Northern Trust (NTRS) Barclays 23rd Annual Global Financial Services Conference summary

Business unit performance and strategy

• Asset servicing is focusing on scalable, higher-margin opportunities, bidding less frequently but with greater discipline to improve profitability and margin of safety.

• Organic growth in asset servicing remains solid, though below target, with a more deliberate approach expected to strengthen long-term prospects.

• Wealth management's family office segment is a standout, with strong growth and high penetration among ultra-high-net-worth clients, while regional product utilization remains episodic.

• Asset management is seeing strong liquidity flows and performance in active fixed income, with leadership changes driving greater collaboration across business lines.

• Pricing pressures are present in asset management, but fee rates in wealth management advisory remain resilient, and competitive pressures are most intense at the high end of the market.

Financial performance and outlook

• Deposits have held up better than expected, with high betas anticipated if rates decline, and a significant portion of deposits remain non-interest bearing.

• Net interest income is expected to be flat in the near term, with potential declines if rates fall, but deposit volumes may offset some pressure.

• Fee income from trust operations is solid, while FX volatility has not materially impacted results.

• Expense growth exceeded initial targets due to accelerated investments in modernization and resiliency, but headcount growth has flattened and productivity initiatives are underway.

• Expense growth is expected to fall below 5% in 2025, with labor and other costs targeted for further reductions and technology spend gradually declining.

Capital, credit, and risk management

• CET1 ratio increased significantly, aided by the Visa gain, leaving ample capital and liquidity for share repurchases and investments.

• Anticipated regulatory changes are expected to have a manageable impact on risk-weighted assets, with the balance sheet remaining short in duration and high in quality.

• Credit quality remains strong, with over 90% of the loan book guaranteed and nonperformers at historic lows, despite a recent increase in watchlist loans.

• Investments in resiliency and modernization are client- and regulator-driven, with spend expected to remain elevated through mid-2025 before normalizing.

• Technology and automation, including AI, are being deployed to drive efficiency in asset servicing and wealth management.