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Northern Trust(NTRS) - 2024 Q1 - Earnings Call Transcript
NTRSNorthern Trust(NTRS)2024-04-16 16:22
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Financial Data and Key Metrics Changes - The company reported a net income of 215millionandearningspershareof215 million and earnings per share of 0.96, with a return on average common equity of 7.3% [21] - Net interest income (NII) on a fully taxable equivalent (FTE) basis was 535million,up7535 million, up 7% sequentially but down 2% year-over-year [22] - Non-interest expenses were 1.4 billion, down 2% sequentially and up 6% compared to the prior year [25] - The average balance sheet increased by 6% on a linked quarter basis, primarily due to higher deposit levels [24] Business Line Data and Key Metrics Changes - Trust, investment, and other servicing fees totaled 1.1billion,a51.1 billion, a 5% sequential increase and a 7% increase compared to last year [15] - Assets under management (AUM) for asset servicing clients were 1.1 trillion, with investment management fees up 11% year-over-year [23] - Wealth management clients' AUM reached 421billion,withtrust,investment,andotherservicingfeesup9421 billion, with trust, investment, and other servicing fees up 9% year-over-year [50] Market Data and Key Metrics Changes - Assets under custody and administration for asset servicing clients were 15.4 trillion at quarter-end, with asset servicing fees totaling 640million[49]−Thecompanyexperiencedstrongclientvolumelevelsincapitalmarkets,particularlyinFXtrading[15]CompanyStrategyandDevelopmentDirection−Thecompanyaimstooptimizegrowth,driveproductivity,andstrengthenresiliency,withafocusonscalablenewbusiness[18]−The"OneNorthernTrust"strategyisenhancingcollaborationbetweenassetmanagementandassetservicing,leadingtomorenewbusinessopportunities[14]−Thecompanyisprioritizingsharerepurchasesaspartofitscapitalframework[6]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedstrongmarkettailwindsandpositivenewbusinessmomentumenteringthesecondquarter[20]−Thecompanyiscautiousaboutdepositlevels,whichhavebeendifficulttopredict,andanticipatesapotentialdeclineinNIIof3640 million [49] - The company experienced strong client volume levels in capital markets, particularly in FX trading [15] Company Strategy and Development Direction - The company aims to optimize growth, drive productivity, and strengthen resiliency, with a focus on scalable new business [18] - The "One Northern Trust" strategy is enhancing collaboration between asset management and asset servicing, leading to more new business opportunities [14] - The company is prioritizing share repurchases as part of its capital framework [6] Management's Comments on Operating Environment and Future Outlook - Management noted strong market tailwinds and positive new business momentum entering the second quarter [20] - The company is cautious about deposit levels, which have been difficult to predict, and anticipates a potential decline in NII of 3% to 5% for the second quarter [51][57] - Management expressed confidence in the strength of underlying equity markets and the progress made against strategic priorities [18] Other Important Information - The company was appointed as the sole asset servicing provider for Sanlam Asset Management's 9 billion of funds, indicating strong client relationships [19] - The company returned 285 million to common shareholders through cash dividends and stock repurchases [54] Q&A Session Summary Question: What is the outlook for NII growth in 2024? - Management indicated that NII growth is uncertain and will depend on deposit levels and market conditions [6] Question: Can you elaborate on the changes in compensation and expenses? - Compensation is expected to decrease by 35 million to 40millionsequentially,whileexpensesforequipment,software,andoutsideservicesareprojectedtoincreaseby40 million sequentially, while expenses for equipment, software, and outside services are projected to increase by 10 million to $15 million [2][26] Question: How are you addressing the pressure on fee rates? - Management acknowledged pressure on fee rates but emphasized strong growth in client advisory fees and product-level fees due to favorable markets [9][13] Question: What is the impact of Visa proceeds on the company's capital strategy? - Visa proceeds are expected to enhance capital and liquidity, with a gradual deployment strategy [30][116] Question: How do you view the stability of non-interest bearing deposits? - Non-interest bearing deposits have stabilized and are expected to remain at current levels despite potential pressures [107][126]