• Net Income: $392 million for the first quarter.
• Earnings Per Share (EPS): $1.90, a 13% increase compared to the prior year.
• Return on Average Common Equity: 13% for the quarter.
• Trust, Investment, and Other Servicing Fees: $1.2 billion, a 6% increase year-over-year.
• Net Interest Income (FTE basis): $574 million, up 7% from the prior year.
• Assets Under Custody and Administration: $15.8 trillion, a 3% year-over-year increase.
• Assets Under Management: $1.2 trillion, up 7% year-over-year.
• Net Interest Margin: 1.69%, down 2 basis points quarter-over-quarter.
• Average Deposits: $116 billion, up 3% compared to the fourth quarter.
• Noninterest Expense: Approximately $1.4 billion, up 4.8% year-over-year.
• Common Equity Tier 1 Ratio: 12.9%, up 50 basis points from the previous quarter.
• Return to Shareholders: $435 million through dividends and stock repurchases.

• Warning! GuruFocus has detected 5 Warning Sign with NTRS.

Release Date: April 22, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Northern Trust Corp (NASDAQ:NTRS) achieved its third consecutive quarter of positive operating leverage, driven by mid-single-digit growth in trust fees and net interest income.
• The company reported a 13% increase in EPS, excluding notable items, and a return on common equity of 13%.
• Northern Trust Corp (NASDAQ:NTRS) successfully raised $435 million to return to shareholders, reflecting strong capital management.
• The Asset Management segment saw strong fundraising, particularly in alternative investment solutions, with plans to nearly double capital raise versus prior year averages.
• The Wealth Management segment launched a dedicated ultra-high-net-worth segment, Family Office Solutions, which has already seen good client traction.

Negative Points

• Currency movements unfavorably impacted revenue growth by approximately 20 basis points.
• Trust, investment, and other servicing fees saw a 1% sequential decline.
• Net interest margin decreased by 2 basis points quarter-over-quarter.
• Expenses increased by 3% sequentially and 4.8% year-over-year, reflecting higher compensation and outside services expenses.
• The company faces a challenging macroeconomic and market backdrop, which could impact future performance.

Q & A Highlights

Q: Can you discuss the deposit beta assumptions underpinning your NII guidance, especially given the positive surprise in cumulative beta during this easing cycle? A: David Fox, CFO, explained that deposit betas have remained stable historically, with institutional business closer to 100% and wealth around 60%-70%. The company has focused on deposit pricing, which has benefited the deposit base positively.

Q: How do you plan to manage expenses if fee pressures intensify due to market conditions, and can you maintain your expense growth guidance? A: David Fox, CFO, emphasized their commitment to keeping expense growth below 5%. They have identified discretionary and non-discretionary spending and are building a flexible business model to adjust to market conditions, focusing on consulting, technology spend, and incentives.

Q: What type of capital markets activity was strong towards the end of the quarter, and has it continued into April? A: Michael O'Grady, CEO, noted that market volatility drove capital markets activity, particularly in foreign exchange and brokerage, including integrated trading services for asset manager clients. This momentum has carried into April.

Q: Can you elaborate on the Family Office Solutions launched this quarter and its potential impact? A: Michael O'Grady, CEO, explained that Family Office Solutions aims to deliver family office services to ultra-high-net-worth clients, enhancing service levels and offering outsourced capabilities. This initiative targets both existing clients and new business growth, with plans to expand internationally.

Q: With a higher CET1 ratio, how comfortable are you with capital returns, and could you increase buybacks? A: David Fox, CFO, stated that they value flexibility and aim for higher payout levels, potentially around 100% going forward. They are comfortable with their capital levels and open to increasing buybacks if conditions allow.

Q: How does market volatility impact new business and client attrition in asset servicing versus wealth management? A: Michael O'Grady, CEO, acknowledged that volatility can affect decision-making, with institutional clients typically continuing RFPs despite market changes, while wealth clients may delay switching but build up pipelines.

Q: What are the alternative initiatives in asset and wealth management, and how do they contribute to growth? A: Michael O'Grady, CEO, highlighted the focus on enhancing alternative solutions, including proprietary and third-party funds. They aim to double fundraising in alternatives and expand third-party offerings, investing in client education and technology.

Q: How do you view the regulatory changes, including Basel III endgame and potential SLR adjustments? A: Michael O'Grady, CEO, noted that refined operational risk models are favorable, and changes in SLR treatment for treasuries would provide more capacity, though current capital levels are sufficient.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.