Northern Trust (NasdaqGS:NTRS) FY Conference Transcript

Summary of Northern Trust FY Conference Call (September 09, 2025) Company Overview - Company: Northern Trust (NasdaqGS: NTRS) - Event: FY Conference Call - Date: September 09, 2025 Key Points Leadership Changes and Organizational Structure - The Chief Operating Officer (COO) role is newly created, focusing on operational excellence, risk management, and scalable growth [2] - Leadership changes were made a year ago, with new executives now in key positions [1] Financial Performance and Productivity - Northern Trust aims to achieve $200 million in productivity savings in 2025, with 75% of this being sustainable [3] - The company reported a significant improvement in asset servicing margins, with an average fully loaded margin of 470 basis points better in the first half of 2025 compared to 2024 [3] - The expense to trust fee ratio for new business in asset servicing was below 100% in the first half of 2025 [4] Growth Initiatives - The company is focused on scalable growth in asset servicing, with plans to exit underperforming client relationships [4] - A client-centric capability model has been implemented to enhance service delivery and operational efficiency [15] - The "One Northern Trust" initiative aims to integrate services across business lines, enhancing client experience and cross-selling opportunities [19][20] Technology and Automation - Northern Trust is investing in technology and AI to improve productivity and operational efficiency [10][11] - The company has reduced the number of third-party vendors by 10%, streamlining operations [8] - AI is being integrated into processes to enhance automation and reduce manual tasks [11] Wealth Management and Asset Servicing - The Global Family Office (GFO) business has seen an 8% revenue growth in the first half of the year, with significant international wins [38] - The wealth management segment is expanding its suite of alternative products, with $2 billion of alternatives onboarded onto the platform [33] - The asset servicing business is experiencing strong momentum, with 160% of its target achieved in the Americas [49] Financial Metrics and Projections - Average deposits were reported at $122 billion, up 6% [42] - Record net interest income (NII) in Q2 was up 16% year-on-year, with expectations for modest growth in 2025 [44] - The company aims for less than 5% expense growth this year, with a target of 3% organic growth and 3% market growth for a total of 6% revenue growth [53] Strategic Positioning and Market Outlook - Northern Trust is well-positioned in the private capital market, with a 49% growth in assets under administration (AUA) over the last two years [37] - The company has a strong pipeline in wealth management, with GFO on pace to match last year's record performance [48] - Northern Trust maintains a conservative approach to capital management, with a CET1 ratio target of $11 to $12 [55] M&A and Future Strategy - The management team has no current plans to entertain merger discussions, emphasizing the importance of independence and existing growth strategies [58][60] - Acquisitions may play a role in future growth, particularly in asset management, but partnerships and joint ventures are also being considered [64] Additional Insights - The company is focused on maintaining a strong client base and enhancing service delivery through technology and operational improvements [59] - The leadership emphasizes a dynamic financial planning model, allowing for flexibility in response to market conditions [25]