NORTHERN TRUST CORP Q1 FY2025 earnings call

Optimize Growth

• Entered 2025 with good momentum, embedding collaboration between business units. Advanced enterprise-wide growth initiatives aligning with client needs, including alternative investment solutions, family office services, and liquidity solutions.
• In asset management, fundraising strong in alternatives, on track to nearly double capital raise vs prior year averages. Asset servicing had brisk new business activity, especially in private markets, with wins like Ignio Infrastructure Partners and Alchemy Partners. Wealth management rolled out Family Office Solutions for ultra-high-net-worth clients, seeing good traction. Liquidity had healthy deposit levels, positive liquidity flows in asset management, and $1.7 billion inflows into custom tax-optimized SMAs.

Strengthen Resiliency and Manage Risk

• Multiyear effort to uplift risk and control system, transitioning to implementation of new capabilities to systematically anticipate, identify, manage, and control risk.
• Advanced technology journey towards a more stable, scalable, safe, secure environment for stakeholders.

Drive Productivity

• Reengineered operating model to enhance efficiency, standardize services, and streamline processes. Made headway with workforce initiatives and third-party spend management, including pursuing further vendor savings.

Asset Servicing: Assets under custody/administration were $15.8 trillion at quarter-end, up 3% year-over-year. Asset servicing fees totaled $672 million. Custody and fund administration fees were $453 million, up 4% year over year. Other fees were $48 million, up 7% year over year. Assets under management for asset servicing clients were $1.2 trillion, up 7% over the prior year. Investment management fees within asset servicing were $153 million, up 9% year over year. Wealth Management: Assets under management for wealth management clients were $447 billion at quarter-end, up 6% year over year. Trust investment and other servicing fees for wealth management clients were up 8% year over year, primarily due to strong equity markets.

• Expenses: Continue to expect total operating expense growth to be below 5% for the full year, excluding notable items.
• NII: Raised full-year guidance from low single-digit growth to low to mid-single-digit growth due to first quarter outperformance and recent deposit growth, assuming continued strong deposit levels and stable deposit mix.

• Market volatility and uncertainty can impact client decision-making, potentially affecting new business and client attrition.
• Regulatory changes, such as Basel III endgame, can impact capital requirements and operational risk treatment.

Q: Steven Chubak from Wolfe Research asked about NII guidance and deposit beta assumption.

A: David Fox responded about deposit betas being stable, higher for institutional business, lower for wealth, and spent time on deposit pricing.

Q: Betsy Graseck from Morgan Stanley asked about capital markets activity and Family Office Solutions.

A: Michael O’Grady talked about capital markets activity related to volatility driving trading services and details on Family Office Solutions.

Q: Ken Houston from Autonomous Research asked about capital return and expense side.

A: David Fox discussed capital return flexibility and expense growth expectations.

Q: Mike Mayo from Wells Fargo Securities asked about Family Office Solutions addressable market and capital.

A: Michael O’Grady provided details on Family Office Solutions addressable market and capital position.

Q: Ibrahim Poonawala from Bank of America asked about expense proof points and NII sensitivity to rate cuts.

A: Michael O’Grady and David Fox talked about expense productivity initiatives and NII sensitivity to rate cuts.

Q: Glenn Shore from Evercore asked about alternative initiatives and semi-liquid funds.

A: Michael O’Grady discussed alternative initiatives in asset and wealth management and semi-liquid funds in different markets.

Q: Gerard Cassidy from RBC asked about fee revenues calibration and Basel III endgame.

A: David Fox and Michael O’Grady talked about fee revenues calibration and Basel III endgame impact.

Q: David Smith from Turis Securities asked about market volatility impact and growth initiatives.

A: Michael O’Grady discussed market volatility impact and growth initiatives.

Q: Jim Mitchell from Seaport Global Securities asked about Family Office Solutions stickiness and organic growth.

A: Michael O’Grady talked about Family Office Solutions stickiness and organic growth efforts.

Q: Vivek Jainja from JPMorgan asked about fee revenues geography and growth.

A: Michael O’Grady provided details on fee revenues geography and growth plans.

Q: Alex Goldstein from Goldman Sachs asked about NII mix and expense flexibility.

A: David Fox responded on NII mix and expense flexibility.

Q: Gerard Cassidy from RBC asked about Visa position value.

A: Michael O’Grady and David Fox discussed Visa position value and considerations