Northern Trust Corporation Q4 FY2025 earnings call

• Optimize Growth: Advanced initiatives at enterprise and business unit levels, deepened client relationships, expanded market share, broadened private markets footprint, enhanced capital markets and banking penetration contributing over one-third of enterprise revenue.
• Productivity: Implemented client-centric capability operating model, increased managerial spans of control by over 35% and reduced management layers by over 20% in the COO organization, deployed AI for efficiency gains, achieved over 4% productivity savings in 2025, planning to raise productivity target by 10% in 2026.
• Resiliency: Strengthened risk technology and operational foundations, advanced cybersecurity, upgraded data environment, expanded cloud adoption, modernized software platforms.
• Business Unit Performance:
  • Wealth Management: Strong momentum in upper-tier segments, GFO achieved record new business, launched Family Office Solutions, focused on talent and investment solutions with over doubling funds launched and tripling assets raised in alternatives.
  • Asset Servicing: Improved organic growth and profitability, capital markets and private markets performed well, scaled core fund administration and depository services, expanded global asset owner franchise.
  • Asset Management: Strong liquidity flows, broadened liquidity franchise, expanded product capabilities, maintained high product innovation cadence with 11 new ETFs launched and meaningful expansion of SMA fixed income suite.

Wealth Management

• Fourth quarter trust investment and other servicing fees were $578 million, up 6% year over year. Assets under management for wealth management clients were $507 billion at quarter end, up 13% year over year. Trust fees within the regions were up 5% year over year in the quarter and 6% for the full year. Wealth management average deposits were up 5% sequentially, while average loans were down 4%.

Asset Servicing

• Assets under custody and administration for asset servicing clients were $17.4 trillion at quarter end, up 11% year over year. Asset servicing fees totaled $730 million, up 8% year over year. Custody and fund administration fees were $496 million, up 9% year over year. Asset servicing pretax profit grew 23% over the prior year or 40% excluding severance charges.

Asset Management

• Liquidity AUM reached nearly $340 billion, with the fourth quarter marking the twelfth consecutive quarter of positive flows. NTAM continued to broaden its liquidity franchise and expand product capabilities, with strong net organic flows in tax-advantaged equity suite.

• Full-year 2026 NII expected to grow by low to mid-single digits over the prior year, up from previous guidance.
• Expect to generate more than 100 basis points of positive operating leverage.
• Expect to return more than 100% of earnings to shareholders.

• Interest rate changes that could significantly impact financial models.
• Market downturns that affect AUM, AUC, and AUA levels.
• Challenging operational environments such as those seen during the pandemic.

Q: Good morning. Thank you for taking my questions. Really encouraging to see the targets moved higher on the medium term. And actually, looks like really some encouraging ambition in the targets. Can you speak to your conviction in driving change across the organization? And like when you think the timing of some of this traction could start to come through in the financial results?

A: So I would say, Brennan, that we have a high level of conviction that we're seeing the change transmit through the entire company. I talked about in my comments there just the fact that this is an effort on the part of all of our employees, all of our partners to do this. And I think you're seeing, you know, what I think I'll call the early days of the results from a financial perspective. And that to the extent we continue to maintain that conviction and execute on the strategy, we'll continue to see consistently high performance like we did this quarter. That's why we had the confidence to move the targets up in the medium term, which we look at as kind of a three to five-year time frame. And if you just think about, you know, what Dave has said even for the year that we're in right now, trying to generate more positive, operating leverage, you know, that will take us in the direction towards those targets.

Q: Hey. Good morning. I guess, maybe Paul, if you could just start on the fee growth side. And just talk to us, I appreciate you don't want to sort of pin down the guidance if we assume a relatively sort of a steady state macro backdrop, one, what does that imply for fee growth this year? And then you and just talk to us in terms of, like, one or two areas you think drives trends. You talked about GFO ending 25 on a strong note. Would love to get some color around sort of the two or three drivers of growth that you are seeing on the fee side. For 2026?

A: Yeah. So, you know, the way we look at '26 and we just finished our planning period, is if the market conditions as are you as the way you described, we would think that we would be around mid-single digits in revenue growth. And trust fee and revenue growth, maybe revenue growth a bit higher, but around mid-single digits. And that would also give you an implication in terms of where we wanna solve for our expense growth for the year as well. So that's sort of how we're thinking about it going into '26. You know, in terms of the fee growth, you know, as you know, in GFO, the business there can be very lumpy. And when you win, you usually win very large amounts. And so the traction win rate in GFO really picked up in Q3. And because of the quarter lag, you saw a lot of it in Q4. We even had additional inflows in GFO of another $5 billion, and Q4, which you're going to see primarily in Q1. So that's driving a lot of the growth. The other thing I would say, and Mike can comment on this as well is the traction we're getting in the ultra-high-net-worth segment around from the front of or the family office solutions. Which really we're finding our win rate and our traction and our backlog in that particular area of the $100 million plus that don't have a family office. Has really picked up considerably.