Michael O’Grady: We initiated significant changes to enhance and scale our operations. Our client-centric capability operating model provides a unified and consistent way of working across the company, standardizing core processes, increasing spans of control, reducing organizational layers, and empowering the broad adoption of AI-driven automation inclusive of our AI platform NT Byron. For example, the chief operating officer's organization, which encompasses more than half of our workforce, increased mana ...

Northern Trust (NasdaqGS:NTRS) Q4 2025 Earnings call January 22, 2026 09:00 AM ET Company ParticipantsEbrahim Poonawala - Managing DirectorMichael O'Grady - Chairman and CEOGlenn Schorr - Senior Managing DirectorGerard Cassidy - Managing DirectorSteven Chubak - Managing DirectorDavid Smith - VP and Banks Equity ResearchDavid Fox - CFOBetsy Graseck - Global Head of Banks and Diversified Finance ResearchJennifer Childe - Director of Investor RelationsConference Call ParticipantsNone - AnalystMike Mayo - Resea ...

Northern Trust (NasdaqGS:NTRS) Q4 2025 Earnings call January 22, 2026 09:00 AM ET Company ParticipantsEbrahim Poonawala - Managing DirectorMichael O'Grady - Chairman and CEOGlenn Schorr - Senior Managing DirectorGerard Cassidy - Managing DirectorSteven Chubak - Managing DirectorDavid Smith - VP and Banks Equity ResearchDavid Fox - CFOBetsy Graseck - Global Head of Banks and Diversified Finance ResearchJennifer Childe - Director of Investor RelationsConference Call ParticipantsNone - AnalystMike Mayo - Resea ...

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]

Financial Performance - Northern Trust Corporation's revenue grew by 6% in 3Q25 compared to 3Q24, excluding $553 million in notable items that favorably impacted 3Q24 revenue[4] - EPS increased by 14% in 3Q25 compared to 3Q24, excluding notable items[4] - The pre-tax margin was 308% in 3Q25[4] - Net income was $4576 million in 3Q25, a decrease of 2% compared to 3Q24[7] Assets Under Management and Custody - Assets under Custody/Administration (AUC/A) reached $182476 billion in 3Q25, a 5% increase compared to 3Q24[7] - Assets under Management (AUM) totaled $17727 billion in 3Q25, a 9% increase compared to 3Q24[7] - Wealth Management AUC/A was $12572 billion, up 10% from 3Q24[11] - Asset Servicing AUC/A was $169904 billion, up 4% from 3Q24[14] Capital and Expenses - The company's Tier 1 capital was $120 billion[26] - Noninterest expense increased by 5% year-over-year[4] - Common stock repurchases amounted to $2770 million in Q3 2025[26]

Core Insights - Northern Trust Corporation (NTRS) successfully passed the Federal Reserve's 2025 stress test, maintaining a 2.5% Stress Capital Buffer, indicating a strong capital position and resilience against severe economic downturns [1][3] - Analysts have revised earnings growth estimates for NTRS upward for 2024 and 2025, reflecting optimism about the company's financial performance [2] Financial Performance - The Zacks Consensus Estimate for NTRS's earnings per share (EPS) for 2025 is projected at $8.18, with a year-over-year growth estimate of 6.23% [12] - Over the past three to five years, NTRS's EPS has increased by 3.1%, with a projected growth rate of 6.2% in the near term [8][11] - The company reported a return on equity (ROE) of 13% in the first quarter of 2025, indicating consistent profitability and operational efficiency [16] Dividend and Share Repurchase - Following the stress test, NTRS plans to increase its quarterly dividend by 7% to $0.80 per share starting in Q3 2025, subject to board approval, with a current dividend yield of 2.34% [4] - NTRS has an active share repurchase program, having repurchased $287 million worth of shares in Q1 2025, with $25 million authorized for buybacks [6] Growth Drivers - The company has experienced a compound annual growth rate (CAGR) of 7.8% in total revenues from 2020 to 2024, supported by increases in net interest income (NII) and non-interest income [12][14] - Loan and lease balances grew at a CAGR of 6.7% during the same period, with expectations for a rebound in loan activity as the client base expands [13][14] - The launch of Family Office Solutions in April 2025 aims to attract ultra-high-net-worth clients, enhancing revenue potential [14] Cost Management - Northern Trust is implementing cost optimization measures, including disciplined headcount management and process automation, to enhance productivity and achieve financial objectives [15] - The company has maintained a solid liquidity position, with deposits totaling $52 billion compared to total debt of $12 billion, supporting its financial flexibility [7] Market Performance - Over the past year, NTRS shares have increased by 53.1%, outperforming the industry growth of 28.6% [17] - NTRS currently holds a Zacks Rank of 2 (Buy), indicating positive market sentiment [20]

Core Insights - The financial services sector outperformed expectations in the first half of 2025, driven by modest economic expansion, decent loan demand, higher interest rates, increased market volatility, and ongoing business restructuring initiatives [1][2][8] Sector Performance - The financial services sector gained over 7% in the January-June period, surpassing the S&P 500 Index's 4.9% rise [2] - Higher interest rates, technology investments, loan growth, and market volatility contributed to the sector's strength [8] Technology and Innovation - Increased use of innovative trading platforms and the adoption of artificial intelligence (AI) are expected to enhance profitability for finance firms in the long run, despite initial technology-related expenses [3] Top-Performing Stocks - Five top-performing stocks in the financial services sector include Coinbase Global (COIN), W. R. Berkley Corporation (WRB), Northern Trust (NTRS), Goldman Sachs (GS), and Charles Schwab (SCHW) [4][8] Coinbase Global (COIN) - Coinbase is positioned to benefit from increased crypto market volatility, with 84% of its revenues coming from the U.S. market [9] - The company is investing in infrastructure and platforms like Base to enhance the practical use of crypto [10] - Coinbase ended Q1 2025 with $10.2 billion in USD resources, a 6.7% increase from the end of 2024 [12] W. R. Berkley Corporation (WRB) - WRB has been investing in startups and expanding into international markets, with a 10.2% year-over-year increase in net premiums written in Q1 2025 [15] - The company is experiencing growth across all business lines except for professional liability and workers' compensation [16] Northern Trust (NTRS) - Northern Trust is focusing on organic expansion and has launched Family Office Solutions to attract ultra-high-net-worth clients [20] - The company reported a return on equity (ROE) of 13% in Q1 2025, indicating progress towards sustainable profitability [22] Goldman Sachs (GS) - Goldman Sachs is restructuring to refocus on core strengths, including the transfer of its GM credit card business and the sale of GreenSky [24][25] - The company expects a recovery in investment banking revenues in the second half of 2025 as economic conditions stabilize [26] Charles Schwab (SCHW) - Schwab is benefiting from a high-interest-rate environment, with its net interest margin improving to 2.12% by the end of Q1 2025 [30] - The company has a strong cash position of $35 billion and a total debt of $39.9 billion as of March 31, 2025 [33]

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]