• Net Income: $455 million for the fourth quarter.
• Earnings Per Share (EPS): $2.26 for the fourth quarter.
• Return on Average Common Equity: 15.3% for the fourth quarter.
• Trust, Investment, and Other Servicing Fees: $1.2 billion, a 12% increase year-over-year.
• Net Interest Income (FTE basis): $574 million, up 15% year-over-year.
• Assets Under Custody and Administration: $15.6 trillion, up 9% year-over-year.
• Assets Under Management: $1.2 trillion, up 12% year-over-year.
• Trust Fees: Up 8% for the full year 2024.
• Operating Leverage: Over 600 basis points of trust fee operating leverage and nearly 800 basis points of overall operating leverage.
• Expense-to-Trust Fee Ratio: Improved by 100 basis points to 113% on a linked-quarter basis.
• Capital Return to Shareholders: $403 million in the fourth quarter and over $1.5 billion for the full year.
• Common Equity Tier 1 Ratio: 12.4% under the standardized approach.
• Tier One Leverage Ratio: 8.1%, flat with the prior quarter.

• Warning! GuruFocus has detected 7 Warning Signs with NTRS.

Release Date: January 23, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Northern Trust Corp (NASDAQ:NTRS) reported a 12% increase in trust fees and a 15% growth in net interest income compared to the previous year.
• The company achieved a 50% increase in earnings per share year-over-year, excluding notable items.
• Northern Trust Corp (NASDAQ:NTRS) returned over $400 million to shareholders in the fourth quarter and $1.5 billion for the full year, marking a five-year high.
• The company made significant progress in its 'One Northern Trust' strategy, focusing on optimizing growth, strengthening resiliency, and driving productivity.
• The Global Family Office (GFO) segment showed strong performance with a 9% increase in wealth deposits and a nearly 400 basis point expansion in segment pretax margin.

Negative Points

• Assets under custody and administration were down 4% sequentially, impacted by unfavorable currency movements and weaker markets.
• The company experienced a 1% sequential decline in assets under management, despite a 12% year-over-year increase.
• Noninterest expenses increased by 5.5% year-over-year, driven by higher compensation and modernization costs.
• Currency impacts unfavorably affected fourth-quarter revenue growth by approximately 50 basis points.
• Despite strong performance, Northern Trust Corp (NASDAQ:NTRS) faces challenges in maintaining service quality while reducing headcount in asset servicing.

Q & A Highlights

Q: Can you provide more details on the durability of the 7% growth in noninterest-bearing deposits and the pricing adjustments made in line with market conditions? A: Noninterest-bearing deposits were up over $1 billion, likely due to some seasonality. Regarding pricing adjustments, we've focused on overall liquidity and balance sheet management, ensuring our deposit pricing aligns with market conditions and maintaining consistent betas across multiple currencies. - David Fox, CFO

Q: Alternatives are a big part of your objectives across Wealth, Asset Management, and Asset Servicing. Can you discuss the acceleration and specifics of product demand? A: Alternative investment solutions are crucial across our businesses. We offer private market solutions through 50 South Capital and other private capital managers. We aim to expand options on our platform and ensure our portfolio managers are well-versed in private capital alternatives. Additionally, we provide advisory services to larger institutions and banking solutions to private capital firms. - Michael O'Grady, CEO

Q: Is the 5% or below expense growth target for 2025 still reasonable, and what variables should we watch? A: I have strong conviction around the 5% or below expense growth target for 2025. Our focus is on driving down the expense curve to maintain a resilient business model, regardless of market conditions. - David Fox, CFO

Q: Why haven't the ROE targets moved higher, especially with recent growth rates? A: Our 10% to 15% ROE range accounts for different market environments and capital requirements. We're driving for higher returns on capital while also focusing on growth. Achieving a higher ROE could detract from our ability to grow the business, so we aim for a balance between growth and returns. - Michael O'Grady, CEO

Q: How have you managed to reduce headcount in asset servicing while maintaining service quality? A: We've reorganized our operations under a Chief Operating Officer to gain efficiency through centralization, standardization, and automation. Investments in technology have helped us maintain service quality while achieving greater scalability and resiliency. - Michael O'Grady, CEO

Q: What are the risks you focus on, aside from geopolitical risks, given the optimistic outlook for 2025? A: We focus on macroeconomic factors like market downturns and central bank activities, which can impact liquidity and interest rates. We prepare for operational risks and ensure resilience to handle surge volumes and maintain financial stability. - Michael O'Grady, CEO

Q: How do you plan to use your elevated capital levels, and where do you want to bring them over the next year? A: We have strong capital levels, allowing us to continue share repurchases at a higher pace. We're comfortable with our current levels but are open to moving them down somewhat. We aim for a payout ratio of 78% or higher in 2025. - Michael O'Grady, CEO

Q: Can you explain the subdued AUM and AUC growth relative to peers in 4Q and any plans for organic growth targets? A: The sequential decline was mainly due to currency movements and exposure to weaker markets like fixed income. We don't plan to include organic growth targets due to the complexity of estimating market and currency impacts. - David Fox, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.