Northern Trust(US:NTRS)2024-01-18 17:20Financial Data and Key Metrics Changes - In Q4 2023, reported revenue was $1.6 billion, expenses were $1.4 billion, and earnings per share were $0.52, with a return on average common equity of 4% [30][33] - Excluding notable items, revenue was flat year-over-year, with trust fees increasing by 5% and expenses up by 3% [115][37] - Net interest income on a fully taxable equivalent basis was $501 million, up 7% sequentially but down 9% year-over-year [6][36] Business Line Data and Key Metrics Changes - Wealth management assets under management were $423 million, with trust investment and servicing fees totaling $478 million [7] - Asset servicing clients had assets under custody/administration of $14 trillion, with asset servicing fees totaling $612 million [34] - The asset management business saw positive inflows in Q4, particularly in index equity and alternatives, contributing to fee revenue growth [123] Market Data and Key Metrics Changes - Average deposits were $102 billion, flat compared to the prior quarter, but ended the year at $116 billion, indicating stronger than expected deposit growth [126] - The company experienced a decrease in average borrowings by $4 billion relative to the third quarter, reflecting a reduction in FHLB advances and Fed funds purchased [35] Company Strategy and Development Direction - The company is focused on expense control and productivity improvements, with a goal to lower the trajectory of expense growth further in 2024 [3][10] - There is a strategic emphasis on growing the asset management and wealth management segments, particularly in alternatives and private markets [4][91] - The company aims to leverage its data and analytics capabilities to enhance client relationships and drive organic growth [31][92] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging operating environment in 2023 due to geopolitical instability and high inflation, but expressed optimism about organic growth prospects moving forward [121][90] - The company expects to navigate ongoing macroeconomic uncertainty while focusing on profitable organic growth and maintaining expense discipline [32][90] Other Important Information - The company returned over $300 million to common shareholders in Q4 through cash dividends and stock repurchases, totaling approximately $980 million for the full year [38] - The company was recognized for its exceptional client service, winning multiple awards in 2023 [116] Q&A Session Summary Question: What is the outlook for deposit flows with the expected Fed QT? - Management noted that the RRP program significantly impacted deposits, and as it diminishes, they anticipate changes in deposit flows [17][19] Question: Can you elaborate on the competitive landscape in the alternative asset space? - Management highlighted the alternative space as a major opportunity, citing recent wins with large private market firms as evidence of their competitive capabilities [57] Question: What are the expectations for expense growth in 2024? - Management confirmed that expense growth is expected to be lower than 2023, with a focus on maintaining productivity and efficiency [50][64] Question: How does the company plan to approach buybacks in light of capital levels? - Management indicated that they are considering various options for capital deployment, including potential buybacks, while maintaining strong capital ratios [75][76] Question: What are the drivers behind the increase in noninterest-bearing deposits? - Management attributed the increase to new business activity and expressed optimism about stabilizing these deposits [55][56]