Northern Trust Q2 2025 slides: Sequential growth amid strategic execution

Introduction & Market Context

Northern Trust Corporation (NASDAQ:NTRS) shared its second quarter 2025 earnings presentation on July 23, highlighting sequential improvement in key financial metrics despite challenging year-over-year comparisons. The company’s stock has shown resilience, trading at $126.53 after rising 0.75% in the previous session, and has recovered significantly from its 52-week low of $80.81.

The financial services provider continues to execute on its "One Northern Trust" strategy while making progress on expense management initiatives. Following a strong first quarter where the company beat EPS forecasts, Northern Trust has maintained positive momentum with sequential growth in revenue, net income, and earnings per share.

Quarterly Performance Highlights

Northern Trust reported revenue of $2,002.6 million for Q2 2025, representing a 3% increase from the previous quarter, though down 26% year-over-year due to significant one-time gains in Q2 2024. Net income reached $421.3 million, up 7% sequentially but down 53% from the same period last year.

Diluted earnings per share came in at $2.13, showing a robust 12% improvement from Q1’s $1.90, continuing the positive trend highlighted in the company’s previous earnings report. Return on average common equity improved to 14.2% from 13.0% in the first quarter, while pre-tax profit margin increased to 28.4% from 27.1%.

As shown in the following comprehensive financial summary:

The year-over-year declines are largely attributable to notable items in Q2 2024, including an $878.4 million net gain from the Visa (NYSE:V) Exchange Offer. Excluding these one-time factors, the company demonstrated solid sequential improvement across key metrics.

Assets under custody and administration (AUC/A) grew to $18,068.3 billion, up 7% from the previous quarter and 9% year-over-year, reflecting strong client activity and market performance.

Strategic Initiatives

Northern Trust continues to execute on its integrated "One Northern Trust" approach, which leverages synergies across its three core businesses: Wealth Management, Asset Servicing, and Asset Management. This strategy is visualized in the company’s business model:

The company’s strategic framework focuses on three key pillars: optimizing growth, strengthening resiliency and risk management, and driving productivity. This balanced approach aims to deliver sustainable performance while adapting to changing market conditions.

A significant growth driver has been the company’s alternatives solutions platform, which has seen record fundraising in the first half of 2025. The 50 South Capital unit closed its largest secondary fund, while alternatives advisory assets under advisement increased by 66%.

In the Wealth Management segment, Northern Trust reported strong organic growth in its Global Family Office business, with international market acceleration revenue up over 20%. The division serves 30% of the Forbes 400 and has maintained its position as the Best Private Bank in the U.S. for 13 out of 16 years.

The Asset Management division, with $1.7 trillion in assets under management, has seen fundraising increase 60% compared to full-year 2024. The segment recorded $2 billion in net flows into Tax-Advantaged Equity strategies and $19 billion in liquidity flows during the first half of 2025.

Detailed Financial Analysis

Northern Trust’s Asset Servicing segment, which accounts for the largest portion of AUC/A at $16.9 trillion, reported continued business momentum with alternatives assets under administration approaching $1 trillion. The segment serves 52% of the Top 100 US Corporate Pension Plans and 80% of the Top 10 Sovereign Wealth Funds in APAC.

A key focus area has been expense management, with the company making significant progress in "bending the cost curve." Annual expense growth has declined from 6.5% during 2021-2024 to 4.8% in the first half of 2025, on track to meet the target of less than 5% for the full year.

Net interest income reached $615.2 million in Q2 2025, with a net interest margin of 1.69%. The company’s balance sheet showed average earning assets of $145.8 billion, with loans comprising $52.3 billion and debt securities at $43.7 billion.

Northern Trust maintains a strong capital position with a Common Equity Tier 1 ratio of 12.2% under the standardized approach and 15.0% under the advanced approach. The company declared $146.2 million in common stock dividends and $4.7 million in preferred stock dividends during the quarter.

Forward-Looking Statements

Looking ahead, Northern Trust has established clear financial targets for both 2025 and the medium term. For the current year, the company aims to maintain expense growth below 5%, achieve positive operating leverage, and deliver a total payout ratio exceeding 100%.

Medium-term targets include an expenses-to-trust-fees ratio of 105-110%, a pre-tax margin exceeding 30%, and a return on equity of 13-15%. These targets align with the company’s focus on balancing growth initiatives with cost discipline.

The company’s 135-year history as a trusted steward of multi-generational wealth, combined with its unwavering fiduciary commitment and culture of integrity, positions Northern Trust to navigate market challenges while pursuing long-term growth opportunities in alternatives, specialized services, and international markets.

Northern Trust’s Q2 2025 presentation demonstrates that the company is making steady progress on its strategic initiatives while delivering sequential improvement in financial performance. With expense discipline taking hold and growth in key business segments, the company appears well-positioned to meet its near-term financial targets despite the challenging year-over-year comparisons.

Full presentation:

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