Northern Trust (NTRS -1.79%), the financial services company known for its institutional asset servicing and wealth management, reported its second quarter 2025 results on July 23, 2025. The quarter's headline news was a solid earnings beat, with EPS of $2.13 against a $2.06 analyst forecast, and revenue of $2.00 billion narrowly outpacing estimates. Despite meeting or surpassing these key expectations, both revenue and profit fell compared to the same quarter last year. The quarter showed strong momentum in client asset growth and expense controls, while elevated credit provisions and flat organic revenue raise questions on future trajectory.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (GAAP) | $2.13 | $2.06 | $4.34 | (51)% |
| Revenue (Non-GAAP) | $2.00 billion | $2.0 billion | $2.72 billion | (26)% |
| Net Interest Income (Non-GAAP) | $615 million | $530 million | 16% | |
| Total Assets Under Custody/Administration | $18.1 trillion | $16.6 trillion | 9% | |
| Total Assets Under Management | $1.70 trillion | $1.53 trillion | 11% |
Source: Analyst estimates for the quarter provided by FactSet.
Business Overview and Strategic Focus
Northern Trust operates as a global provider of asset servicing, investment management, and wealth management solutions. Its core activities center around safeguarding institutional assets, providing fund administration, and customized financial services for high-net-worth individuals and families.
The company's business hinges on two main segments: Asset Servicing and Wealth Management. Asset Servicing manages client assets on behalf of institutional investors, while Wealth Management focuses on individuals and family offices. Recent priorities include strengthening digital and operational capabilities, keeping pace with regulatory demands, and broadening service offerings in fast-growing areas like alternatives and ultra-high-net-worth family office solutions. Success depends on retaining client trust, growing assets under custody and management, maintaining high capital strength, and meeting evolving service needs across a global footprint.
Quarter Highlights: Financial and Operating Performance
Revenue and earnings both exceeded analyst estimates for the period. EPS reached $2.13, beating the $2.06 consensus, and revenue slightly exceeded the $2.0 billion estimate. Despite these beats, revenue dropped 26 % from the same quarter last year due to a tough comparison, and EPS fell by half. Net interest income climbed 16 % year over year, supported by higher average deposits and a steady net interest margin of 1.69 %. Management credited “higher deposits, lower funding costs, and foreign exchange swap activity” for this income growth.
Trust, investment, and other servicing fees, which make up the largest portion of the company's income, rose 6 % compared to last year. Asset Servicing fees rose 6 % to $691.8 million, with custody and fund administration fees up 5 % and investment management fees up 8 %. Securities lending fees jumped 22 %. Wealth Management trust and servicing fees increased 5 %, with all core U.S. regions (Central, East, West) showing mid-single-digit gains. The launch of Family Office Solutions, a dedicated ultra-high-net-worth service, expanded the company's reach for clients with $100 million or more in assets, marking an early phase of targeted growth. Management continues to invest in integrated trading services and alternatives such as the Fifty South Capital product line and proprietary private capital funds, aiming to double fundraising compared to historical averages.
Total assets under custody and administration rose to $18.1 trillion, up 9 %, while assets under management hit $1.70 trillion, up 11 %. Management attributed the rise to both “favorable markets and net new business.” Roughly 25–30 % of revenues now come from outside the U.S., with notable expansion in Europe, the Middle East, and Asia-Pacific. Average deposits grew 8 % year over year as clients shifted assets into cash, seeking stability with established providers.
Expenses remained tightly controlled. Noninterest expense, which covers operational costs outside of interest paid on deposits, dropped 8 % compared to last year and stayed flat on a sequential basis. Management reaffirmed full-year goals to keep total operating expense growth under 5 %. While cost discipline remains in focus, technology and workforce investments continue, as headcount reached 23,400, up 2 % year over year. The ratio of expenses to trust fees, a measure of efficiency, showed improvement for a fourth consecutive quarter, though management noted long-term targets remain below current levels.
A key watch area emerged in credit risk. The provision for credit losses, which reflects expected future loan losses, spiked to $16.5 million in the period, up from $8.0 million a year ago. This was driven by “an increase in specific reserves related to a small number of non-performing loans and an increase in the collective reserve resulting primarily from a worsening macroeconomic outlook.” Nonaccrual loans—loans not generating interest—more than doubled compared to the prior year, reaching $92.8 million. However, management highlighted that capital levels remain well above regulatory minimums, with a common equity tier 1 ratio of 12.2 %.
From a segment view, Asset Servicing income before income taxes doubled versus prior year to $271.1 million, with margins improving by more than 10 percentage points. Wealth Management income before taxes increased 18 % to $309.6 million, with margin expansion as well. The company's ongoing technology investments have also enabled it to support semi-liquid fund structures in international markets and to plan new launches for exchange traded funds (ETFs) in the coming year. Expansion into private markets and alternative investments, particularly via integrated and third-party platforms, is expected to remain a driver for new asset inflows. Family Office Solutions, aimed at ultra-high-net-worth clients, has seen early traction, with management citing further investment in both people and supporting digital platforms.
Outlook and Shareholder Returns
Management provided guidance for fiscal 2025, expecting operating expense growth of less than 5 % and projecting “low to mid-single digit” net interest income growth, an upgrade from previous forecasts. No specific numerical forecast was offered for organic trust or servicing fee growth, but performance was described as closely linked to market trends and client flows. The company expects stable deposit levels and limited earnings impact from moderate central bank rate cuts. A 25-basis-point rate move would affect net interest income by less than $1 million per month.
The company returned over 100 % of earnings to shareholders during the quarter. This included $146.2 million in common dividends and $339.4 million on share repurchases, buying back about 2 % of shares at an average price of $100.57 each. The board approved a 7 % increase to the quarterly dividend, raising it to $0.80 per share. Management confirmed a high capital return target, maintaining payout ratios near or above earnings. Book value per share rose 7 % to $62.65, while market value per share was up 51 % to $126.79 year over year. Investors should watch for ongoing progress on expense efficiency, changes in credit quality, and the pace of organic asset growth as indicators of future performance.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
