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NORTHERN TRUST CORP (NTRS)·Q3 2025 Earnings Summary

Executive Summary

  • EPS of $2.29 grew 7% q/q and 3% y/y; pre-tax margin expanded to 30.8% (FTE), the fifth consecutive quarter of positive operating leverage, aided by expense discipline and capital markets strength .
  • Total revenue (FTE) was $2.031B, up 1% q/q and 3% y/y; net interest income (FTE) was $596M, down 3% q/q as deposits normalized from elevated Q2 levels, while net interest margin rose to 1.70% .
  • Management raised full-year NII growth guidance to mid–high single digits and reiterated full-year operating expense growth below 5%; effective tax rate expected to align with YTD .
  • Capital return remained robust: quarterly dividend increased to $0.80 (from $0.75) and $277M of share repurchases, totaling a 98% payout in Q3 and 110% year-to-date .

What Went Well and What Went Wrong

What Went Well

  • Trust, investment and other servicing fees rose 6% y/y to $1.266B; Asset Servicing fees +6% y/y and Wealth Management fees +5% y/y, driven by favorable markets, net new business, and FX .
  • Capital markets momentum: FX trading income +6% y/y and securities commissions/trading +18% y/y, with >100 new clients year-to-date via outsourced trading and currency management services .
  • Strategic execution and AI adoption: “AI is embedded in more than 150 use cases…saving our partners tens of thousands of hours,” supporting productivity and cost curve bending .

What Went Wrong

  • Net interest income (FTE) declined 3% q/q to $596M due to lower deposit balances; average deposits fell 5% q/q to $116.7B as seasonal normalization followed elevated Q2 levels .
  • AUCA sequential growth (+1%) masked client-specific outflows; management noted a large asset manager restructuring and one redemption with limited fee impact ($300–400K/month), highlighting ebb-and-flow in asset manager AUC .
  • Effective tax rate rose 70 bps q/q to 26.1% due to higher tax impacts from international operations .

Financial Results

P&L and Margin Trends (Quarterly)

MetricQ1 2025Q2 2025Q3 2025
Total Revenue (FTE, $USD Millions)$1,945.6 $2,002.6 $2,030.9
Net Interest Income (FTE, $USD Millions)$573.7 $615.2 $596.3
Noninterest Expense ($USD Millions)$1,417.6 $1,416.6 $1,422.9
Net Income ($USD Millions)$392.0 $421.3 $457.6
Diluted EPS ($USD)$1.90 $2.13 $2.29
Pre-tax Margin (FTE, %)27.1% 28.4% 30.8%
ROE (%)13.0% 14.2% 14.8%

Results vs Wall Street Consensus (Q3 2025)

MetricQ3 2025 ActualQ3 2025 Consensus*Surprise
Revenue (Total, $USD Billions)$2.042$2.031*+$0.011B (~+0.6%)*
Primary EPS ($USD)$2.29$2.251*+$0.039*
# of Estimates (EPS / Revenue)12 / 912 / 9*—

Values retrieved from S&P Global. Results may reflect methodological differences (e.g., FTE vs GAAP).*

Segment Breakdown – Trust, Investment and Other Servicing Fees

Segment / Line Item ($USD Millions)Q3 2024Q2 2025Q3 2025
Asset Servicing – Custody & Fund Admin$453.1 $469.2 $482.7
Asset Servicing – Investment Mgmt$152.6 $157.3 $159.6
Asset Servicing – Securities Lending$17.5 $20.2 $21.2
Asset Servicing – Other$43.9 $45.1 $43.4
Total Asset Servicing Fees$667.1 $691.8 $706.9
Wealth Mgmt – Central$186.6 $189.2 $200.6
Wealth Mgmt – East$136.4 $139.3 $146.0
Wealth Mgmt – West$105.7 $106.3 $110.5
Wealth Mgmt – Global Family Office$100.8 $104.5 $101.5
Total Wealth Mgmt Fees$529.5 $539.3 $558.6
Total Consolidated Fees$1,196.6 $1,231.1 $1,265.5

KPIs

KPIQ3 2024Q2 2025Q3 2025
AUC/A ($USD Trillions, End of Period)$17.423 $18.068 $18.248
AUM ($USD Trillions, End of Period)$1.622 $1.698 $1.773
Average Deposits ($USD Billions)$112.6 $122.4 $116.7
Net Interest Margin (FTE, %)1.68% 1.69% 1.70%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Expense GrowthFY 2025Below 5% Below 5% Maintained
Net Interest Income GrowthFY 2025Not specified in Q3 docsMid–high single digits Raised (tweaked up)
Effective Tax RateFY 2025Not specified in Q3 docsIn line with YTD effective rate Maintained
Quarterly Dividend per ShareQ4 2025 / Payable Jan 1, 2026$0.75 $0.80 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
AI/Technology initiativesOngoing productivity focus; “bending the cost curve” referenced as continuing quarterly effort “AI embedded in 150+ use cases; Copilot to all employees; ~20% programming efficiency improvement; automation in muni FI call analysis” Accelerating adoption and measurable gains
Asset Servicing profitability focusEmphasis on operating leverage and margin improvement across quarters Targeted margin accretion via high-margin wins, pricing discipline, and selective roll-off of underperforming business; pre-tax margin up to 24.7% Improving margins
Capital markets/business mixBuilding durable brokerage/FX streams beyond volatility dependence >100 new clients YTD via outsourced trading; FX and brokerage revenues up; currency management as a service More recurring/reliable
Deposits/NIISeasonal deposit patterns and sensitivity discussed across quarters Q3 average deposits -5% q/q; NII down 3% q/q; NIM up; FY NII guidance raised Normalizing deposits; improving outlook
Alternatives/ETFs/SMAsGrowth initiatives noted YTD11 new ETF strategies launched; feeder fund structure via 50 South; liquidity flows positive 11th consecutive quarter Expanding product set
Digital assets/stablecoin/tokenizationStrategy development ongoingNo stablecoin issuance planned; focus on tokenized money market funds; interoperability with traditional assets emphasized Practical issuance path (tokenized MMF)

Management Commentary

  • “For the fifth consecutive quarter, we delivered positive organic growth and operating leverage…pre-tax margin expanded by nearly 200 bps, and EPS grew 14%…Return on equity reached 14.8%” .
  • “AI is rapidly becoming a catalyst for innovation and efficiency…embedded in more than 150 use cases…saving our partners tens of thousands of hours” .
  • “We’re also selectively allowing non-core and underperforming business to roll off…we expect a continued gradual trajectory of margin improvement and overall growth” .
  • CFO: “We now expect full-year NII to grow by mid to high single digits…we continue to expect operating expense growth to be below 5% for the full year” .
  • CFO on expense discipline: “We’re not done bending that cost curve down…the productivity we are going to realize in 2025 is great, but 2026 will probably be greater” .

Q&A Highlights

  • NII and deposits: Deposits normalized as expected; slight pickup seen in Q4; FY NII guidance raised; 2026 NII outlook flat to +1–2% with mitigants (repricing, deposit pricing, securities roll-offs) .
  • AUCA dynamics: Client-specific restructuring (mutual fund to CIT) and one redemption drove outflows; limited fee impact (~$300–400K/month), with potential earn-back next quarter .
  • Pricing/fees: Persistent fee pressure in asset management; wealth fees sometimes reduced to stay competitive; servicing pricing disciplined with accretive new business .
  • Asset servicing strategy: Margin focus via selective roll-off and efficiency under COO operating model; pre-tax margin moved toward ~25% .
  • Capital markets: Outsourced trading and currency management building recurring revenue streams; diversified liquidity (including FICC repo) .
  • Digital assets: No stablecoin issuance planned; focus on tokenizing MMFs; platform interoperability with traditional assets .

Estimates Context

  • Q3 2025 results were modest beats: EPS $2.29 vs consensus $2.251, revenue $2.042B vs consensus $2.031B; 12 EPS and 9 revenue estimates contributed to consensus.* This supports management’s confidence in NII and operating leverage trajectory .
    Values retrieved from S&P Global.*

  • Implications: Consensus may nudge higher for FY NII after guidance raise; expense outlook likely unchanged (<5% growth), while segment margin expectations for Asset Servicing could improve given demonstrated accretion .

Key Takeaways for Investors

  • Raised NII guidance to mid–high single digits with deposit normalization and pricing actions; NIM improved to 1.70% .
  • Expense growth capped <5% for FY; productivity and AI initiatives are visibly bending the cost curve .
  • Asset Servicing margins are trending up via accretive wins and disciplined portfolio pruning; pre-tax margin reached 24.7% .
  • Capital markets strategy is paying off (outsourced trading, currency management as a service), diversifying fee streams .
  • Strong capital return: dividend increased to $0.80 and $277M buybacks in Q3; payout 98% in Q3 and 110% YTD .
  • Alternatives/ETF innovation and WM/GFO momentum underpin fee growth; feeder fund structure improves access to top managers .
  • Near-term trading: Modest beat and guidance raise are positive catalysts; watch deposit trajectory and AUCA mix in Q4. Medium-term thesis: sustained operating leverage through AI-driven efficiency and disciplined segment economics should support margin resilience across cycles .