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NORTHERN TRUST CORP (NTRS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid operational progress: diluted EPS rose to $2.13 (+12% QoQ) and GAAP revenue to $1.998B (+3% QoQ), aided by record net interest income and better pre-tax margins; trust fees grew YoY despite FX trading pressure .
  • Versus Wall Street: EPS beat by ~$0.07 and revenue modestly exceeded consensus; Q4 2024 and Q1 2025 were also EPS beats, with Q1 a slight revenue miss (S&P Global data)*.
  • Management raised the medium-term ROE target to 13–15% (from 10–15%), reaffirmed 2025 OpEx growth “below 5%” (ex-notables, regardless of FX), and guided FY 2025 NII to mid-single-digit YoY growth; dividend increased to $0.80 per share and buybacks reached $339M in Q2 .
  • Near-term catalysts: clearer independence stance, higher ROE target, dividend hike/buyback intensity, and improving segment margins; watch for normalization of deposit levels and non-recurring ~$10M NII boost from Treasury FX swaps to fade in Q3 .

What Went Well and What Went Wrong

  • What Went Well

    • “Record net interest income” and “meaningful expansion in our pretax margin,” with EPS up ~20% excluding prior-year notables; dividend increased by $0.05 (7%) .
    • Asset Servicing pre-tax margin expanded >10 pts YoY to 23.2%; Custody & Fund Administration fees +5% YoY; continued wins with asset owners and alternatives momentum .
    • Clear cost discipline: H1 2025 OpEx +4.8% YoY (3.8% ex-FX), on track for <5% FY growth; AI and automation (e.g., GitHub Copilot) cited as productivity drivers bending the cost curve .

  • What Went Wrong

    • FX trading income declined QoQ and YoY due to unfavorable treasury FX swap activity; core FX ex-swaps was +10% YoY, but reported FX was pressured .
    • Provision for credit losses rose to $16.5M on higher reserves for a small number of NPLs and macro outlook deterioration (partly offset by CRE improvements) .
    • Wealth Management fees were flat QoQ (-$2.6M) with pre-tax margin “flattish” (37.2%); organic growth beneath ultra-high-net-worth tiers remains a gradual build via targeted market penetration .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Revenue (GAAP, $USD Millions)$1,959.6 $1,940.0 $1,997.9
Diluted EPS ($)$2.26 $1.90 $2.13
Net Interest Income (FTE, $USD Millions)$574.3 $573.7 $615.2
Net Interest Margin (FTE, %)1.71% 1.69% 1.69%
Pre-Tax Margin (FTE, %)30.7% 27.1% 28.4%
Trust, Investment & Other Servicing Fees ($USD Millions)$1,222.2 $1,213.8 $1,231.1
Revenue Consensus Mean ($)*$1,932.9$1,948.2$1,961.2
EPS Consensus Mean ($)*$2.033$1.838$2.065

Values marked with * retrieved from S&P Global.

Segment breakdown

Segment MetricQ2 2024Q1 2025Q2 2025
Asset Servicing Fees ($USD Millions)$650.6 $671.9 $691.8
Asset Servicing Pre-Tax Margin (FTE, %)12.9% 20.9% 23.2%
Wealth Mgmt Fees ($USD Millions)$515.5 $541.9 $539.3
Wealth Mgmt Pre-Tax Margin (FTE, %)33.4% 37.1% 37.2%

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
Total AUC/A ($USD Billions, EOP)$16,788.0 $16,924.0 $18,068.3
Total AUM ($USD Billions, EOP)$1,610.4 $1,607.8 $1,697.7
CET1 (Standardized, %)12.4% 12.9% 12.2%
CET1 (Advanced, %)14.5% 15.3% 15.0%
Effective Tax Rate (%)23.4% 24.8% 25.4%
Common Stock Repurchases ($USD Millions)$253.7 $287.2 $339.4
Common Dividend per Share ($)$0.75 $0.75 $0.75 (declared in Q2), increased to $0.80 subsequently

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ROE Target (Medium-term)Multi-year10–15% 13–15% Raised
Total OpEx Growth (ex-notables)FY 2025—Below 5%, regardless of currency Maintained/Explicit
Net Interest Income (YoY)FY 2025—Mid-single-digit increase New
Deposits outlookQ3 2025—Modest decline (seasonal), mix mostly stable New/Specific
Dividend on common stockOngoing$0.75 per quarter $0.80 per quarter (effective Oct 1, 2025) Raised
Medium-term financial targetsMulti-yearPre-tax margin >30%; Expense/Trust fee 105–110% Reiterated trajectory toward targets Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 & Q1 2025)Current Period (Q2 2025)Trend
AI/Technology & Productivity“Laid the foundation to scale automation and accelerate A.I. tools”; operational modernization Deploying AI (GitHub Copilot, document digitization) to reduce manual effort and bend cost curve Expanding and embedding
Macro/Deposits & NII60–63% of deposits covered by highly liquid assets; NIM improvement Record NII; avg deposits +6% QoQ; ~$10M FX swap NII uplift not expected to persist; Q3 seasonality Strong but normalizing
Alternatives & ETFsStrengthened platform; positive net flows Record fundraising at 50 South; advisory AUA +66%; launching 11 fixed income ETFs in 3Q Accelerating
Independence/M&AStrategic pillars focused on organic growth “We have never entertained sale discussions…remain independent”; scale ≠ size Reaffirmed independence
Regulatory/CapitalStrong ratios; SCB minimum maintained Constructive regulatory outlook; CET1 12.2% (Std) / 15.0% (Adv) Stable
Tokenization/Stablecoins—Advancing capabilities; moving to public blockchains; tokenization pilots (e.g., carbon credits) Emerging initiative
Segment MarginsAsset Servicing margin progress Asset Servicing margin 23.2% (Q2); target moving toward high-20s/30s over time Improving

Management Commentary

  • CEO strategic summary: “another quarter of strengthening results…mid-single digit trust fee growth, record net interest income, and meaningful expansion in our pretax margin…yesterday, our Board…approved a $0.05 or 7% increase to our quarterly dividend” .
  • Cost/productivity: “on track to achieve…below 5% [OpEx growth]…accelerating deployment of AI tools…to streamline processes, reduce manual effort” .
  • Independence: “we have never entertained discussions regarding the sale of the company…nor do we intend to” .
  • ROE target rationale: raising range to 13–15% given momentum and clearer capital framework .
  • NII guide/deposits: FY NII up mid-single digits; Q3 deposit seasonality and mix stability; ~$10M non-recurring treasury FX swap contribution in Q2 .

Q&A Highlights

  • Alternatives & ETFs: $2.5B raised YTD across platforms (+$1B advisory); fixed income ETFs to address muni, ladders, and client demand .
  • Scale vs size in custody: focus on scalable capabilities, centralization, standardization, automation; aim for Asset Servicing margins to move from low-20s toward high-20s and 30s over time .
  • Capital return: buybacks calibrated to capital/earnings/ROE/loan growth; on pace to exceed last year’s capital return (which included Visa) .
  • Deposits: risk-off in Q2 drove levels up; normalizing in Q3 with typical seasonality; one very large euro deposit handled via flexible balance sheet .
  • Regulatory: constructive outlook on capital/liquidity/operational risk; investments in control environment continuing .
  • Tokenization/stablecoins: capability build to interact with public chains; broadening digital asset support .
  • Timeline to >30% pre-tax margin: management implied around 2027 under normalized rate environment and continued execution .

Estimates Context

PeriodRevenue Consensus Mean ($)*Reported Revenue ($)EPS Consensus Mean ($)*Reported Diluted EPS ($)
Q4 20241,932,920,250$1,959,600,000 2.033$2.26
Q1 20251,948,168,580$1,940,000,000 1.838$1.90
Q2 20251,961,178,860$1,997,900,000 2.065$2.13

Values marked with * retrieved from S&P Global.
Implications: Q2 and Q4 were clear EPS beats with revenue above consensus; Q1 had an EPS beat but slight revenue miss*. These beats, alongside stronger margin trajectory, support upward estimate revisions to NII and segment profitability.

Key Takeaways for Investors

  • Improving earnings quality: record NII, better pre-tax margins, Asset Servicing margin expansion, and stable NIM at 1.69% despite deposit normalization .
  • Capital deployment ramping: $339M buybacks and dividend raised to $0.80, supported by robust capital ratios (CET1 Std 12.2%; Adv 15.0%) and payout of ~117% in Q2 .
  • Medium-term returns recalibrated: ROE target increased to 13–15% signals confidence in sustainable profitability and cost discipline .
  • Near-term watch items: the non-recurring ~$10M NII benefit from FX swaps should fade; Q3 deposit seasonality likely to lower deposits modestly; FX trading visibility remains influenced by treasury swap activity .
  • Strategic growth vectors: alternatives (50 South, advisory), ETF platform expansion, and asset owner wins provide diversified fee growth pathways; AI-enabled productivity underpins margin expansion .
  • Independence stance removes deal uncertainty; execution focus, scalable operating model, and technology leverage should continue to drive operating leverage and valuation support .
* S&P Global estimates disclaimer: Consensus values (revenue and EPS) are retrieved from S&P Global.