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Date

Tuesday, April 21, 2026, at 9 a.m. ET

Call participants

  • Chairman and Chief Executive Officer — Michael Gerard O’Grady
  • Chief Financial Officer — David W. Fox
  • Head of Investor Relations — Jennifer Childe

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Takeaways

  • Total revenue rose 14% year over year in the first quarter, driven by increased trust fees, net interest income, and capital markets activity.
  • Trust, Investment, and Other Servicing Fees -- $1.3 billion, representing an 11% increase, supported by favorable markets, currency effects, and new business.
  • Net Interest Income (NII) -- $662 million, up 15% compared to last year, and up 1% sequentially to a new quarterly record.
  • Pretax Margin -- 32%, expanding nearly 500 basis points year over year, reflecting positive operating leverage and efficiency improvements.
  • EPS -- $2.71, up 43% year over year, with share count reduced by 5% from prior year due to $359 million in share repurchases.
  • Return on Average Common Equity -- 17.4%, reaching the upper end of the new medium-term target range.
  • Shareholder Returns -- $510 million returned, a 100% payout ratio, split between $151 million in dividends and $359 million in share buybacks.
  • Operating Leverage -- More than 700 basis points of positive operating leverage; total operating leverage measured at 740 basis points.
  • Trust Fees: Wealth Management -- $601 million, up 11%, with Global Family Office (GFO) growth above the business average.
  • Assets Under Management (AUM): Wealth Management -- $498 billion, rising 11% year over year but down 2% sequentially.
  • Trust Fees: Asset Servicing -- $741 million, up 10%, benefiting from new mandates and strong capital markets activity.
  • Assets Under Custody/Administration (AUC/A): Asset Servicing -- $17.3 trillion, up 9% year over year, down 1% sequentially.
  • AUM: Asset Servicing Clients -- $1.3 trillion, representing an 11% year-over-year increase.
  • Capital Markets Noninterest Income -- Up 34%, with "very strong FX trading and securities commission and trading income," reflecting elevated volatility.
  • Deposits -- $129 billion average, an 8% increase from the prior quarter and 11% higher year over year, driven in part by episodic large institutional inflows.
  • Net Interest Margin (NIM) -- 1.75%, declining sequentially due to large, low-yielding institutional deposits and the absence of higher FTE adjustments from the previous quarter.
  • Expense Growth -- 6% year over year, with most of the increase driven by incentive compensation and currency effects.
  • Expense-to-Trust-Fee Ratio -- 112.4%, seasonally higher, yet down 440 basis points year over year.
  • Share Repurchase Impact -- 5% reduction in share count from the prior year resulting from first-quarter buybacks.
  • Effective Tax Rate -- 25%, down 150 basis points from the previous quarter due to "higher benefits associated with share-based compensation."
  • Common Equity Tier 1 (CET1) Ratio -- 12%, down 60 basis points sequentially as risk-weighted assets (RWA) increased from higher capital markets activity.
  • Assets Under Administration: Alternatives -- Approaching $1 trillion, covering hedge funds, private capital, and semi-liquid vehicles.
  • Tokenization Initiatives -- Launched a tokenized share class for NIF Treasury Instruments Portfolio; onboarded five new clients for custody and services of tokenized real-world assets and digital instruments.
  • AI Strategy -- Anchored in "hyper-personalization, AI-generated alpha, and infinite scalability," with ongoing deployment across workflows and investment processes.
  • Product Development -- Seven alternative investment funds in market, with a targeted 25% increase in ALPS fundraising this year.
  • ETF Launches and Distribution -- Introduced the Northern Trust U.S. Equity ETF and a Saudi Arabia equity index strategy with $1 billion in initial client capital; expanded direct indexing capabilities onto Envestnet’s platform.
  • Expense Guidance -- The direction for expenses "is down for the remainder of the year." The full-year NII growth outlook increased from low- to mid-single digits to mid- to high-single digits.

Summary

Management provided strategic clarity around sustaining high ROE and margin levels by aligning investments, talent acquisition, and productivity funding with the One Northern Trust strategy. The increase in Wealth producers targeted at 7%-9% by year-end aims to accelerate organic growth, especially in high-performing regions and family office solutions. Episodic large institutional deposit inflows materially affected deposit averages, and management expects only $4 billion to $5 billion of the recent $9 billion increase to remain into the next quarter. Capital levels remained robust, and management is considering multiple options for redeploying $470 million in anticipated Visa share proceeds but has not committed to a specific use. Basel Endgame preliminary analysis may be "a net positive for," with greater benefit expected for commercial loan exposures and relatively limited operational risk impact stated.

  • Positive currency movements contributed roughly 120 basis points to revenue growth and negatively affected expenses by about 130 basis points.
  • Management reiterated the medium-term organic growth target of "We have talked about an organic growth rate targeted around 3%," aiming to surpass it via investments in AI, hiring, and third-party asset management distribution.
  • Within Asset Servicing, Northern Trust Corporation (NTRS 2.42%) now serves three-quarters of the top 50 U.S. healthcare systems after securing four new healthcare system mandates in the quarter.
  • The GFO segment continues to grow faster than other wealth segments, with international representing less than 15% of clients and revenue but expanding more rapidly.
  • In Asset Management, liquidity products marked 13 consecutive quarters of positive net flows; ETF and alternatives businesses received new mandates spanning private credit, secondaries, and private equity.
  • Despite higher capital markets and NII benefitting Asset Servicing margins, management stressed that sustainable, high margins remain a strategic priority across segments.
  • CFO David W. Fox stated, "expenses as a dynamic line we look at continuously, driven by the productivity and investment side of the equation," emphasizing real-time discipline over fixed targets.
  • Credit quality remains solid, with key metrics in line with historical norms and a $3 million reserve release recorded, partially offset by "a small number of nonperforming loans."
  • New tokenization efforts launched in both asset servicing and asset management segments to meet rising digital asset demand.
  • The Family Office Solutions launch in the Central region was highlighted as a key driver of that region's outsized Wealth Management growth, with a rollout planned for additional regions.

Industry glossary

  • ALPS: Alternative Liquidity Product Solutions, Northern Trust Corporation’s branded platform for alternative investment funds and strategies.
  • GFO: Global Family Office, a wealth management segment focusing on serving the world’s largest, most sophisticated family offices with integrated solutions.
  • NTAM: Northern Trust Asset Management, the asset management division responsible for investment products across asset classes.
  • TAMP: Turnkey Asset Management Platform, a platform facilitating outsourced investment management and administrative services for financial advisers.
  • Tokenization: The conversion of assets or rights into digital tokens on a blockchain or distributed ledger for enhanced transfer, custody, or transaction efficiency.
  • CLO: Collateralized Loan Obligation, a structured credit product pooling loans and issuing tranches to investors, used here regarding operational servicing.

Full Conference Call Transcript

Michael Gerard O’Grady: Thank you, Jennifer. Let me join in welcoming you to our first quarter 2026 earnings call. We are off to a strong start in 2026, reflecting our ability to capitalize on a constructive market and rate environment while continuing to advance our One Northern Trust strategic priorities. Against this backdrop, first quarter trust fees increased 11%, net interest income grew 15%, and total revenue rose 14%, all year over year. While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage, driving our pretax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%.

Return on average common equity reached 17.4%, which is at the higher end of our new medium-term target range. And we returned $510 million to shareholders, representing a total payout ratio of 100%. This included $359 million in share repurchases in the first quarter, contributing to a 5% reduction in share count as compared to the previous year. These results confirm that our One Northern Trust strategy is driving steady improvement in organic growth, consistent efficiency gains, and resiliency in a volatile environment. AI is increasingly embedded in how we operate, enabling our teams to deliver more value with greater consistency and speed.

Moving forward, we are accelerating its deployment in ways that will further advance our strategy and financial objectives. We are applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise while maintaining the resilience, governance, and client confidence that define our franchise. Our AI strategy is anchored in three outcomes: hyper-personalization, AI-generated alpha, and infinite scalability. Together, these outcomes focus investment where it matters the most, enhancing the client experience, improving decision quality, and increasing operating leverage. Hyper-personalization allows us to move toward highly contextual, tailored engagement. A tangible example is our One Wealth assistant, which integrates the Northern Trust Institute insights directly into workflows.

With future enhancements, this will equip our wealth management advisors with real-time, client-specific context, connecting market insights, portfolio considerations, and client objectives to support more informed, high-touch conversations with speed at scale. AI-generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insight. Within asset management, AI-assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured data sets, identify patterns more quickly, and test scenarios more efficiently. This enhances both investment decision-making and operational execution, supporting stronger client outcomes without adding complexity. Infinite scalability is a key driver of operating leverage.

By digitizing work through agents, we further disconnect the relationship between growth and staffing, allowing for consistent execution across value chains and supporting stronger controls, all of which enable us to scale while maintaining rigorous risk management. With that backdrop, let me now turn to business performance for the quarter, beginning with Wealth Management. Momentum from last year carried into the first quarter, as improved organic growth underpinned by both strong advisory and product fees drove low double-digit trust fee growth. The regions delivered another quarter of solid results, with trust fee growth accelerating to 11%, supported by especially robust performance in the central region.

We made good progress implementing various client acquisition initiatives across talent, centers of influence, and digital channels. Talent is our most important growth driver. We are advancing plans to increase revenue-generating roles by high single-digit percentages by year-end. This includes significant increases in critical producer roles. Centers of influence, which include attorneys, accountants, and other professionals, are a vital referral source, driving nearly 25% of our new business activity. In the first quarter, we introduced a more robust and structured outreach framework to engage key centers of influence, including hiring a senior leader to accelerate this initiative, targeting a 10% increase in opportunities in 2026. Digital channels also continue to be an increasingly important source of new business.

To boost the transition from interest to conversion, we are enhancing data integration, lead qualification, and personalization at scale. Notably, the opportunities originating from digital channels in the first quarter grew by nearly 50% year over year. Within our Global Family Office business, strength in international markets and investment management fees drove healthy performance. We also continued to scale Family Office Solutions with early traction and client wins across several new markets. Expanding our investment offerings, particularly within alternatives, remains an important focus area. We had seven funds in the market during the first quarter, up from five in the previous quarter.

Looking ahead, we will continue to build out our alternatives platform, with a number of new alternative investment funds and strategies planned for launch later this year, with the goal of increasing ALPS fundraising by 25%. These offerings, spanning areas such as venture capital, co-investments, and secondary funds, will broaden access and flexibility for clients seeking diversified sources of return while maintaining our disciplined approach to portfolio construction and manager selection. Collectively, these initiatives are strengthening our ability to generate repeatable, scalable growth while enhancing both the client and employee experience. Turning to Asset Servicing. The business delivered another quarter of solid organic growth and strength in profitability, driven by disciplined execution of our strategic priorities.

Trust fee growth of 10%, coupled with significant NII and capital markets activity, fueled over 700 basis points of year-over-year pretax margin expansion. Our differentiated service model, deep institutional expertise, and strength in supporting complex client needs continues to resonate, particularly with global asset owners. During the quarter, we secured nine new mandates across foundations, endowments, and healthcare institutions, including four not-for-profit healthcare systems. As a result, we now serve three quarters of the top 50 healthcare systems in the United States. Within alternatives, we remain a market leader, with assets under administration approaching $1 trillion across hedge funds, private capital, and semi-liquid vehicles.

Demand for scalable, institutional-grade services remains strong, supported by more than a dozen wins during the quarter. These included Igneo’s planned second-quarter launch of a new private equity fund focusing on energy infrastructure in Europe, further expanding our global relationship across Europe, Australia, and the U.S. We also announced an expansion of our CLO middle office services, delivering a unified operational and compliance framework that supports the full lifecycle of CLOs as interest in this offering continues to grow. Strong momentum in capital markets continued in the first quarter, as elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees.

We are also seeing continued interest in our digital asset strategy, particularly in custody, reporting, and servicing of tokenized assets as tokenization moves towards scale. During the quarter, we onboarded five new clients, providing custody and other services for tokenized real-world assets, U.S. stablecoins, European money market funds, and carbon credits. Turning to Asset Management. NTAM made good progress in the first quarter, with strength across liquidity, alternatives, and equities, positioning the business well to meet its 2026 targets. Within liquidity, we extended our streak to 13 consecutive quarters of positive flows, with associated AUM increasing to $350 billion. Importantly, we continue to diversify our funding sources across global liquidity vehicles and third-party platforms while gaining overall market share.

We also launched a tokenized share class for our NIF Treasury Instruments Portfolio during the quarter, marking Northern Trust Corporation’s entry into the digital asset marketplace. By applying tokenization to institutional-grade liquidity strategies, we are offering clients a modern, digital-first way to access money market investments while maintaining our high standards for risk management and service. Within equities, ETF momentum remains strong, with the fourth consecutive quarter of positive flows. This was supported by the successful launch of the Northern Trust U.S. Equity ETF, our latest active ETF designed to deliver tax-efficient outcomes for investors.

We also launched our first Saudi Arabia equity index strategy with $1 billion in client capital, reflecting our expanded presence and strategic partnerships in the Middle East. NTAM continued to broaden its alternatives capabilities through active fundraising, which included three new sizable custom solutions and advisory mandates spanning secondaries, private credit, and private equity. Earlier in the quarter, we announced an important milestone in our third-party distribution strategy: our institutional-quality direct indexing capabilities became available on Envestnet’s platform, the largest independent TAMP, which supports approximately one-third of all financial advisers in the U.S. This will enable advisers to access our diverse lineup of equity strategies, empowering them to personalize portfolios at scale while managing tax outcomes.

Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals, NTAM was recognized by Barron’s as a top fund family in 2025, ranking fourth overall and fifth in general equity out of 46 fund families. To wrap up, as we enter the second quarter, our priorities are clear and we remain focused on disciplined execution. With that, I will turn it over to David to walk through our first quarter financial results.

David W. Fox: Thanks, Mike. Let me join Jennifer and Mike in welcoming you to our first quarter 2026 earnings call. Let us discuss the financial results of the quarter starting on page four. This morning, we reported first quarter net income of $526 million, earnings per share of $2.71, and our return on average common equity was 17.4%. We are off to a strong start to the year. We delivered our seventh consecutive quarter of positive organic growth, positive operating leverage, and year-over-year improvement in our expense-to-trust-fee ratio, all excluding notables. We also returned 100% of our earnings to shareholders.

Relative to the prior year, currency movements favorably impacted our revenue growth by approximately 120 basis points and unfavorably impacted our expense growth by approximately 130 basis points. Relative to the prior period, currency movements were immaterial to both revenue and expense growth. Trust, investment, and other servicing fees totaled $1.3 billion, an 11% increase compared to last year, driven by favorable markets, currency, and new business generation. Other noninterest income was up 33% year over year, reflecting very strong FX trading and securities commission and trading income, which benefited from elevated macro volatility and uncertainty.

Net interest income on an FTE basis was up 1% sequentially to $662 million, a new quarterly record, and up 15% from a year ago. Our assets under custody/administration were down 1% sequentially but up 10% compared to the prior year. Our assets under management were also down 1% sequentially and up 11% year over year. Overall, our credit quality remains very strong, with all key credit metrics in line with historical standards. We recorded a $3 million reserve release in the first quarter driven by improvements to the C&I portfolio, which was partially offset by a small number of nonperforming loans.

Our effective tax rate was 25%, down 150 basis points from the previous quarter due to higher benefits associated with share-based compensation. We still expect the effective tax rate in 2026 to be approximately 26% to 26.5%. There were no notables in either 2026 or 2025. Turning to our Wealth Management business on page five. Wealth Management started the year well, with strength in trust fees across both GFO and the regions, spanning both advisory and product channels. Assets under management for our Wealth Management clients were $498 billion at quarter end, down 2% sequentially but up 11% year over year.

Trust, investment, and other servicing fees for Wealth Management clients were $601 million, up 11% year over year, with particularly robust organic growth within GFO. Average deposits within Wealth Management were flat sequentially, while average loans were up 1%. Wealth Management’s pretax profit rose 9% over the prior-year period, while the pretax margin remained flat at 37.1%, as we continue to reinvest in the business to support future growth. Moving to our Asset Servicing results on page six. Our Asset Servicing business also had a good start to the year, boosted by healthy new business generation, coupled with robust capital markets activity.

Assets under custody and administration for Asset Servicing clients were $17.3 trillion at quarter end, reflecting a 9% year-over-year increase. Asset Servicing fees totaled $741 million, up 10% over the prior year. Custody and fund administration fees were $498 million, also up 10% year over year, largely reflecting the impact from strong equity markets, favorable currency movements, and net new business. Assets under management for Asset Servicing clients were $1.3 trillion, up 11% over the prior year. Investment management fees within Asset Servicing were $169 million, up 11% year over year due to favorable markets and new business activities.

Asset Servicing average deposits were unusually strong, increasing 11% sequentially, while average loan volume decreased 2% from fourth-quarter levels, albeit off a small base. Asset Servicing pretax profit grew 59% over the prior-year period, and the pretax margin expanded 740 basis points year over year to 28.3%, benefiting from elevated deposit levels, higher volatility-driven capital markets activities, and the pivot in our new business approach. Moving to page seven on our balance sheet and net interest income trends. Our average earning assets were up 7% on a linked-quarter basis, as higher deposit levels drove an increase in money market assets and in our securities portfolio.

The fixed percentage of the securities portfolio remained flat at 52% in the first quarter, including the impact of swaps. The duration of the securities portfolio dipped slightly to 1.44 years at the end of the quarter, and the duration of our total balance sheet continued to be under one year. Deposit levels were higher than expected throughout the quarter, a result of both elevated volatility and general uncertainty in the marketplace. Average deposits were $129 billion, up 8% compared to fourth-quarter levels and 11% year over year. Within the deposit base, interest-bearing deposits increased by 8% sequentially, and noninterest-bearing deposits increased by 5%, remaining at 15% of the overall mix.

Net interest income on an FTE basis was up 1% to $662 million sequentially and up 15% compared to the prior year. Sequentially, NII was favorably impacted by higher deposit levels, including growth in noninterest-bearing deposits, along with the impact from fixed asset pricing and deposit pricing actions we have taken, which was partially offset by the full quarter’s impact from the fourth-quarter rate cuts. Our net interest margin on an FTE basis decreased sequentially to 1.75%, primarily reflecting several large short-term institutional deposits and the absence of the higher FTE adjustment recorded in the fourth quarter. Turning to our expenses on page eight. Expenses increased 6% year over year.

We delivered 410 basis points of trust-fee operating leverage and 740 basis points of total operating leverage. And our expense-to-trust-fee ratio, while seasonally higher at 112.4%, was down 440 basis points year over year. This translated to a pretax margin of 32%, up nearly 500 basis points year over year. Turning to page nine. Our capital levels and regulatory ratios remained strong in the quarter, and we continue to operate at levels well above our required regulatory minimums. Our Common Equity Tier 1 ratio under the standardized approach decreased by 60 basis points on a linked-quarter basis to 12%, driven by an increase in RWA related to elevated capital markets activities.

Our Tier 1 leverage ratio was 7.3%, down 50 basis points from the prior quarter, driven by our larger balance sheet. At quarter end, our unrealized after-tax loss on available-for-sale securities was $446 million. We returned $510 million to common shareholders in the quarter through cash dividends of $151 million and stock repurchases of $359 million, reflecting a 100% payout ratio. Turning to our guidance. For the full year, we now expect NII to grow by mid- to high-single digits over the prior year, which is an increase from our previous guide of up low- to mid-single digits.

We still expect to generate more than 100 basis points of positive operating leverage, and we expect to return at least 100% of our earnings to shareholders. Before we open it up for questions, I would like to take a moment to thank Jennifer Childe, our head of investor relations, and congratulate her on her upcoming retirement. Steve Carroll, currently the CFO of Northern Trust Asset Management, will be stepping into the role and will work closely with Jennifer over the coming weeks to ensure continuity. Jennifer has been a trusted partner to me and the leadership team, and we are very grateful for her many contributions over the years. And with that, operator, please open the line for questions.

Operator: Thank you. And if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We ask that you please limit yourself to one question and one follow-up question. Again, you can press star one to ask a question. We will pause for just a moment to allow everyone an opportunity to signal for questions. We will now take your first question, coming from the line of Ebrahim Huseini Poonawala with Bank of America.

Ebrahim Huseini Poonawala: Good morning. I have two questions. First, at the top of the house, we look at the pretax margin and ROE performance this quarter, including in Asset Servicing but for the entire business. There is a component of the macro being very strong for Northern Trust Corporation, but there is also a self-help component that was kicked off a couple of years ago. As we think about the sustainability of the ROE or the pretax margin, can you frame where there might be cyclical tailwinds that are leading to over-earning relative to the structural actions taken over the last couple of years that may improve resiliency, relative to what you reported for 1Q?

Michael Gerard O’Grady: Sure, Ebrahim. Our goal is to be a consistently high-performing company, and as you pointed out, that is something we put out there a few years ago along with our One Northern Trust strategy. We are very focused on executing on the three pillars of that strategy, and we will do that in different environments. This past quarter was a very constructive environment, and there is no question we got a lift in our financial performance as a result. Equity levels are still relatively high, the level of volatility is attractive for our capital markets business, and there is a fair amount of liquidity broadly in the market, which helps us with deposits and money market funds as well.

That said, we also, to your point, focus on self-help and executing as well as possible, whether it is a really strong environment or not so strong. As for the targets, at the last earnings call, we put out medium-term targets. Some of those, as I mentioned, we have largely hit or are close to, but it was in this strong environment. So we are going to keep driving towards those medium-term targets.

Ebrahim Huseini Poonawala: Got it. And switching to the Global Family Office, it has been a strong business over the last few years. Talk to us about the win rate and competitive landscape there, and the evolution of that client once they are on board. How do you think about the growth runway and the opportunity to improve ROI on the client once they are on board?

Michael Gerard O’Grady: The Global Family Office business is absolutely one of our strongest businesses. It is an area where we can deliver the entire firm—the best of all three businesses working together for these largest families and their family offices. It has grown at a high rate, and once again, in the first quarter, the organic growth rate for GFO was above the average for the businesses. Our competitive position and offering are strong. Second, it is still largely a U.S.-domiciled or focused business—international is less than 15% of the client base and revenues—yet it is growing faster. We believe this offering is attractive globally and is scalable globally.

Often the relationship starts with a more limited breadth of offering—primarily custody and reporting—but then we can do much more with the family office, particularly along investment management, and you saw some of that in the first quarter. We think it is a great business with a lot of upside.

Operator: Your next question will come from the line of Analyst with Morgan Stanley.

Analyst: Good morning. I wanted to start on operating leverage. You delivered 740 basis points of operating leverage this quarter—really strong. You reiterated the guide of generating over 100 basis points of operating leverage this year. Can you help us think about expense growth this year? Are there any investments that maybe got pushed out, any timing differences, or anything else we should be considering?

David W. Fox: Our expense growth methodology has not really changed. In this quarter, most of the year-over-year increase was driven by incentives, and there was some noise from currency as well. When you make more money, you are going to have a rising expense line. We still have in process the idea behind productivity funding investment, and then solving for an expense growth as a result of that. The productivity targets for the first quarter hit their target, the investments we wanted to make we were able to make, and the expense growth we managed to was about where we thought it would be.

That discipline and flexibility is built into our planning, which is why at the beginning of the year I talked more about operating leverage than attaching ourselves to a finite expense growth number. We wanted flexibility to react when markets are conducive, but also discipline to flex down in environments that are less so. So think of expenses as a dynamic line we look at continuously, driven by the productivity and investment side of the equation.

Analyst: Got it. And maybe pivoting to capital, any thoughts on the new Basel Endgame proposal and how it impacts your capital deployment strategy going forward?

David W. Fox: It is too soon to say how it might impact capital return. On balance, our preliminary view is it could be a net positive for us as it relates to the commercial loan side, and operational risk is something we probably have less of than some other peer banks. Net-net, we think it is going to be a positive for RWA, but it is still early days, we are in the comment period, and we are taking a cautious look. We do not think it will have a massive impact, but if it does, it would likely be net positive.

Operator: Your next question will come from the line of Michael Lawrence Mayo with Wells Fargo Securities.

Michael Lawrence Mayo: Wealth is growing double digits, as you said; firmwide revenue is up 14%; you are at the higher end of return targets—seems like it was working this quarter. What got my attention is the new news that you look to grow wealth producers by 7% to 9% this year. I think this is the most competitive market we have seen in wealth almost ever. Why now do you look to increase the wealth producers, and what is your pitch, given every large bank and brokerage is expanding wealth?

Michael Gerard O’Grady: You are right; we are focused on hiring talent in Wealth Management, especially revenue-generating producer roles, and it is a very competitive marketplace for the best talent. Looking back over the last several years, that group has grown but at a lower rate than the growth of the business itself. There is an acknowledgment that we need more talent to increase the organic growth rate within Wealth. As for the value proposition, we have an excellent brand and are positioned within the upper tiers of the market where the highest levels of expertise want to serve that client base and bring on new clients.

We have been investing in the platform, including Family Office Solutions, which we believe is differentiated—better and more attractive than standalone virtual family offices—because it brings the full set of resources and banking capabilities we have, leveraging our history and fiduciary and trust capabilities. For an adviser seeking to apply their trade and succeed, we offer a platform that we believe is the best place to do that. It is a different model at Northern Trust Corporation, and we think it is attractive.

Michael Lawrence Mayo: As part of this increased investing for growth—whether in wealth or firmwide—you are still guiding to 100 basis points of operating leverage this year, but you had over 700 basis points in the first quarter. Is the reason for no change in that guide just conservatism, or also because you think you might ramp up some spending as you bring on new producers?

Michael Gerard O’Grady: It is a very constructive macro environment for us, so there is acknowledgment that strong revenue growth was supported by that backdrop. We do not know what will happen through the year, and there are tough comps ahead given strong second, third, and fourth quarters last year. As David mentioned, we have aligned resource deployment with productivity, looking to drive productivity to fund investment. We expect to continue to invest in areas we discussed, but the plan is to generate more productivity to do it and not necessarily change the expense growth profile.

David W. Fox: The direction of travel on expenses is down for the remainder of the year.

Operator: Next question will come from the line of Brennan Hawken with BMO Capital Markets.

Brennan Hawken: Good morning, and thanks for taking my question. Dave, you flagged strength in deposit growth, and it looks like a lot of that was driven by the servicing business. You also flagged some large institutional deposits weighing on NIM. Was part of that deposit strength from large institutional deposits? How should we think about the deposit profile as we move forward through the year?

David W. Fox: We had some largely unexpected, extremely large deposits. We keep our capital ratios where we keep them because we want our balance sheet open at all times for our largest clients. Occasionally, some clients do strategic repositioning, and we want to be in position to capture those deposits. They are not core operational deposits and are not there for a long period, but we accommodate them. In this quarter, that drove up average deposits significantly. That will not fully translate into Q2, although of the roughly $9 billion increase, we think we will keep $4 billion to $5 billion in terms of average deposits. These deposits came from a handful of very important big clients.

Brennan Hawken: Got it. You also spoke to robust organic growth in the GFO business, but we did not see a lot of deposit trends. Is the organic growth in that business less tied to deposits, and therefore that is the divergence? Also, could you give a little color around your new efforts around Family Office Solutions, and how you categorize those versus GFO?

Michael Gerard O’Grady: These family offices have significant liquidity, which they actively move between on-balance-sheet deposits, our money market funds, and short-term Treasuries. It is active liquidity management on their part and for them, so from quarter to quarter, deposit numbers can move up and down. It is less an indicator of organic growth and more an indicator of activity. Regarding Family Office Solutions, we leverage our strong GFO capabilities to create a virtual family office experience for a family that does not want to set up its own office. They are not run as one business but are closely related and highly coordinated, leveraging technology and expertise across both.

It is a different service model where we act as essentially the head of that family office, as opposed to that person and team being employees of the client’s family office.

Operator: Your next question will come from the line of Alexander Blostein with Goldman Sachs.

Alexander Blostein: Good morning. The tone in your prepared remarks and some of the Q&A feels like it leans toward organic growth acceleration a bit more than in the past, and you talked about investments to support that. Where do you see the most opportunity to accelerate growth, and what do you think Northern Trust Corporation’s organic fee growth—ex markets—should look like over the next couple of years if you achieve these goals across both institutional and wealth?

Michael Gerard O’Grady: We see organic growth opportunity across all three businesses, though the nature differs. In Wealth Management, the focus is on adding talent to increase the growth rate, plus other drivers like marketing, digital marketing, and centers of influence—essentially bringing in more opportunities at the top of the funnel. AI will also create opportunities to transform the client and adviser experience, particularly as you work down the wealth tier, and that requires investment. Within Asset Servicing, the goal is scalable growth, staying focused on our current footprint, offerings, and segments to continue growth at a very profitable level and drive margins up.

In Asset Management, growth has come from core products—certainly liquidity—but we are investing in ETFs, tax-advantaged equity, and quant, which requires building out third-party distribution. That is currently a small part of our asset management business but could grow at a much higher rate. We have talked about an organic growth rate targeted around 3%, and we believe these initiatives will drive the 3% and, we hope, above that.

Alexander Blostein: Thanks. A quick follow-up around capital management: with the Visa shares becoming available this year, talk through the amount of proceeds you expect, the use of these proceeds, and timing when it comes to potentially bigger buybacks.

David W. Fox: We expect roughly half of our position to become available, with an estimated pretax value of about $470 million—roughly $3.50 per share post-tax, depending on the share price. We have only just begun to evaluate the uses. We are not going to use the same playbook we had a few years ago; we have other options now. We will weigh proceeds against our priorities and decide at that time, but we have not landed on a specific use yet.

Operator: Your next question comes from the line of Kenneth Michael Usdin with Autonomous Research.

Kenneth Michael Usdin: Thanks, and good morning. On the balance sheet, you mentioned the benefits from size and deposits—some may not stay, some might. Given the higher-for-longer environment, how do you think about duration of the securities portfolio and any changes to that, or is it more wait-and-see because you are not 100% sure if the elevated size lingers?

David W. Fox: When we think about upside to the balance sheet and NII during the year, we consider several drivers as we guide. First is investment securities maturity replacement—we still have back-book repricing and can take advantage of that through 2026. We took some deposit pricing actions toward the end of last year that we have not lapped yet, so those are built-in increases this year. We have been leaning a bit more into incremental investment strategies around higher-yielding opportunities and looking at our wholesale funding mix, leaning a bit more into FICC repo as well. Then there is deposit growth in line with the businesses.

We also no longer have the potential headwind, in our view, of a U.S. rate cut, and there may be rate increases in Europe. Put all that together, and that is how we get there. We are not going to reach for yield or materially change duration; we do not need to. There is a lot of uncertainty, and our positioning is pretty stable.

Kenneth Michael Usdin: Bigger picture follow-up: with potential new Fed share coming on and talk about shrinking the size of the Fed balance sheet—already down about $2.5 trillion—and trust bank deposits keep growing, what is the rule of thumb if the Fed balance sheet continues to shrink over time? How insulated is your balance sheet from that in terms of deposits?

Michael Gerard O’Grady: We are observant of what is happening and frankly a little surprised that liquidity levels have remained so high on our balance sheet and in our funds given the Fed has reduced its balance sheet as much as it has. If we are in some level of stabilization, that is good because our deposit and money market fund levels will grow with organic growth. If the Fed were to really shrink its balance sheet more, that would pull liquidity out of the marketplace, and our model, like others, would tend to expand and contract with that somewhat. So yes, there is some downside exposure if liquidity is pulled, less so on the upside.

Operator: Your next question will come from the line of Analyst with Wolfe Research.

Analyst: Good morning. On the margins in the business segments: Asset Servicing margin has expanded nicely, but in Wealth, the margin was flat year on year despite strong revenue growth. What are the components that will drive the path toward your medium-term target of 33% in the margin?

Michael Gerard O’Grady: The goal in Asset Servicing is scalable growth, and while we had a strong pretax margin this quarter, we are working to move it up consistently. The macro backdrop—capital markets and NII—was particularly strong and contributed to the higher pretax margin this quarter, but we want to make that more sustainable and resilient at a high level, and there is more opportunity. In Wealth Management, where we have had a very attractive pretax margin, we are emphasizing growth and making investments to support that growth. We feel we are in a good margin range, but we are prioritizing growth over margin expansion.

To the extent we have near-term pressure on the Wealth margin as we invest, the expectation is we more than make up for that with improvement in Asset Servicing.

Operator: Your next question comes from the line of David Charles Smith with Truist Securities.

David Charles Smith: Good morning. On organic growth, you said it is seven consecutive quarters of positive growth for the business as a whole, and you have a 3% target that you think you can do better than over time. Help us with where organic growth is today and where you were a year ago by business. We know GFO is above average; is Asset Servicing and the regional part of Wealth barely positive today—1% or 2%—and where were those the year prior?

Michael Gerard O’Grady: In this quarter, each of the three businesses had positive organic growth, and that is true within their major segments. Within Wealth Management, organic growth has been closer to a consistent ~1%, with GFO above that and the regions a little below that. We are looking for GFO to continue at a high rate and for the regions to incrementally increase their growth rate through this year and next, to move the total above 3%. In Asset Servicing, given the nature of larger mandates, organic growth can swing more from quarter to quarter or even year to year. A few years back, we had periods of business roll-offs that brought growth down to flat-to-negative.

It is positive now, about the same range as Wealth, and we see opportunity to increase it with focus on profitability and scalability. In Asset Management, more recent organic growth has been primarily driven by liquidity, but we are seeing greater diversification, with ETFs and tax-advantaged equity showing nice organic growth. Again, about the same range and the expectation to increase.

David Charles Smith: Do you expect over time all major businesses to be doing 3% organic, or, in the medium term, to get there for the company as a whole with some above and some below?

Michael Gerard O’Grady: The target is for all of them to be above 3%, but given variability quarter to quarter and year to year, they may not all be at the same time. That is the benefit of having three businesses.

Operator: Your final question will be coming from the line of Gerard Cassidy with RBC.

Gerard Cassidy: Hi, Mike. Hi, Dave. Mike, you called out outsized growth in Wealth in your central region. What drove that?

Michael Gerard O’Grady: Given the company has been in the central region and headquartered in Chicago for a very long time, we have a very strong business there. Often people think it is a mature business that will not grow at the same or a higher rate, but the team and leadership—particularly under John Fumagalli and his team—have consistently leveraged that strength to grow at a higher rate. More recently, Family Office Solutions has been a driver. That is where we started with that solution set; it has gained momentum in this region, and we are rolling it out to the other regions in the same way.

Gerard Cassidy: Turning to credit quality, which is always strong at Northern Trust Corporation: you do not take a lot of risk in lending and your loan portfolio is not large relative to assets. What are you seeing in quality trends? Have things changed meaningfully since the financial crisis and pandemic—are customers more resilient today?

David W. Fox: Keep in mind our tilt toward investment grade on the corporate side, and in Wealth we usually do secured facilities. For those to be in stress would take quite a bit of downside. We are also not exposed to the same extent in private equity or private credit where there is some pressure. We do not lend on valuation or performance of underlying fund investments; we do subscription facilities where the underlying obligors are largely institutional and quite strong. We are not in the high-yield or leveraged loan markets. So we are not seeing the same pressures others might be experiencing.

Operator: And it appears there are no additional questions at this time. I will now turn the call back to Jennifer Childe for closing remarks.

Jennifer Childe: Thanks for joining us, and we look forward to speaking with you again in the future.

Michael Gerard O’Grady: Once again, Jennifer, thank you very much.

Jennifer Childe: Thank you.

Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.