Northern Trust Q4 Earnings Call Highlights

Northern Trust (NASDAQ:NTRS) executives told investors the company exited 2025 with improving financial momentum, citing higher trust fees, record net interest income and continued progress under its “One Northern Trust” strategy. Management also raised several medium-term financial targets and provided updated 2026 guidance centered on positive operating leverage.

Fourth-quarter results and full-year performance

Chief Financial Officer Dave Fox reported fourth-quarter net income of $466 million, or $2.42 per share, with a 15.4% return on average common equity. Trust, investment and other servicing fees totaled $1.3 billion, rising 3% sequentially and 7% from a year earlier. Net interest income (FTE) increased 10% sequentially to a record $654 million and was up 14% year over year.

Northern Trust ended the quarter with assets under custody and administration up 3% sequentially and 11% year over year, while assets under management rose 2% sequentially and 12% from the prior year.

Fox said the quarter included $69 million in net unfavorable notable items, including $19 million of expenses tied to Visa swaps recognized in other operating income, $59 million of severance-related expense, and a $10 million release of an FDIC special assessment reserve recorded in other operating expense. Excluding notable items, management said revenue rose 9% and expenses increased 5% from a year earlier, with pre-tax margin expanding 250 basis points to 33.2% and EPS increasing 19%. The company also noted that currency movements added roughly 90 basis points to revenue growth but increased expense growth by about 140 basis points versus the prior year quarter.

For the full year, Fox said results were distorted by a comparison to 2024’s favorable notable items (including an $878 million gain related to Visa B share monetization recorded in the first three quarters of 2024). Including notables, 2025 revenue decreased 2% and EPS declined 11%. Excluding notable items in both periods, 2025 revenue increased 7% while expenses rose 4.9% (or 4.3% excluding unfavorable currency impacts). On that basis, the company reported a 30% pre-tax margin, more than two points of positive operating leverage, and 17% EPS growth.

Strategy progress: growth, productivity, and resiliency

Chairman and CEO Michael O’Grady said the company made “significant progress” in 2025 executing its One Northern Trust strategy, highlighting six consecutive quarters of positive trust fee and total operating leverage while continuing to invest in the business.

O’Grady said optimized growth initiatives helped deepen client relationships and expand market share in targeted areas, including private markets and capital markets and banking. He noted that capital markets and banking penetration “now contributes more than one-third of enterprise revenue.”

On productivity, O’Grady described operational changes tied to a “client-centric capability operating model,” including process standardization, increased spans of control, reduced organizational layers, and expanded use of AI-driven automation, including the firm’s “NT Byron” AI platform. He said the Chief Operating Officer organization (more than half of the workforce) increased managerial spans by more than 35% while reducing management layers by more than 20%.

Management said productivity savings in 2025 represented more than 4% of the expense base, with savings reinvested into growth and resiliency initiatives. For 2026, O’Grady said the company plans to raise its productivity target by 10%, supported by broader AI deployment and continued structural and workforce improvements.

On resiliency, he highlighted cybersecurity enhancements, upgrades to the data environment, expanded cloud adoption, modernization of key software platforms, and strengthened risk and control processes.

Business unit highlights: wealth, asset servicing, and asset management

Wealth Management. O’Grady said Wealth Management showed strong momentum, particularly in upper-tier segments. He highlighted record new business in 2025 for Global Family Office (GFO), with international contributions up 15%. The company also launched Family Office Solutions (FOS) to serve families with more than $100 million in net worth; management said the offering exceeded goals for clients and assets and is being scaled across markets.

Fox said Wealth Management assets under management were $507 billion at quarter end, up 13% year over year, with $5 billion of flows within GFO late in the quarter. Trust, investment and other servicing fees for Wealth Management clients rose 6% from a year earlier to $578 million. Wealth Management average deposits increased 5% sequentially, while average loans fell 4% due to repayment of a large GFO loan. Including $15.2 million of severance charges, segment pre-tax profit declined 3% from record prior-year levels and the pre-tax margin contracted 300 basis points to 38.9%.

Asset Servicing. Management said Asset Servicing ended 2025 with improved organic growth and profitability. O’Grady pointed to strong capital markets performance and private markets wins; he said win-related revenue in private markets rose 18% year over year. Fox reported asset servicing fees of $730 million in the fourth quarter, up 8% from a year earlier, while custody and fund administration fees increased 9% to $496 million. Segment pre-tax profit rose 23% year over year (or 40% excluding severance), and the pre-tax margin expanded 210 basis points to 25.5% (up 550 basis points excluding severance). Fox attributed margin improvement to seasonally strong deposit levels supporting NII, a pivot toward cross-selling higher-margin products, and streamlined operations. He said new business generated a pre-tax margin “above 30%.”

Asset Management (NTAM). O’Grady said NTAM delivered another solid year, led by liquidity, where the fourth quarter marked the 12th consecutive quarter of positive flows and liquidity AUM reached nearly $340 billion. He also cited product innovation, including 11 new ETFs, expanded SMA fixed income capabilities, and custom alternatives solutions. Management said direct indexing and customized SMAs remain in demand, supported by $5 billion of net organic flows in a tax-advantaged equity suite in 2025. O’Grady said NTAM introduced a tokenized share class of one money market fund and plans to launch a long-short tax-advantaged equity strategy and expand customized fixed income SMAs.

Balance sheet, deposits, and net interest income

Fox said average deposits were $119.8 billion, up 3% sequentially, reflecting normal seasonality and a higher-than-usual surge in the last two weeks of the quarter. He said management expects deposits to normalize in the first quarter. Within deposits, interest-bearing balances rose 2% sequentially, while non-interest-bearing deposits increased 10% and reached 15% of the mix.

Net interest margin increased sequentially to 1.81%. In the Q&A, Fox noted the reported NIM was “artificially boosted by about three points” due to an FTE true-up, and suggested thinking of the margin as “more high 170s than 181.” He said deposit pricing actions, a more favorable mix, and the roll-off of expensive wholesale funding supported results, and indicated the company has “a lot of tools” to further lower deposit costs.

Capital return, targets, and 2026 outlook

Northern Trust returned $522 million to common shareholders in the fourth quarter through $152 million of dividends and $370 million of share repurchases. For the full year, the company returned $1.9 billion, including a record $1.3 billion in repurchases, reducing average shares outstanding by 5%.

O’Grady said the company raised two medium-term targets, which management views as a three- to five-year timeframe. In addition to targeting an expense-to-trust-fee ratio below 110%, Northern Trust is now targeting a 33% pre-tax margin and return on equity in the mid-teens.

For 2026, Fox said the company is moving away from a specific expense growth target and focusing on positive operating leverage as its “North Star.” Updated guidance calls for:

• Net interest income growth of low- to mid-single digits versus 2025, assuming current market-implied forward curves and a relatively stable deposit mix
• More than 100 basis points of positive operating leverage
• More than 100% of earnings returned to shareholders

In response to analyst questions, management also discussed fee growth expectations under a steady macro backdrop, with Fox saying the company’s planning assumes “around mid-single digits” revenue growth for 2026. O’Grady reiterated the company’s stance that it must “earn our independence,” while remaining open to acquisitions or partnerships that could accelerate strategy—particularly in alternatives capabilities and expanded distribution.

About Northern Trust (NASDAQ:NTRS)

Northern Trust Corporation (NASDAQ: NTRS) is a global financial services firm headquartered in Chicago that provides asset servicing, asset management and wealth management solutions to institutions, corporations and high-net-worth individuals. The company’s core businesses include custody and fund administration, investment operations outsourcing, trust and fiduciary services, private banking, and retirement and defined contribution plan services.

Northern Trust’s product and service offerings span custody and fund accounting, portfolio and performance analytics, securities lending, cash management and foreign exchange, as well as discretionary and non-discretionary investment management.