. Human Capital and Employee Engagement - As of December 31, 2024, Northern Trust employed approximately 23,300 full-time equivalent employees, with 42% in Asia-Pacific, 41% in North America, and 17% in Europe, Middle East, and Africa[106]. - Over 88% of employees participated in the annual Employee Engagement Survey, which is crucial for understanding employee needs and driving engagement[116]. - The company has implemented a Human Capital Management System to streamline processes and enable dynamic workforce analytics[108]. - Northern Trust's total compensation includes base salaries, performance-linked incentives, and comprehensive benefits, ensuring fair compensation aligned with market standards[113]. - The organization emphasizes professional development through Northern Trust University, offering training programs for employees at all career stages[110]. - The company has documented succession plans for leadership resiliency roles, supporting its talent strategy[115]. - Northern Trust's culture is built on five key behaviors aimed at delivering strategic objectives, including being client-centric and accountable[109]. - The company recognizes and rewards employee contributions through various awards and recognition programs[112]. - The company is committed to fostering an inclusive workplace, as reflected in the inclusion index embedded in the engagement survey[117]. Capital and Liquidity Management - The Corporation's capital conservation buffer is integrated with stress test results to avoid constraints on dividends and equity repurchases[56]. - The Bank is required to conduct its own annual internal stress test, with results reported to regulators and made publicly available[46]. - Regulatory capital requirements for non-U.S. banking subsidiaries were met, with capital ratios above specified minimums as of December 31, 2024[105].

Core Viewpoint - Northern Trust Corporation (NTRS) shows potential as a strong investment opportunity due to significant revisions in earnings estimates, indicating an improving earnings outlook [1][3]. Estimate Revisions - The current quarter's earnings estimate is projected at $1.83 per share, reflecting a year-over-year increase of +7.65%. Over the last 30 days, the Zacks Consensus Estimate has risen by 6.73% with four upward revisions and no negative changes [4]. - For the full year, the earnings estimate stands at $8.25 per share, representing a +7.14% change from the previous year. In the past month, six estimates have been revised upward, leading to a 5.33% increase in the consensus estimate [5]. Analyst Sentiment - There is strong consensus among analysts regarding the upward revision of earnings estimates for Northern Trust, contributing to a favorable outlook for the stock [3][6]. - The company has achieved a Zacks Rank 1 (Strong Buy), indicating a positive sentiment and potential for outperformance compared to the S&P 500 [6]. Stock Performance - Northern Trust's stock has appreciated by 5.9% over the past four weeks, driven by strong estimate revisions, suggesting further upside potential [7].