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    NTRS
    Earnings call· Dec 2025(Q4 FY25)

    NORTHERN TRUST CORP NTRS

    Jan 22, 2026 Source

    Executive summary

    Northern Trust Q4 FY25 — Strong Performance and Raised Medium-Term Targets

    Northern Trust delivered a strong Q4 FY25, marked by significant revenue growth and margin expansion, driven by its 'One Northern Trust' strategy and productivity initiatives. The company raised its medium-term financial targets, including pretax margin and ROE, reflecting confidence in its operational improvements and capital allocation. Management emphasized a focus on profitable, scalable growth and disciplined expense management, aiming for sustained double-digit EPS growth through cycles.

    Highlights

    5

    • Q4 revenue up 9% YoY (excluding notables), driven by 7% trust fee growth and 14% net interest income increase.

    • Q4 pretax margin expanded 250 bps to 33.2% (excluding notables), with over 4 points of positive operating leverage.

    • FY25 EPS grew 17% (excluding notables), with ROE at 14.8% (excluding notables).

    • Record $1.3 billion in share repurchases in FY25, reducing share count by 5%.

    • Productivity savings exceeded 4% of the expense base in FY25, with the 2026 target raised by 10%.

    Concerns

    5

    • Q4 effective tax rate increased 310 bps YoY to 26.5%, largely due to higher international tax impacts.

    • Wealth Management pretax profit decreased 3% YoY (including $15.2 million severance charges), with margin contracting 300 bps to 38.9%.

    • Average loans in Wealth Management were down 4% sequentially due to a large GFO loan repayment.

    • Asset Servicing loan volume remained down 8% YoY, despite a 6% sequential increase.

    • Q4 results included $69 million in net unfavorable notable items, including $59 million in severance-related expense.

    Guidance & targets

    8
    CategoryTargetConfidence
    Pretax margin
    33%
    high materiality
    High
    Return on equity (ROE)
    mid-teens
    high materiality
    High
    Expense-to-trust fee ratio
    below 110%
    high materiality
    High
    EPS growth
    double-digit
    high materiality
    High
    Effective tax rate
    approximately 26% to 26.5%
    medium materiality
    High
    Net interest income (NII) growth
    low to mid-single digits
    high materiality
    High
    Operating leverage
    more than 100 basis points
    high materiality
    High
    Capital return
    more than 100% of earnings
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Wealth Management
    Strong quarter with GFO winning 3 largest deals of the year and Priority Markets delivering best overall quarter. Healthy incremental flows, including $5 billion in GFO. Pretax profit decreased due to severance charges.
    Assets under management: $507 billionAssets under management growth YoY: 13%Trust fees (regions) YoY growth: 5% (Q4), 6% (FY)GFO trust fees YoY growth: 6% (Q4), 5% (FY)Average deposits QoQ growth: 5%Average loans QoQ growth: -4%Pretax profit YoY change (incl. severance): -3%Pretax margin YoY change (ex-severance): -120 bpsOrganic growth rate: 1-2% (FY)
    		$578 million6%—38.9% pretax margin
    Asset Servicing
    Very strong finish to the year with accelerated transaction volumes and robust capital markets activities. New business generation was healthy and margin accretive. Segment margin benefited from seasonally strong deposit levels and focus on cross-selling high-margin products.
    Assets under custody and administration: $17.4 trillionAssets under custody and administration growth YoY: 11%Custody and fund administration fees: $496 millionCustody and fund administration fees YoY growth: 9%Assets under management: $1.3 trillionAssets under management growth YoY: 12%Investment management fees: $166 millionInvestment management fees YoY growth: 6%Average deposits QoQ growth: 3%Average deposits YoY growth: 6%Loan volume QoQ growth: 6%Loan volume YoY growth: -8%Pretax profit YoY growth: 23%Pretax profit YoY growth (ex-severance): 40%Pretax margin expansion YoY: 210 bpsPretax margin expansion YoY (ex-severance): 550 bpsPretax margin on new business: >30%Organic growth rate: 2-3% (Q4)
    		$730 million8%—25.5% pretax margin
    Firm-wide
    Trust, investment and other servicing fees totaled $1.3 billion, a 3% sequential increase and a 7% increase compared to last year.
    		$1.3 billion (Trust fees)7% (Trust fees)3% (Trust fees)—

    Operational metrics

    65
    Return on equity
    14.8%
    FY25

    excluding notables

    Severance-related expense
    $15.2 million
    Q4 FY25

    included in Wealth Management pretax profit calculation

    Expense growth
    3.8%YoY
    Q4 FY25

    excluding notables and unfavorable currency movements

    Expense growth
    4.3%YoY
    FY25

    excluding notables and unfavorable currency movements

    Net favorable notable items
    $536 million
    FY24

    recorded in Q1-Q3 2024, including Visa B share monetization

    Visa B share monetization gain
    $878 million
    FY24

    part of net favorable notables in 2024

    Tier 1 leverage ratio
    7.8%down 20 bps QoQ
    Q4 FY25

    driven by larger balance sheet

    Revenue growth
    9%YoY
    Q4 FY25

    excluding notables

    EPS growth
    19%YoY
    Q4 FY25

    excluding notables

    Revenue growth
    7%YoY
    FY25

    excluding notables

    Expense growth
    5%YoY
    FY25

    excluding notables

    Operating leverage
    >2 points
    FY25

    excluding notables

    EPS growth
    17%YoY
    FY25

    excluding notables

    Total capital returned to shareholders
    $1.9 billion
    FY25

    including share repurchases and dividends

    Share repurchases
    $1.3 billion
    FY25

    record amount

    Share count reduction
    5%YoY
    FY25

    due to share repurchases

    Productivity savings
    >4%
    FY25

    of expense base

    Productivity target increase
    10%YoY
    2026

    target for 2026 productivity savings

    Currency impact on revenue
    +90 bpsYoY
    Q4 FY25

    favorable impact

    Currency impact on expense
    -140 bpsYoY
    Q4 FY25

    unfavorable impact

    Assets under custody and administration growth
    3%QoQ
    Q4 FY25

    firm-wide

    Assets under custody and administration growth
    11%YoY
    Q4 FY25

    firm-wide

    Assets under management growth
    2%QoQ
    Q4 FY25

    firm-wide

    Assets under management growth
    12%YoY
    Q4 FY25

    firm-wide

    Credit reserve release
    $8 million
    Q4 FY25

    largely reflecting refinements to estimate losses for C&I portfolio

    Effective tax rate
    26.5%up 310 bps YoY
    Q4 FY25

    largely due to higher tax impacts from international operations

    Net unfavorable notable items
    $69 million
    Q4 FY25

    includes Visa swaps expense, severance, and FDIC special assessment release

    Visa swaps expense
    $19 million
    Q4 FY25

    recognized within other operating income

    Severance-related expense
    $59 million
    Q4 FY25

    primarily recognized within compensation expense

    FDIC special assessment reserve release
    $10 million
    Q4 FY25

    recognized within other operating expense

    Operating leverage
    >4 points
    Q4 FY25

    excluding notables

    Average shares outstanding decrease
    5%YoY
    Q4 FY25

    due to share repurchases

    Assets under management
    $507 billion
    Q4 FY25

    for Wealth Management clients

    Assets under management growth
    13%YoY
    Q4 FY25

    for Wealth Management clients

    Average deposits growth
    5%QoQ
    Q4 FY25

    reflecting year-end portfolio repositioning and new business momentum

    Average loans growth
    -4%QoQ
    Q4 FY25

    reflecting repayment of a large GFO loan

    Assets under custody and administration
    $17.4 trillion
    Q4 FY25

    for Asset Servicing clients

    Assets under custody and administration growth
    11%YoY
    Q4 FY25

    for Asset Servicing clients

    Assets under management
    $1.3 trillion
    Q4 FY25

    for Asset Servicing clients

    Assets under management growth
    12%YoY
    Q4 FY25

    for Asset Servicing clients

    Average deposits growth
    3%QoQ
    Q4 FY25

    reflecting normal seasonal patterns

    Average deposits growth
    6%YoY
    Q4 FY25

    for Asset Servicing clients

    Loan volume growth
    6%QoQ
    Q4 FY25

    from third quarter levels

    Loan volume growth
    -8%YoY
    Q4 FY25

    albeit off a small base

    Average earning assets growth
    3%QoQ
    Q4 FY25

    as higher deposits drove an increase in cash and securities portfolio

    Debt issuance
    $1.25 billion
    Q4 FY25

    new debt issued

    Fixed percentage of securities portfolio
    52%down from 54% QoQ
    Q4 FY25

    including impact of swaps

    Duration of securities portfolio
    1.48dipped slightly QoQ
    Q4 FY25

    at end of quarter

    Duration of total balance sheet
    <1 year
    Q4 FY25

    continued to be under one year

    Average deposits
    $119.8 billionup 3% QoQ
    Q4 FY25

    reflecting normal seasonality

    Interest-bearing deposits growth
    2%QoQ
    Q4 FY25

    sequential increase

    Noninterest-bearing deposits growth
    10%QoQ
    Q4 FY25

    sequential increase

    Noninterest-bearing deposits mix
    15%
    Q4 FY25

    of overall deposit mix

    Net interest margin
    1.81%sequential increase
    Q4 FY25

    reflecting favorable deposit pricing actions and mix shift; artificially boosted by FTE true-up, underlying was high 170s

    Expense growth
    9%YoY
    Q4 FY25

    firm-wide

    Expense growth
    5%YoY
    Q4 FY25

    excluding notables

    Expense-to-trust fee ratio
    110.8%
    Q4 FY25

    excluding notables; sixth consecutive quarter of YoY improvement

    Currency impact on revenue
    +50 bpsYoY
    FY25

    favorable impact

    Currency impact on expense
    -60 bpsYoY
    FY25

    unfavorable impact

    Operating leverage
    >200 bps
    FY25

    excluding notables

    Unrealized after-tax loss on AFS securities
    $401 million
    Q4 FY25

    at quarter end

    Total capital returned to common shareholders
    $522 million
    Q4 FY25

    through cash dividends and stock repurchases

    Cash dividends
    $152 million
    Q4 FY25

    paid to common shareholders

    Stock repurchases
    $370 million
    Q4 FY25

    executed in Q4

    Net interest margin
    stable in 170s
    2026

    expected to remain stable during the course of the year

    Industry KPIs

    4
    MetricValueDetails
    Cet1 ratio12.6%%
    Payout ratio113%%
    Pretax margin33.2%%
    Net interest income$654 millionUSD

    Product announcements

    5
    ProductTypeDetails
    Family Office Solutions (FOS)launch
    Tokenized share class of money market fundlaunch
    Distributing ladder ETFslaunch
    Long, short tax-advantaged equity strategyroadmap
    Customized fixed income SMAsexpansion

    Risks & headwinds

    3
    Dramatic changes in interest rates

    500 basis points in a year

    Mitigation: Difficult for financial institutions to adjust; creates big issues if rates go up or down dramatically (e.g., zero rates, waivers on money market funds).

    Market downturns

    Markets going down

    Mitigation: Much of the business is priced on AUM/AUC/AUA levels, so a market decline would have a big financial impact.

    Challenging operational environments

    Not quantified

    Mitigation: Requires extreme adaptability to operate the business and continue providing client services (e.g., pandemic). Company invests to prepare and anticipate such environments.

    What to watch in Q1 FY26

    5

    Deposit levels normalization

    Q1 FY26
    CurrentUp 3% QoQ to $119.8 billion, with noninterest-bearing up 10% QoQ
    TargetNormalization from Q4 surge

    Why it matters

    Deposit levels and mix significantly impact Net Interest Income (NII) and Net Interest Margin (NIM) trajectory.

    We expect deposit levels to normalize in the first quarter. Within the deposit base, interest-bearing deposits increased 2% sequentially and noninterest-bearing deposits increased by 10%, climbing to 15% of the overall mix.

    Q&A highlights

    8

    Given the raised medium-term targets, how confident is management in the ongoing organizational changes, and when will their impact be fully reflected in financial results?

    Management has high conviction in the changes, seeing early positive financial results. The 3-5 year medium-term timeframe allows for continued execution and consistent high performance, with current year operating leverage already moving towards these targets.

    “I would say, Brennan, that we have a high level of conviction that we're seeing the change transmit through the entire company.”

    asked by Brennan Hawken · answered by Michael O'grady

    2 min read6 chapters

    Detailed Narrative

    01

    One Northern Trust Strategy Execution

    The company made significant progress on its 'One Northern Trust' strategy in 2025, focusing on optimizing growth, enhancing productivity, and strengthening resiliency. This involved deepening client relationships, expanding market share in key areas like private markets and capital markets, and improving collaboration across business units. The strategy aims to deliver consistent high performance and meaningful value for stakeholders.

    02

    Productivity and Operational Efficiency

    Northern Trust initiated significant changes to enhance and scale operations, including a client-centric capability operating model. This standardized core processes, increased managerial spans of control by over 35%, and reduced management layers by over 20%. Accelerated deployment of AI across high-volume activities drove efficiency gains, contributing to productivity savings exceeding 4% of the expense base in 2025, with a 10% increase targeted for 2026.

    03

    Wealth Management Growth Initiatives

    Wealth Management showed strong momentum, particularly in upper-tier segments like Global Family Office (GFO) and ultra-high net worth. GFO achieved record new business in 2025, with international markets up 15%. The new Family Office Solutions (FOS) platform, serving families with over $100 million net worth, exceeded client and asset goals. The company plans to invest in growth-oriented talent, sharpen incentives for new client acquisition, and expand its suite of investment solutions, including alternatives and direct indexing.

    04

    Asset Servicing Strategic Focus

    Asset Servicing improved organic growth and profitability by focusing on scalable growth in core product areas. Capital markets performed well, with robust FX trading and integrated trading solutions activity. Private markets win-related revenue was up 18% YoY. The strategy for 2026 includes scaling core fund administration and depository services, increasing cross-sell of capital markets activities, expanding the global asset owner franchise, and enhancing products like ETF servicing and digital asset capabilities.

    05

    Asset Management Product Innovation and Flows

    NTAM delivered a solid year, with liquidity being particularly strong, marking the 12th consecutive quarter of positive flows and liquidity AUM reaching nearly $340 billion. The company broadened its liquidity franchise by introducing a tokenized share class of a money market fund. Product innovation included doubling product launches YoY, with 11 new ETFs and expansion of SMA fixed income. Direct indexing and customized SMAs saw $5 billion of net organic flows in tax-advantaged equity suite.

    06

    Balance Sheet and NII Trends

    Average earning assets increased 3% sequentially, driven by higher deposits. The company issued $1.25 billion in new debt in November, swapped to floating rates, and invested proceeds at a positive carry. Average deposits were $119.8 billion, up 3% sequentially, with noninterest-bearing deposits increasing 10% and comprising 15% of the mix. Net interest income reached a record $654 million, up 10% sequentially, benefiting from higher deposits, a greater proportion of noninterest-bearing deposits, and pricing actions.

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