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    NTRS
    Earnings call· Jun 2026(Q2 FY26)

    NORTHERN TRUST CORP NTRS

    Jul 22, 2026 Source

    Executive summary

    Northern Trust Q2 FY26 — Strong Organic Fee Growth and Operating Leverage

    Northern Trust reported a strong Q2 FY26, marked by robust organic fee growth and significant operating leverage, driven by diversified business performance and a constructive market. The firm strategically monetized a Visa stake, offsetting it with portfolio repositioning and restructuring charges, while also increasing its dividend. Management remains focused on strategic investments and disciplined expense management, anticipating continued solid performance despite some expected normalization in certain revenue streams and deposit levels.

    Highlights

    5

    • Delivered an eighth consecutive quarter of positive organic fee growth.

    • Generated significant positive operating leverage of over 700 basis points, excluding notable items.

    • Total revenue increased 13% year-over-year, driven by 10% trust fees, 11% NII, and 69% capital markets revenue.

    • Returned over $1 billion to shareholders year-to-date, with a Q2 payout ratio of 90% excluding notables.

    • Board approved a $0.08 or 10% increase to the quarterly common dividend.

    Concerns

    5

    • Reported results included approximately $220 million in restructuring charges and other notable items.

    • Expects some normalization of foreign exchange, capital markets, and securities lending flows from particularly elevated levels.

    • Anticipates some large institutional deposits from Q1 and Q2 to not last into Q3, impacting average deposits.

    • Wealth Management fees were moderately down sequentially due to GFO billing and alternative valuation inconsistencies, despite AUM growth.

    • Competition for talent in Wealth Management remains high, requiring sustained recruitment efforts.

    Guidance & targets

    4
    CategoryTargetConfidence
    Net interest income (NII) growth
    up 9% to 10% year-over-year
    high materiality
    High
    Total revenue growth
    grow by 9% to 10% year-over-year
    high materiality
    High
    Operating leverage (excluding notable items)
    approximately 400 basis points
    high materiality
    High
    Effective tax rate
    approximately 26% to 26.5%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Wealth Management
    Delivered solid quarter with double-digit fee growth, driven by success with ultra-high net worth clients and expanding capabilities. Disclosures updated to align with current operating structure, consolidating regions into private wealth.
    Assets under management: $534 billionAssets under management growth YoY: 14%Assets under management growth QoQ: 7%Average deposits: $26.7 billionAverage deposits growth QoQ: 1%Average loans: $35.8 billionAverage loans growth QoQ: 1%Pretax income: $334 million
    		$592 million10%—37%
    Asset Servicing
    Performed well, driven by new business, enterprise liquidity strategy, and strong capital markets activity. Pretax margin expanded 8 points year-over-year (excluding notables), reflecting disciplined execution and favorable macro environment.
    Assets under custody and administration: $18.6 trillionAssets under custody and administration growth YoY: 10%Custody and fund administration fees: $512 millionCustody and fund administration fees growth YoY: 9%Assets under management: $1.4 trillionAssets under management growth YoY: 17%Investment management fees: $172 millionInvestment management fees growth YoY: 10%Securities lending income: $29 millionSecurities lending income growth YoY: 46%Average deposits: $101 billionAverage deposits growth QoQ: -1%Average loans: $5.8 billionAverage loans growth QoQ: 3%Pretax income: $323 million (reported)
    		$757 million9%—30% (excluding notables)

    Operational metrics

    43
    Return on average common equity
    25.9%
    Q2 FY26

    Reported return on average common equity for the quarter.

    Pretax income
    $1.1 billion
    Q2 FY26

    Reported pretax income for the quarter.

    Favorable pretax income impact from notable items
    $306 million
    Q2 FY26

    Aggregate favorable pretax income impact from Visa gain, AFS repositioning loss, software dispositions, severance, and equity grant.

    Favorable net income impact from notable items
    $232 million
    Q2 FY26

    Aggregate favorable net income impact from notable items.

    Total revenue (excluding notable items)
    up 2% sequentiallyup 13% year-over-year
    Q2 FY26

    Revenue growth excluding the impact of notable items.

    Trust, investment and other servicing fees
    $1.3 billionup 1% sequentially and up 10% compared to the prior year
    Q2 FY26

    Total fees for the quarter.

    Other noninterest income (excluding notable items)
    up 42% year-over-year
    Q2 FY26

    Growth in other noninterest income, driven by client activity and trading flows.

    Reserve release
    $5 million
    Q2 FY26

    Reflecting improved portfolio quality and macroeconomic outlook.

    Effective tax rate
    25.6%up 60 basis points from prior quarter and up 20 basis points from prior year
    Q2 FY26

    Reported effective tax rate for the quarter.

    Noninterest expense
    $1.6 billionup 9% sequentially and up 16% year-over-year
    Q2 FY26

    Reported noninterest expense.

    Noninterest expense (excluding notable items)
    down 1% sequentiallyup 5% year-over-year
    Q2 FY26

    Expense trend excluding one-time items.

    Expense-to-trust fee ratio (excluding notable items)
    less than 111%compared to 115% in the prior year quarter
    Q2 FY26

    Improved efficiency ratio.

    Unrealized after-tax loss on available-for-sale securities
    $373 million
    Q2 FY26

    Balance at quarter end.

    Common stock repurchases
    $350.6 million
    Q2 FY26

    Amount of common stock repurchased in the quarter.

    Common stock dividends declared
    $148.8 million
    Q2 FY26

    Total dividends declared in the quarter.

    Stressed Capital Buffer
    2.5%
    Q2 FY26

    Remains at the minimum requirement based on 2026 CCAR results.

    Dividend increase
    $0.0810%
    Q2 FY26

    Increase to quarterly common dividend approved by the Board.

    NII impact from securities repositioning
    $30-plus million
    Annually

    Expected annual benefit to NII from the repositioning of the available-for-sale securities portfolio.

    Deposit beta
    about 80%
    Current

    Overall deposit beta, with specific considerations for currency and client segment.

    Average earning assets
    $151 billiondown 2% sequentially
    Q2 FY26

    Average earning assets for the quarter.

    Securities portfolio duration
    1.4 years
    Q2 FY26

    Duration of the securities portfolio.

    Total balance sheet duration
    under 1 year
    Q2 FY26

    Duration of the total balance sheet.

    Average deposits
    $128 billiondown 1% sequentially
    Q2 FY26

    Average deposits for the quarter.

    Noninterest-bearing deposits mix
    15%increased 4% sequentially
    Q2 FY26

    Noninterest-bearing deposits as a percentage of overall mix.

    GFO revenue growth
    9%
    H1 FY26

    Revenue growth for Global Family Office in the first half of the fiscal year.

    Marketing qualified leads
    up over 50%from the same period last year
    H1 FY26

    Increase in marketing qualified leads driven by digital channel and Lead Lab.

    Alternatives Assets Under Administration
    exceed $1 trillion
    Q2 FY26

    Total AUA for alternative strategies within Asset Servicing.

    New product launches from existing hedge fund clients
    increased approximately 50%quarter-over-quarter
    Q2 FY26

    Highlighting continued demand for institutional-grade servicing.

    Outsourced capital market solutions revenue growth
    up almost 50%year-over-year
    Q2 FY26

    Momentum in scalable businesses like complete FX and integrated trading solutions.

    ETF positive flows streak
    fifth consecutive quarter
    Q2 FY26

    Reflecting investments in the ETF platform and collaboration.

    Liquidity flows
    record quarter
    Q2 FY26

    Strong performance in liquidity products, gaining market share.

    Money market fund manager rank
    top 10
    Current

    Positioning in the U.S. money market fund market.

    Direct indexer rank
    top 3
    Current

    Position in the direct indexing market.

    Capital raised (alternatives platform)
    approaching 80%of last year's full year total
    H1 FY26

    Strong fundraising momentum for the alternatives platform.

    Visa Class B common stock exchange offer gain
    $525 million
    Q2 FY26

    Gain recognized from participation in the second tranche of the Visa exchange offer.

    Available-for-sale securities portfolio repositioning loss
    $74 million
    Q2 FY26

    Loss associated with strategic repositioning to improve earnings profile.

    Software dispositions charge
    $62 million
    Q2 FY26

    Charge related to software dispositions as part of a periodic review.

    Severance charge
    $51 million
    Q2 FY26

    Charge associated with a reduction in force.

    One-time equity grant expense
    $33 million
    Q2 FY26

    Expense related to a one-time equity grant.

    Operating leverage (excluding notable items)
    over 700 basis points
    Q2 FY26

    Strong operating leverage achieved by revenue growth and expense discipline.

    Total capital returned to shareholders
    $500 million
    Q2 FY26

    Amount returned to shareholders during the quarter.

    Total capital returned to shareholders year-to-date
    over $1 billion
    YTD FY26

    Cumulative capital returned to shareholders through the first half of the year.

    Payout ratio (excluding notable items)
    95%
    H1 FY26

    Payout ratio for the first half of the year, excluding one-time items.

    Industry KPIs

    5
    MetricValueDetails
    Cet1 ratio12.2%%
    Payout ratio63%%
    Pretax margin39.6%%
    Organic fee growthpositive
    Net interest income$683 millionUSD

    Product announcements

    4
    ProductTypeDetails
    Invested as Onelaunch
    AI Capabilities (Client Action Plan Agents)launch
    AI Capabilities (Investment Research & Idea Generation)update
    AI Capabilities (Horizon Scanning Agents)launch

    Deals & partnerships

    1
    Visa Inc.Participation in Class B common stock exchange offer$525 million (pretax gain)

    Northern Trust participated in the second tranche of the Visa Class B common stock exchange offer, monetizing a long-held asset.

    Risks & headwinds

    5
    Normalization of elevated capital markets activitySecond half of FY26

    Expected normalization of foreign exchange, capital markets, and securities lending flows.

    Mitigation: Focus on diversified business model and disciplined expense management.

    Deposit volatilityQ3 FY26

    Large institutional deposits from Q1 and Q2 are not expected to last into the third quarter.

    Mitigation: Distinguishing between operational/sticky deposits and one-time flows; balance sheet flexibility.

    Tougher revenue comparisonsSecond half of FY26

    Year-over-year comparisons for revenue growth will be tougher in the second half of the year due to strong S&P performance in H2 2025 (up 20%).

    Mitigation: Continued focus on organic growth and expense discipline to deliver positive operating leverage.

    Competition for talent in Wealth ManagementOngoing

    Competitive market for the best talent, particularly for revenue-generating professionals and producer roles.

    Mitigation: Offering a differentiated platform, excellent brand, deep fiduciary expertise, strong banking capabilities, and a compelling position in the upper tiers of the market.

    Price compression on liquidity productsQ2 FY26

    Seen a little bit of price compression as it relates to some of our liquidity products.

    Mitigation: Focus on long-term strategies and broader client relationships.

    What to watch in Q3 FY26

    5

    Net interest income (NII) growth

    Next quarter (Q3 FY26) and full year FY26
    Currentup 3% sequentially (Q2 FY26)
    Targetup 9% to 10% year-over-year (FY26)

    Why it matters

    NII is a significant revenue component, and achieving the updated full-year guidance will indicate sustained earnings power despite deposit normalization.

    For the full year, assuming a relatively stable market environment and interest rate backdrop, we now expect net interest income to be up 9% to 10% year-over-year. This is an increase from our previous guide up mid- to high single digits.

    Q&A highlights

    5

    Clarify the drivers behind the 400 bps operating leverage guidance for FY26, given stronger H1 performance, especially regarding expense base and top-line seasonality/normalization.

    Management explained that the H2 operating leverage would be lower due to tougher year-over-year comparisons for revenue (S&P run-up in H2 2025), expected normalization of elevated FX trading, capital markets, and securities lending flows, and the anticipated non-persistence of large institutional deposits from Q1/Q2 into Q3. They assume a flat market and stable interest rates for the guidance.

    “The S&P really had a pretty good run from Q2 to Q4 in '25. It was up 20%. As we get into Q3 and Q4, it's going to be a tougher year-over-year comparison. It still implies solid growth and positive operating leverage in our business going forward. It's just we do feel, as you mentioned, there will be some normalization of foreign exchange, capital markets, sec lending from particularly elevated flows that we had in the quarter.”

    asked by Glenn Schorr · answered by David Fox

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Capital Deployment and Shareholder Returns

    Northern Trust strategically utilized a significant pretax gain of $525 million from the Visa Class B common stock exchange offer. This gain was partially offset by a $74 million pretax loss from repositioning the available-for-sale securities portfolio and $220 million in restructuring charges. The firm returned nearly $500 million to shareholders in Q2, totaling over $1 billion year-to-date, reflecting a 90% payout ratio excluding notables. The Board also approved a 10% increase in the quarterly common dividend, underscoring confidence in earnings power and capital strength.

    02

    Wealth Management Growth Initiatives

    Wealth Management delivered solid results with trust fees up 10% year-over-year and AUM up 14% year-over-year. The firm is expanding its Global Family Office (GFO) playbook to ultra-high net worth clients through 'Family Office Solutions,' which is resonating well with new and existing clients. Efforts are focused on talent acquisition, with good progress in hiring revenue-generating professionals, and enhancing digital marketing through 'Lead Lab' to increase qualified leads by over 50% in H1 FY26, aiming for durable organic growth.

    03

    Asset Servicing Performance and Strategic Focus

    Asset Servicing reported strong revenue growth of 16% year-over-year and a pretax margin of over 30% (excluding notables), benefiting from favorable market conditions and strategic execution. Alternatives remain a key growth area, with assets under administration exceeding $1 trillion across various structures. The business is deepening client relationships by scaling high-value capabilities like outsourced capital market solutions, which saw revenues up almost 50% year-over-year, and progressing digital asset capabilities for institutional clients.

    04

    Asset Management Momentum and Diversified Flows

    NTAM achieved diversified asset gathering, marking its fifth consecutive quarter of positive ETF flows, particularly in U.S. quality large cap and tax-efficient fixed income. Liquidity flows were a record for the quarter, extending a 14-quarter streak of positive organic flows, with the firm ranking as a top 10 money market fund manager in the U.S. The alternatives platform continues fundraising momentum, with capital raised in H1 FY26 approaching 80% of last year's full-year total.

    05

    Augmented Intelligence (AI) Strategy

    Northern Trust is integrating AI as 'augmented intelligence' to enhance service, expertise, and integrity, rather than solely for productivity. Examples include client action plan agents for relationship managers, AI-enhanced investment research in asset management, and horizon scanning agents for cybersecurity. This approach emphasizes human oversight and accountability, aiming to hyper-personalize client experiences and amplify expert advice, with strong employee adoption driving momentum.

    06

    Deposit Dynamics and Net Interest Margin

    Average deposits were $128 billion, down 1% sequentially, with noninterest-bearing deposits increasing 4% to represent 15% of the mix. Net interest income (FTE) was $683 million, up 3% sequentially, and the net interest margin (FTE) expanded 6 basis points sequentially to 1.81%. The sequential NII benefit was driven by improved deposit mix, higher yields from securities repositioning, and an additional day. Management anticipates some large institutional deposits from Q1/Q2 may not persist into Q3.

    AI-generated summary of the company’s earnings call. Not investment advice.