Core Insights - The company has implemented significant operational changes to enhance efficiency and scalability, including a client-centric operating model that standardizes processes and promotes AI-driven automation [1][5] - Financial performance for the full year showed a 7% increase in revenue and a 5% increase in expenses, resulting in a 30% pretax margin and a 14.8% return on equity [3][19] - The company returned $1.9 billion to shareholders in 2025, including a record $1.3 billion in share repurchases, reducing the share count by 5% [3][32] Operational Enhancements - The chief operating officer's organization increased managerial spans of control by over 35% and reduced management layers by over 20%, improving speed and accountability [1] - The deployment of AI in high-volume activities has led to productivity savings representing more than 4% of the expense base, with plans to increase productivity targets by 10% for 2026 [5] - The company has strengthened its risk technology and operational foundations, enhancing cybersecurity and modernizing key software platforms [5] Business Unit Performance - Wealth management showed strong momentum, particularly in the global family office (GFO) segment, achieving record new business and a 15% increase in international contributions [6][20] - Asset servicing ended the year with improved organic growth and profitability, with assets under custody and administration increasing by 11% year over year [22][23] - Capital markets performed well, with private markets revenue up 18% over the prior year, solidifying the company's position with hedge fund managers [9] Financial Results - In the fourth quarter, net income was $466 million, with earnings per share of $2.42 and a return on average common equity of 15.4% [15] - Trust, investment, and other servicing fees totaled $1.3 billion, reflecting a 7% year-over-year increase, while net interest income reached a record $654 million, up 14% from the previous year [17] - The effective tax rate for the fourth quarter was 26.5%, with expectations for a similar rate in 2026 [18] Strategic Focus - The company aims to maintain a pretax margin of 33% and a return on equity in the mid-teens, with a focus on generating attractive returns on capital and double-digit EPS growth [13][31] - There is a commitment to organic growth, with potential for selective acquisitions to bolster the asset management business [49][58] - The company is focused on enhancing its product offerings, particularly in alternatives and customized investment solutions, to meet client demand [11][12]

Financial Data and Key Metrics Changes - In Q4 2025, net income was $466 million, with earnings per share (EPS) of $2.42, and return on average common equity was 15.4% [18] - Trust fees grew by 7%, net interest income (NII) increased by 14%, and revenue was up 9% year-over-year, excluding notable items [5][21] - For the full year, revenue rose by 7%, expenses grew by 5%, resulting in a pre-tax margin of 30% and a 14.8% return on equity [5][29] Business Line Data and Key Metrics Changes - Wealth Management saw assets under management (AUM) reach $507 billion, up 13% year-over-year, with trust fees increasing by 6% [22] - Asset Servicing reported assets under custody and administration of $17.4 trillion, reflecting an 11% year-over-year increase, with fees totaling $730 million, an 8% increase [24] - Asset Management maintained strong liquidity flows, with AUM in liquidity reaching nearly $340 billion, marking the 12th consecutive quarter of positive flows [14][15] Market Data and Key Metrics Changes - The company experienced favorable currency movements, positively impacting revenue growth by approximately 90 basis points [18] - The effective tax rate increased to 26.5%, primarily due to higher tax impacts from international operations [19] Company Strategy and Development Direction - The company is focused on its "One Northern Trust" strategy, aiming for optimized growth, productivity improvements, and enhanced resiliency [5][9] - Significant investments in AI-driven automation and operational efficiency are expected to drive productivity savings and support future growth [9][10] - The company plans to enhance its Wealth Management and Asset Servicing businesses, particularly in the ultra-high net worth segment and capital markets [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving medium-term financial targets, citing strong market conditions and effective execution of strategic initiatives [5][17] - The company anticipates continued positive operating leverage and aims to return over 100% of earnings to shareholders [31] - Management acknowledged the need to adapt to changing market conditions while maintaining flexibility in expense management [31] Other Important Information - The company returned $1.9 billion to shareholders in 2025, including a record $1.3 billion in share repurchases [6][30] - The company aims to maintain a pre-tax margin of 33% and a return on equity in the mid-teens as part of its financial targets [17] Q&A Session Summary Question: Can you speak to your conviction in driving change across the organization? - Management expressed high conviction in the ongoing changes across the company, noting early signs of financial results from these efforts [34][35] Question: What drove the lower cost on the interest-bearing side? - Management indicated that the growth in non-interest-bearing deposits was influenced by seasonal factors and cash stockpiling due to the government shutdown [36][38] Question: What does the fee growth outlook look like for 2026? - Management expects mid-single-digit revenue growth for 2026, driven by strong performance in the Global Family Office segment and family office solutions [43][45] Question: How does the company view potential acquisitions in Asset Management? - Management remains focused on organic growth but is open to acquisitions that align with their strategy, particularly in alternatives and distribution [49][50] Question: What is the outlook for the expense-to-trust-fee ratio? - Management confirmed that they consider the expense-to-trust-fee ratio when pricing new business and continuously assess client profitability [62][64] Question: How sustainable is the NII growth outlook? - Management believes they can maintain a stable net interest margin (NIM) in the 170s for 2026, with various levers available to optimize the balance sheet [66]

Financial Data and Key Metrics Changes - In Q4 2025, net income was $466 million, with earnings per share (EPS) of $2.42 and a return on average common equity of 15.4% [18] - Trust fees grew by 7%, net interest income (NII) increased by 14%, and revenue was up 9% year-over-year, excluding notable items [5][21] - For the full year, revenue rose by 7%, expenses grew by 5%, resulting in a pre-tax margin of 30% and a 14.8% return on equity [5][29] Business Line Data and Key Metrics Changes - Wealth Management saw assets under management (AUM) reach $507 billion, up 13% year-over-year, with trust fees increasing by 6% [22] - Asset Servicing reported assets under custody and administration of $17.4 trillion, reflecting an 11% year-over-year increase, with asset servicing fees totaling $730 million, an 8% increase [24] - Asset Management (NTAM) maintained strong liquidity flows, with AUM in liquidity reaching nearly $340 billion, marking the 12th consecutive quarter of positive flows [14][15] Market Data and Key Metrics Changes - The company experienced strong market conditions, contributing to the growth in trust fees and net interest income [6] - The international markets contributed significantly to the growth, with the Global Family Office (GFO) segment seeing a 15% increase in contributions from international markets [10] Company Strategy and Development Direction - The company is focused on executing its "One Northern Trust" strategy, which aims to enhance collaboration across business units and improve operational efficiency through AI-driven automation [7][9] - The strategy includes expanding private markets and capital markets penetration, which now contributes over one-third of enterprise revenue [7] - The company plans to raise its productivity target by 10% for 2026, supported by ongoing initiatives and broader AI deployment [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain strong financial performance and achieve double-digit EPS growth through cycles [17] - The effective tax rate is expected to remain stable at approximately 26%-26.5% in 2026, with a focus on generating positive operating leverage [19][31] - Management highlighted the importance of maintaining a strong capital position while pursuing organic growth and selectively considering acquisitions [61] Other Important Information - The company returned $1.9 billion to shareholders in 2025, including a record $1.3 billion in share repurchases, reducing the share count by 5% [6][30] - The company recorded $69 million in net unfavorable notable items in Q4, impacting overall financial results [20] Q&A Session Summary Question: Can you speak to your conviction in driving change across the organization and the timing of financial results? - Management expressed high conviction in the ongoing changes and expects to see consistent high performance as a result of these efforts [34][36] Question: What drove the lower cost on the interest-bearing side? - Management noted that the growth in non-interest-bearing deposits was influenced by seasonal factors and cash stockpiling due to the government shutdown [38][39] Question: What does the fee growth outlook look like for 2026? - Management anticipates mid-single-digit revenue growth, driven by strong performance in the Global Family Office segment and family office solutions [44][46] Question: How does the company view potential acquisitions in asset management? - Management is open to acquisitions but primarily focused on organic growth, particularly in alternatives and expanding distribution [50][51] Question: What is the outlook for the expense-to-trust-fee ratio? - Management indicated that they consider the expense-to-trust-fee ratio when pricing new business and continuously assess client profitability [63][65] Question: How sustainable is the NII growth outlook? - Management believes they can maintain a stable net interest margin (NIM) in the 170s for 2026, with various levers available to optimize the balance sheet [66][68]

Financial Data and Key Metrics Changes - In Q4 2025, net income was $466 million, with earnings per share (EPS) of $2.42 and a return on average common equity of 15.4% [15] - Trust, investment, and other servicing fees totaled $1.3 billion, reflecting a 7% year-over-year increase [15] - Net interest income increased by 14% year-over-year to $654 million, marking a record high [16] - For the full year, revenue rose by 7%, while expenses grew by 5%, resulting in a pre-tax margin of 30% and a 14.4% return on equity [24] Business Line Data and Key Metrics Changes - Wealth Management saw assets under management reach $507 billion, up 13% year-over-year, with trust fees increasing by 6% in Q4 [18] - Asset Servicing reported assets under custody and administration of $17.4 trillion, an 11% year-over-year increase, with asset servicing fees totaling $730 million, up 8% [20] - Asset Management (NTAM) maintained strong liquidity, with liquidity AUM reaching nearly $340 billion, marking the 12th consecutive quarter of positive flows [12] Market Data and Key Metrics Changes - The Global Family Office (GFO) segment achieved record new business in 2025, with international contributions up 15% [8] - Capital markets activities were robust, contributing to strong performance in asset servicing [20] - The company experienced favorable currency movements that positively impacted revenue growth by approximately 90 basis points [15] Company Strategy and Development Direction - The company is focused on its "One Northern Trust" strategy, aiming for optimized growth, productivity improvements, and enhanced resiliency [4][6] - Plans for 2026 include raising productivity targets by 10% and continuing to invest in AI-driven automation [7] - The company aims to maintain a pre-tax margin of 33% and return on equity in the mid-teens as part of its medium-term financial targets [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver consistent high performance and achieve financial targets, citing strong market conditions [4][29] - The effective tax rate is expected to remain stable at approximately 26%-26.5% in 2026 [16] - Management highlighted the importance of maintaining flexibility in expense growth while focusing on positive operating leverage [26] Other Important Information - The company returned $1.9 billion to shareholders in 2025, including a record $1.3 billion in share repurchases [5][25] - The company recorded $69 million in net unfavorable notable items in Q4, impacting overall financial results [17] Q&A Session Summary Question: Can you speak to your conviction in driving change across the organization? - Management expressed high conviction in seeing changes across the company and expects continued high performance as a result of executing the strategy [28] Question: Can you speak to what drove the lower cost on the IB side? - Management noted that the growth in non-interest-bearing deposits was influenced by seasonal factors and cash stockpiling due to the government shutdown [30] Question: What does that imply for fee growth this year? - Management anticipates mid-single-digit revenue growth for 2026, driven by strong performance in the Global Family Office segment and asset servicing [34] Question: How do you think about the split between the two businesses? - Management indicated that while asset servicing margins need improvement, wealth management has attractive margins and is expected to grow faster [55]

Summary of Northern Trust Conference Call (December 10, 2025) Company Overview - **Company**: Northern Trust (NasdaqGS: NTRS) - **Assets**: Approximately $14.5 trillion in custody assets and $1.8 trillion in assets under management - **Focus**: Transitioning towards more profitable areas of organic growth, particularly in wealth management and asset servicing Key Points Strategic Shifts and Priorities - **Strategic Pillars**: The company is executing a strategy centered on three pillars: optimizing growth, strengthening resiliency, and driving productivity [21][29][31] - **Growth Focus**: Aiming for higher organic growth in wealth and asset management, with a target to improve profitability in the Asset Servicing business from low 20s to high 20s margins [35][36] - **Revenue Growth**: Achieved an average revenue growth of about 7% over the past two years, with positive operating leverage of approximately 2 points and ROEs exceeding 13% [44][46] Asset Servicing Business - **Retention Rates**: High retention rates in the institutional client base, around the high 90s percentage, are crucial for maintaining revenue [51][54] - **Client Relationship Expansion**: Approximately half of new business comes from existing clients, emphasizing the importance of expanding relationships and offering additional services [74][75] - **New Client Acquisition**: Winning new clients is essential for long-term sustainability, with a focus on ensuring new business is profitable from the outset [85][96] Digital Asset Ecosystem - **Investment in Capabilities**: Northern Trust is investing in capabilities to support digital assets, including stablecoins and tokenized assets, to meet client needs in capital markets [121][130] - **Commercialization Opportunities**: Exploring new revenue streams through tokenization, particularly in asset management, with potential services for tokenized money market funds [132][134] Wealth Management Business - **Market Position**: Northern Trust has a strong position in the high net worth segment, particularly with global family offices, and is expanding services to ultra-high net worth families without dedicated family offices [151][155] - **Alternative Investments**: Currently, less than 5% of the $500 billion in assets under management is allocated to alternatives, indicating significant growth potential in this area [175][176] - **Product Offerings**: The company is enhancing its alternatives platform, doubling the number of funds offered in 2025, and focusing on providing differentiated opportunities for clients [189][191] Financial Performance and Guidance - **Net Interest Income (NII)**: Expected to finish the year up mid to high single digits year-over-year, with a strong deposit base contributing to this growth [212][213] - **Expense Management**: Committed to keeping expenses below 5% for the year, with a dynamic planning process to adjust as needed [213][250] - **2026 Outlook**: Anticipating flat to marginally up NII in 2026, with potential for growth driven by new business and effective deposit pricing strategies [232][234] Capital Return and Investment Strategy - **Capital Management**: Aiming to maintain a capital return strategy similar to 2025, with a focus on balancing loan activity, ROE, and potential M&A opportunities [276][277] - **Investment Flexibility**: The company has a detailed list of capital expenses and investments, allowing for flexibility in response to market conditions [252][256] Additional Insights - **Technology and Client Experience**: Emphasizing the importance of technology platforms and client education in enhancing the overall client experience in wealth management [200][201] - **Market Conditions**: The company is prepared to operate within a muted market environment while maintaining a focus on productivity and efficiency [250][256] This summary captures the essential insights and strategic directions discussed during the Northern Trust conference call, highlighting the company's focus on growth, profitability, and adaptability in a changing financial landscape.

Financial Data and Key Metrics Changes - The company reported third quarter net income of USD 458 million and earnings per share of USD 2.29, with a return on average common equity of 14.8% [17] - Revenue increased by 6% year-over-year, while expenses rose by 4.7%, resulting in a pre-tax margin expansion of 200 basis points [19][25] - Year-to-date, the company returned 110% of earnings to shareholders, contributing to a 5% decrease in shares outstanding [5][25] Business Line Data and Key Metrics Changes - **Wealth Management**: Assets under management increased to USD 493 billion, up 11% year-over-year, with trust investment and other servicing fees rising to USD 559 million, a 5% increase [20] - **Asset Management**: The company launched 11 new ETF strategies, with liquidity remaining strong, reporting 11 consecutive quarters of positive flows [11][21] - **Asset Servicing**: Assets under custody and administration reached USD 17 trillion, reflecting a 4% year-over-year increase, with asset servicing fees totaling USD 707 million, a 6% increase [21][22] Market Data and Key Metrics Changes - The company experienced a 1% sequential increase in assets under custody and administration and a 5% year-over-year increase [18] - Average deposits were USD 116.7 billion, down 5% compared to the second quarter, reflecting typical seasonal patterns [24] Company Strategy and Development Direction - The company is focused on its "One Northern Trust" strategy, emphasizing organic growth and operational efficiency through AI and a client-centric operating model [5][8] - The Enterprise Growth Program is driving improvements in organic growth, particularly in private markets, with a focus on high-value client segments [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver strong financial performance despite potential economic challenges, emphasizing a disciplined execution of strategy [15][16] - The company anticipates continued growth in net interest income and expects operating expense growth to remain below 5% for the full year [26] Other Important Information - The company has embedded AI in over 150 use cases, enhancing efficiency and client service across various business lines [7][8] - The company is exploring opportunities in digital assets and tokenization, with a focus on enhancing operational efficiency and scalability [79] Q&A Session Summary Question: NII outlook and deposit trends - Management indicated that deposits performed in line with expectations and anticipated a slight pickup in Q4, with NII expected to grow mid to high single digits [31][32] Question: Challenges at the investment product level - Management noted pressure on index products due to asset allocation and pricing, and emphasized a focus on improving product performance and pricing [34][35] Question: AUCA growth and outflows - Management explained that AUCA growth was driven by specific clients, and outflows were due to restructuring rather than client losses [40][41] Question: Expense growth and operating leverage - Management reaffirmed commitment to keeping expense growth below 5% and highlighted ongoing efforts to improve productivity and efficiency [42][44] Question: Focus on profitability versus growth - Management confirmed a focus on profitability, allowing low-margin business to roll off while seeking accretive margins on new business [48][49] Question: AI's impact across business lines - Management stated that AI is enhancing efficiency across all areas, with specific applications in operations, technology, and client service [74][76] Question: Digital assets and stablecoin strategy - Management discussed the importance of innovation and regulation in the digital asset space, indicating a focus on tokenization rather than issuing a stablecoin [79][80]

Core Insights - Northern Trust Corporation reported a net income of $421 million for Q2 2025, with earnings per share (EPS) of $2.13, reflecting a 20% increase excluding prior-year notables [4][40] - The company raised its return on average common equity (ROE) target to a range of 13%-15% from the previous 10%-15% [5][11] - Total revenue increased by 8% year over year, with favorable currency movements contributing approximately 90 basis points to revenue growth compared to the prior year [5][41] Financial Performance - Net interest income reached a record $615 million, up 7% sequentially and 16% year over year, although $10 million of this was attributed to nonrecurring FX swap activity [8][13] - Total expenses rose by 4.8% year over year, marking the lowest expense growth rate in the past six quarters when excluding notable items [6][52] - The asset servicing pretax margin increased over 10 points to 23.2%, with a 29% increase in pretax profit when excluding prior-year notables [6][47] Shareholder Returns - The company returned $486 million to shareholders, with a payout ratio of 117% and a board-approved 7% increase in the quarterly dividend [7][53] - Average deposits were $122 billion, up 6% sequentially, with interest-bearing deposits increasing by 7% [8][51] Growth Initiatives - The company reported approximately $2.5 billion raised in alternatives in the first half of 2025, with an additional $1 billion in advisory, reflecting a 66% year-over-year increase in alternatives advisory assets under advisement [9][25] - Northern Trust plans to launch 11 new fixed income ETFs in Q3 2025 to meet client demand for scalable exposures [10][31] - The firm is investing in new talent and leadership within Wealth Management to strengthen client coverage and accelerate new business generation [14][29] Strategic Focus - The "One Northern Trust" strategy emphasizes integration and momentum across its business segments, particularly in alternatives [11][20] - The company aims to centralize and automate core operational processes, leveraging AI and public blockchains to enhance client experience and internal productivity [16][22] - Management reaffirmed the company's commitment to independence, stating they have never entertained discussions regarding a sale [12][39]

Financial Data and Key Metrics Changes - The company reported first quarter net income of $392 million and earnings per share of $1.90, with a return on average common equity of 13% [15] - Earnings per share, excluding notable items, increased by 13% year-over-year, while expenses rose by 4.8% compared to the prior year [18][23] - The company generated its third consecutive quarter of positive operating leverage, driven by mid-single-digit growth in trust fees and net interest income [6][15] 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 year-over-year [17] - Asset Servicing business saw assets under custody and administration increase to $15.8 trillion, a 3% year-over-year increase, with custody and fund administration fees up 4% year-over-year [19] - Wealth Management assets under management reached $447 billion, up 6% year-over-year, with trust investment and other servicing fees increasing by 8% year-over-year [21] Market Data and Key Metrics Changes - The company experienced strong capital markets activity due to elevated volatility levels, which positively impacted performance late in the quarter and into April [7][14] - The company reported a healthy increase in deposit levels as clients adopted a risk-off approach, reallocating portfolios and raising cash [11] 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 [8][9] - The launch of Family Office Solutions aims to enhance service offerings for ultra-high-net-worth clients, targeting those with over $100 million in net worth [10][44] - The company is also investing in technology to improve operational efficiency and productivity, including the use of machine learning and automation [13][77] 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 [14] - The company raised its full-year guidance for net interest income growth from low single digits to low to mid-single digits, reflecting strong deposit levels [26] Other Important Information - The company returned $435 million to shareholders through cash dividends and stock repurchases, reflecting a payout ratio of 116% [26] - The common equity Tier 1 ratio increased to 12.9%, indicating strong capital levels well above regulatory minimums [25] Q&A Session Summary Question: Deposit beta assumptions and guidance - Management indicated that deposit betas remain stable, with institutional business closer to 100% and wealth business around 60-70% [32] Question: Fee outlook and expense flexibility - Management reaffirmed the commitment to keep expense growth below 5%, with identified discretionary and nondiscretionary spending to manage flexibly [36] Question: Capital markets activity - Management noted increased capital markets activity driven by market volatility, particularly in foreign exchange and brokerage services [41] Question: Family Office Solutions and market expansion - Management confirmed the launch of Family Office Solutions, aiming to provide outsourced family office capabilities to ultra-high-net-worth clients [44] Question: Addressable market for Family Office Solutions - Management highlighted a large addressable market for ultra-high-net-worth clients, with hundreds of existing clients fitting this profile [63] Question: Impact of market volatility on new business and client attrition - Management acknowledged that market volatility can influence client decision-making, potentially causing delays in switching custodians or managers [110]