Northern Trust at Barclays Conference: Strategic Focus on Growth and Efficiency

On Tuesday, 09 September 2025, Northern Trust (NASDAQ:NTRS) presented at the Barclays 23rd Annual Global Financial Services Conference, outlining a strategic roadmap centered on productivity, growth, and efficiency. The company highlighted its "One Northern Trust" approach, emphasizing modernization, resiliency, and client-centric models. While the outlook was optimistic, challenges remain in maintaining operating leverage and managing expenses.

Key Takeaways

• Northern Trust aims for $200 million in productivity savings by 2025, with 75% being sustainable.
• The company is leveraging AI and automation to improve efficiency and reduce costs.
• Anticipates mid-single-digit growth in Net Interest Income (NII) for 2025.
• Strong fee income is expected, driven by wealth management and asset servicing.
• The firm is not actively pursuing a sale but is open to acquisitions that enhance capabilities.

Financial Results

• Net Interest Income (NII): Northern Trust expects mid-single-digit growth in NII for 2025, with strategic adjustments to its securities portfolio to protect revenues in lower rate environments.
• Expense Management: The company reaffirmed its commitment to keeping expense growth below 5% for the year, aiming for positive operating leverage.
• Return on Equity (ROE): The ROE target has been increased to a range of 13% to 15%, up from the previous 10% to 15%.

Operational Updates

• Productivity and Efficiency: The firm targets $200 million in productivity savings, with 75% sustainable through role reductions and vendor negotiations. Asset servicing margins have improved by 470 basis points in the first half of 2025.
• AI and Automation: Implementation of AI tools such as GitHub and Copilot is expected to save developers 31% of their time, enhancing productivity.
• Vendor and Workforce Optimization: Northern Trust reduced third-party vendors by 10% and increased workforce span of control by 22% year-to-date.

Future Outlook

• Growth Strategies: The "One Northern Trust" approach focuses on delivering consistent, speedy, and resilient client solutions. The Global Family Office (GFO) business saw 8% revenue growth in the first half of the year, with international expansion plans.
• Asset Servicing: Private capital assets have doubled over five years, and the company administers over 60% of UK LTAF funds. Sales momentum is strong, with 80% of the annual sales goal achieved.

Q&A Highlights

• Strategic Considerations: While not pursuing a sale, Northern Trust is open to acquisitions that enhance its capabilities. The focus remains on achieving scale through technology and platform capabilities rather than size alone.
• Management Confidence: Executives expressed confidence in achieving financial targets independently, supported by a disciplined approach to capital management and strategic growth initiatives.

In conclusion, Northern Trust’s presentation at the Barclays conference underscores its commitment to strategic growth and operational efficiency. For a detailed view, please refer to the full transcript below.

Full transcript - Barclays 23rd Annual Global Financial Services Conference:

Unidentified speaker, Conference Host: Thank you. Wrapping up what so far has been a very successful Global Financial Services Conference for day two. Very pleased to have Northern Trust with us, like we’ve asked for all the companies on the first ARS questions on the screen. You know, from the company, very pleased to have Dave Fox, Chief Financial Officer, Peter Cherecwich, Chief Operating Officer. It’s interesting, a year ago, I think it was tomorrow, we had Jason Tyler on stage. You know, Northern came out with a number of leadership changes, including both of you. David, you were sitting in the front row then. Little did we know that you’d be up here today as Chief Financial Officer. You know, prior, you were running the Global Family Office business. You know, Pete, you were running oversight servicing. Now you’re Chief Operating Officer. Maybe, you know, Pete, let me start with you.

This Chief Operating Officer role is a newly created role. At the time, the release said you’re going to focus on ensuring operational excellence and resiliency, effective risk management and controls, and scalable growth. Sounds like all important stuff. Just maybe talk to about what you’ve been up to specifically and just how that’s translating into dollars and cents.

Peter Cherecwich, Chief Operating Officer, Northern Trust: All right. First, let me just talk about dollars and cents, because that’s the most important, I think, to everybody here. In 2025, we will achieve $200 million in productivity. Next year, that number will be higher. More importantly to me is that approximately 75% of the productivity is sustainable. What I mean by that is not delaying hiring or cutting travel. It’s permanent reduction in roles that are needed to do a job or negotiated contracts with vendors for less spend, etc. The next piece, we talked a lot about scalable growth. Mike used that word a lot, and that primarily was an asset servicing focus. What I’ll say there is that in the first half of 2025, when we look at all the wins for asset servicing, the average fully loaded margin was 470 basis points better as compared to all the wins in 2024. That’s important.

We’re taking on new business that is improving the margin in asset servicing in a significant manner. When we look at the expense to trust fee ratio for the first half of 2025 wins, that was below 100%. In all the stats, new business is coming on better. Furthermore, importantly, we have been taking a look at our portfolio of asset servicing clients with an eye towards scalable growth and attaining higher margins. Specifically, if there are cases where clients do not meet the hurdles or are underperforming, we may look to exit those relationships or take further action.

Unidentified speaker, Conference Host: In 2026, more than $200 million in productivity savings, a little bit more, a fair amount more. Do you care to size that? Something you’ll have to wait till January to get on the earnings call? Maybe just more context to that.

Peter Cherecwich, Chief Operating Officer, Northern Trust: It’s budget season. I’m angling for a little bit more, and Mike is angling for a lot more. I’ll tell you how it comes in January.

Unidentified speaker, Conference Host: That’s fair. I guess, basically what you said is just how does that fit into this modernization resiliency initiative that you’ve been talking about for the last year or so? Just kind of where are we or what inning are we in that venture?

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, so it’s funny. I looked at the notes from the last Barclays, and Jason was here to say that he thought that, you know, sometime in mid 2025, we’d start to bend the curve. I’m happy to say that as far as modernization resiliency goes, we have started to bend the curve, and the rate of growth is coming down. Middle earnings, rate of growth is coming down. That’s for sure. The way we’re doing that is we’re really focused on the simplification of our model. An example would be, for example, we ended up reducing the number of third-party vendors in the first half of the year by 10%. That’s 10% less due diligence we have to do, filling out paperwork, managing, et cetera. Really helping for us to bend the cost curve.

Middle earnings, I would say we’ll see that continue to come down in the next two years.

Unidentified speaker, Conference Host: I guess, Pete, you know, as Chief Operating Officer, you’re obviously also focused heavily on productivity. What are you doing to ensure the cost curve at Northern Trust really continues to bend down? Maybe talk to how AI fits into that.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, I’ll start with AI, and then I’ll--

Unidentified speaker, Conference Host: Yeah, while you get--

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, so then I’ll include AI both, right? We can do two things. One, as I said, $200 million this year, it’s really based on, one, vendor management. Really looking at reducing the number and consolidating. Simply put, you want higher volumes and better rates. The way to get that is to consolidate vendors, having fewer partners. Laser-focused on that. Workforce optimization. You hear a lot in the industry about span of control, things like that. Under the radar, we’ve increased our span of control by 22% year to date, and there’s more to come. We continue to focus on that. Traditional lean methodologies. This is an industry where there’s a lot of customization by clients and for clients. We have to look at that, figure out how to streamline that, and how to make things more scalable using local tools that are out there.

The teams are working on that. Ultimately, it is about automation, full automation, because then it goes away. For full automation, we continue to invest in technology that will give us that. An example will be, as we think about quality control checks, we have launched an application where all of our fund accountants, instead of doing manual processes to double-check if something’s right, the system now does that for them. Why I bring that up is if I then layer on AI to that on top of it, I don’t even need that individual to do the review of the quality controls. The system will do it for you. AI is an interesting one. It’s just where we are as a journey. Again, if I use your baseball analogy, it’s still early innings on AI. It’s really twofold. One is let’s just talk personal productivity.

If I’m a developer, we’ve rolled out GitHub across the organization, and they’re estimating that it’s saving about 31% of their time in terms of development activity. A huge benefit with GitHub. We’ve deployed Copilot. Many of you probably have Copilot, and Copilot is really something that is giving the individuals the ability to just work smarter. A best example would be, you’d be surprised if you look at your own firms, the number of people that take minutes, type things out, look at the side and tell me typing out notes. If you transcribe it, you summarize it, all that can be done, huge productivity. Just small examples. Those are the small things. The big ideas are really things that we’re building the guardrails for.

We have a group right now that is focused on saying, here are the guardrails for the company, and then focusing on things like AML/KYC docs, document digitization. You’d think in this day and age we wouldn’t get documents. We still get millions and millions of documents on PDFs from our wealth clients, from GPs, et cetera, still come in. Sales and RFPs. Lots and lots of use cases that are either in production or being put in production shortly.

Unidentified speaker, Conference Host: Maybe, you know, one thing that I’ve heard Mike O’Grady talk about is this whole client-centric capability model. Maybe explain to our audience what that is, how it differs from your previous framework. You know, is this more of a productivity thing, or could there be a growth impact?

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, so for me, this is the culmination of the pivot that Mike O’Grady did, about 18 months ago when he announced this organizational structure and was heading down the path. Historically, we were organized in a vertical manner, such that the businesses controlled all their means of production, and not just the three business lines, but also different geographies. Luxembourg would have all of their staff report to them, et cetera, et cetera. What we did is say, we need to strip that out and come up with core capabilities that we’ll organize around. The reason we call it client-centric capability is because it’s about delivering with greater consistency, speed, and resilience while maintaining the trust our clients place in us. We’re not trying to be a factory.

We’re trying to have our business services produce products that can then be combined with other products to produce the solutions that our clients are looking for. What does that mean, though, for productivity and resilience? Ultimately, if I have one group doing AML/KYC across the company, I’ll do it better. I’ll be more efficient. One group doing trade settlements. When you think about settlements, I don’t have a capital markets division and a custody division doing settlements separately. We have one division now that’s doing settlements for both. It truly is breaking down the barriers across all of our lines of business and creating those capabilities. Lastly, it’s taking the business service and combining it with a technology partner such that a small team can manage the transformation of that capability together.

I think ultimately, in this day and age where the technology is moving faster and faster, having a technology professional that understands the domain and a business professional that understands tech combined can transform things faster and drive more productivity.

Unidentified speaker, Conference Host: The other thing we’ve heard around Northern Trust is this whole kind of one Northern Trust, which I understand to be a multi-year kind of transformational approach. Maybe you can just expand on that, maybe detailing its impact and just informing us where you are in this journey.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, I’ll take that, because Pete actually just described a lot of what one Northern Trust is in terms of the productivity and the risk and resiliency part of it. He’s kind of already covered that. If you think about the other part, which is as important, it’s the growth side of the equation. We’ve got numerous examples. In some ways, I would say that the growth part is already well on its way. If you look at a good illustration of that, it would be the GFO business that I used to run. There are other ones like family office services and private capital. We’re going to take the GFO footprint and try to interject that into these other businesses. When you think about GFO, it effectively has representation across all three businesses touching that client base with transparency.

Vis-à-vis the client, they only look at one Northern Trust when they actually approach us on something. They look at it as an integrated team. They don’t look at it as, oh, that’s the asset management guy I’m talking to, or that’s the asset servicing person, or that’s the GFO person. They look at it as an integrated one Northern Trust model, which allows us, by sharing all that information and combining those teams, to offer the best solution at the right time to that client base. We’re kind of doing the same in alternatives. I call it private capital. When you think about alternatives for wealth management and you think about it for asset servicing, it’s more like the holistic offering we do around alternatives.

When you think about even large wealth clients that have a huge concentration in that area, it isn’t just about finding the right manager and investing with the right manager. It’s about the whole continuum of services you can provide around alternatives, whether it’s the banking, the reporting, and the structuring. We marry those two things together. When we talk about alternatives to our clients, it’s from a one Northern Trust perspective. Everyone’s in the room at the same time, right? It just creates that ability to cross-sell without having to do a separate meeting and call a separate person to the room.

Unidentified speaker, Conference Host: Helpful. Dave, as we know you involved, just maybe talk to, right, one year in the role of CFO. Any observations of note, biggest surprises, positive, negative, any particular changes in your leadership you want to highlight? I will say that we did appreciate some of the increased disclosure we got last quarter.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, no, you’re welcome. Listen, I ran a big part of asset servicing. I ran an important part of the wealth management business. No surprises there. Getting into the numbers and things like that, I would actually tell you the biggest surprise I’ve had so far is the size of the prize in the wealth management, asset management opportunity inside the firm, and particularly as it relates to taking some of those capabilities and pushing them into the ultra-high-net-worth and into the core wealth side. I think I underestimated the ability and the opportunity there. It’s much, much greater than I thought it was going to be. I think that’d be one thing. In terms of the finance function, I think we’ve changed the way we do our financial planning. We’ve moved to a much more dynamic model, a more flexible model.

We don’t just set it and forget it at the beginning of the year. People get a plan, but very shortly after that plan is in place, we have a process we go through almost weekly. We look at the markets, we look at our sales, we look at everything. If we need to shift or change priorities, we can do that now. We’ve identified all of our discretionary and non-discretionary spending, and we can use those levers, if we need to, in a given quarter to make sure that we’re maintaining positive operating leverage. I think that’s sort of the way we’re running the business today. It’s much more dynamic than it was in the past. I think that’s an important way to do that when you’re in this type of environment where you’ve got some volatility you’ve got to deal with.

Unidentified speaker, Conference Host: Makes sense. On the topic of leadership changes, maybe just talk about some of the recent ones. Last week there was an announcement kind of changing the Head of Asset Management who’s leaving. I think it was maybe a little bit of a surprise to outsiders. Maybe start with that, and then we can kind of speak to some of the other leadership changes we’ve seen in the last year or so.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, I think the announcement about where Daniel is going is out. Everyone kind of knows that. I think it was a very close call. I was involved in the recruiting effort for Daniel a few years ago, two and a half years ago, roughly. It was a very close call at the time whether we would go internal or external. We had very strong internal candidates. I think at the time we were doing a bit of a shift in asset management, much more towards the alternative space. I was part of that because family office obviously was an important part of what we were trying to do.

I think at the time we thought an external voice at the table could kind of level set and check what we thought was already true in terms of our strategy going forward and bring some different thought processes into that shift that we were doing. I think it was the right decision at that time. The good news is it was a close decision. Mike Hunstad is someone who’s incredibly well-respected and well-known inside our institution, is someone who could have done the job a couple of years ago as well. The strategy that’s been put in place was something he was integrally involved in putting together, together with Daniel. There will be no change in the core strategy of the asset management business. We’re now on these great, you know, sort of focused rails going forward. We know what we’re doing.

He’s going to just continue to execute off that original plan. I wouldn’t expect there to be any noise there. I’d also just say that it actually is a good thing that we’re able to do a succession announcement so quickly. It just speaks to the strength of our bench and the fact that we’ve got this great team already in place.

Unidentified speaker, Conference Host: Last year, you made changes to asset servicing and wealth management, the other two obviously big businesses. Any updated thoughts in terms of how those businesses are run, or is it more status quo?

Peter Cherecwich, Chief Operating Officer, Northern Trust: No, it’s definitely not status quo. I’ll let Pete talk to the asset servicing side. On wealth management, the family office services segment that they put together, I think, is going to be very powerful. I’ll tell you why. One of the big differentiators in GFO has always been your segment expertise and kind of knowing what other folks in that space are doing and why they’re doing it. I think we’ve discovered with the cohort group that’s $100 million and above but doesn’t have a family office, a lot of that same thing is true. We actually incubated that idea in our Central Regional Wealth Management group. We found that by having those dedicated individuals in that particular segment, our win rate was 75% or better. What Jason’s trying to do now is take that template and apply it to the different regions inside the U.S.

to make sure that when that segment comes to the table, whether a new prospect or an existing client, they’re getting the same level of coverage they would get as if they were part of that segment of the Central Region. We already have a test case. We already know it’s working. It will help the migration. A lot of these clients will migrate up to having a family office at some point. We can make that handoff very, very easily because the GFO folks and the family office services folks are sort of co-located. I think that synergy is going to be super powerful. The other thing Jason’s doing is expanding the suite of alternative products that we have on our platform. We already had onboarded roughly $2 billion of alts onto the wealth platform.

He’s already launched four new funds this year, has about, I think, another eight coming down the pike for the second half of the year, and is accelerating that process. We found that our clients are really wanting to add that to their portfolios. I would say we started later than most in getting that into portfolios. Now it’s really accelerating. From that perspective, that’s definitely not status quo. The last thing I would just say on the wealth side is that he’s looking at key geographies and beefing up the teams in those key geographies, including New York and the West Coast and other areas that you’d think would be important to us to make sure we’ve got the right folks and the right sort of sales management there as well.

Unidentified speaker, Conference Host: On the asset servicing side, a little awkward because I was there, and now Theresa’s taking over. What has she changed? First, obviously, the operations and all the services have come over to the COO world. Most importantly, one of the verticals we had was for asset managers and a separate one for asset owners. She’s changed that now. She’s regionalized client service. The UK runs all of the UK, et cetera. The U.S. runs all of the U.S. That’s enabled them to focus a more coherent strategy. As part of the scalable growth initiative, really focusing on upmarket asset owners, global alts, as well as our capital markets business. Our capital markets business has been driving a huge amount of growth on the FX line. Our brokerage line is starting to go up. Liquidity is the last piece of that.

Under our liquidity solutions group, our cross-organization group has been focused on how we make sure we are getting as much wallet share of our clients’ total liquidity, not just deposits or fixed repo or money markets, et cetera, but the entire liquidity basket that’s helping the NII line. Yeah.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Got it. I guess maybe I just hope we could just kind of delve into some of the topics going around. You know, global or not global or just private markets in general is certainly something that’s come up quite a bit. The growth there has been and expected to continue to be pretty strong. Just how is Northern Trust positioned to capture this opportunity on the asset servicing side? Yeah. Really, really well. We bought, I think it was 2012 now, I bought the Omnium platform from Citadel. That group right there was started at $10 billion. That group now is number four in the market, right? The amount of AUA has grown by 49% in the last two years. Interestingly, 90% of the assets are equally divided between private credit and multi-strat, which I would say are the hottest part in the market and well positioned for growth.

That investment and that team is doing great. If I look at pure play private capital across the globe, over the last five years, we’ve seen our assets more than double. We just did a liftout of an organization, IGNEO, in Australia to give us that capability. One of the largest private managers in the world just appointed us to be their primary provider as well. Last piece, which is interesting on the retail side, if you look in the UK, their new vehicle for semi-liquid products, it’s called the LTAF. We have over 60% of all funds authorized by the FCA are administered by Northern Trust. All the big managers that are launching this LTAF, a liquid alternative product, we are there on the ground floor. We expect that to continue to grow. I feel well set up because of our focus on private credit, particularly in multi-strat.

Unidentified speaker, Conference Host: Got it. Maybe, Dave, just back to your prior job as running Global Family Office, you know, 8% revenue growth in the first half of the year. Just talk about opportunities to further grow that business and just how does it kind of play into the broader wealth franchise.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, so we’ve had some really significant wins internationally in GFO. What people don’t fully realize is we’ve had an office and a Global Family Office business in London for the better part of 20, 25 years, so we’re pretty well established. We put a team out in Singapore as well to take advantage of the APAC business. We really benefit substantially off of the penetration we already have in our asset servicing business. When you get overseas, there’s a lot of connectivity between some of the large EMEA and APAC sovereign wealth funds and other folks and actual personal wealth. Our reputation, primarily as an asset servicer in these markets, really appeals to some of these larger big family offices. The stuff we’re going after internationally tends to be the biggest, most sophisticated family offices, and we’ve got a platform there that is already there.

For example, the Luxembourg business, the fund administration business there, is very appealing to family offices. The GFO Foundation, however, I think the really big lock domestically is this family office services segment. What Jason recently did, which I didn’t mention before, is he took the Chief Operating Officer of GFO and the Head of Business Development for GFO and made them Head of All of Wealth, COO All of Wealth Business Development. The idea behind that was to take some of the best practices we developed in growing that business and the technology we had and we’re using at our disposal because a lot of the family office services folks want to access that technology and to push that more into the ultra-high-net-worth and even in some cases the core wealth segment. I think that is really going to turbocharge that business.

It’s also going to make sure that we put the right clients in the right swim lanes, right? We have a fair amount of billionaire families that still aren’t part of GFO. They’re sitting within the regions. We have a sliver of their business. Now we can go in there with a bigger team and make sure that we put them in the right swim lane. That synergy between those two groups is going to be extremely powerful to grow that platform.

Unidentified speaker, Conference Host: Got it. Maybe kind of put up the next ARS question as we shift to the financials. You know, average deposit, I think, was $122 billion last quarter, up 6%. I know typically we see a seasonal decline in 3Q. Maybe just kind of talk to what you’re seeing on that front.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, yeah, I said in the last earnings call that I expected the deposit base to normalize. There obviously was an uptick during the quote unquote "liberation day" and the risk-off trade that ballooned our balance sheet a little bit. I expected it to normalize back down. August is typically a slower month because Europe obviously takes time off, and that’s transpired. I would say that it’s actually worked out pretty much exactly along the lines that I’d anticipated. It’s gone back to what it was before in terms of just the deposit growth growing along with the underlying client business going forward. Obviously, third quarter is panning out. Fourth quarter, there’s usually an uptick in deposits towards the end of the year. I haven’t seen that transpire, obviously, because we’re not there. I think generally speaking, I’m pretty comfortable with that.

Unidentified speaker, Conference Host: I guess record NII in the second quarter, up 16% year on year. You’ve talked to kind of only mid-single-digit growth for 2025. Maybe just talk to some of the near-term puts and takes. Obviously, we have a short duration balance sheet that’s going to likely cut next week, I’m told. How can we think about both the near-term and longer-term NII opportunities?

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, so that’s another case where it’s actually panned out the way we thought it would as well. We had at least two cuts modeled into our guide in Q2. We think it could be two, could be three. Even if it’s three, it won’t matter because the third one would come in December. By then, it doesn’t have much of an impact. From that perspective, we feel like, you know, we’re sort of on the same track that we mentioned before. In terms of 2026, too soon to handicap 2026. What I will say, though, is we have changed the fixed mix of our securities portfolio. The fixed portion has gone up over the last few months. We’ve begun to think a little bit about having anticipated a lower environment, how can we protect some of our revenues going into the following year?

You’ll find that when you see the numbers come out, we’re actually a bit more on the fixed side and a little less asset-sensitive than we might have been before to try to counteract a lower rate environment.

Unidentified speaker, Conference Host: The room expects modest growth next year, for what it’s worth.

Peter Cherecwich, Chief Operating Officer, Northern Trust: OK, where are interest rates going to be next year? We’ll see.

Unidentified speaker, Conference Host: I guess maybe on the fee income side, the markets have obviously been strong. Just maybe talk to the current backdrop, you know, new wins, pipelines, expected trajectory. I know some of your businesses benefit from lag pricing, which is really strong. Just how should we think about that?

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, I’ll let Pete talk about asset servicing. As it relates to wealth, our pipeline is incredibly strong. In the regions, it’s running well ahead of this time last year. GFO had an incredible year last year, a record year, and they’re on pace to match that. I feel really good about the wealth management pipeline. Asset management is sort of a tale of two cities, obviously, in the areas where we have put a lot of our energies into, we call our right to win, whether it’s our U.S. Treasury Fund, our liquidity funds, our tax advantage product, and even our alternatives. If you look at our 50 South capital raising, that’s all been very good. There are some industry headwinds, obviously, we’re grappling with, whether it’s mutual funds or institutional indexing and things of that nature. We’ve seen some weakness in fundamental equity managers. That offsets that.

In the areas we’ve actually prioritized, we’ve actually seen some very decent growth and good pipelines. Do you want to address?

Unidentified speaker, Conference Host: Yeah, on asset servicing, I feel there’s been strong momentum across the board. If we take our annual goal, right, we’re at 80%. I’ll caution everybody, just because you sell something, the implementation time frames are way varied. You can’t really draw any conclusions from that, except that our sales process is being robust. If I look at where that robustness is occurring, in AMIA, right, 90% of our target for asset managers right now. They’ve been delivering very strong results, partly because of our success in those liquid alternatives, in the LTAF funds, et cetera, but also in custody wins and standard fund accounting. In the Americas, really a shining star here is asset owners have reached 160% of its target, mostly from all takeaway wins from our competitors, University of Texas being one of the major ones.

If you ask why, it really is our front office solutions product and the references we’re getting from our other clients, that is winning the day. Ultimately, pipeline’s doing great. One stat which I thought was interesting is that we’ve retained 89% of rebids globally. It’s not that many that are out there every time, but there’s always people go out and do pricing exercises, et cetera. We continue to maintain our client base and do very well there.

Peter Cherecwich, Chief Operating Officer, Northern Trust: On the expense front, you’ve talked to less than 5% expense growth this year. That’s still the case? How do we think about that?

Unidentified speaker, Conference Host: Yeah, I mean, obviously, I would have wished the dollar would have hung in there better. Having made that commitment, we definitely put it out there, and we’re sticking to it.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Got it. I guess, you know, less than 5% this year is better than you did last year. I guess how do we start to think about, you know, 2026? Could we do maybe less than 4% next year? You’ve also talked to this 105% to 110% expense-to-trust fee ratio and pre-tax margin targets. When do you think you can get to those?

Unidentified speaker, Conference Host: What I’m trying to do is redirect everybody to positive operating leverage as being the primary goal, as opposed to just a given number. Everything is interconnected in terms of how we do it. When I took over the role, I knew that we had some credibility gap in terms of our ability to control our expenses. What I wanted to do was put a target out there to say it’s going to be below 5% because we have the intestinal fortitude to do that and the systems and the people that want to do it. We’ve proven we can do that, right? We’ve built this financial model in such a way that if we have to flex, we can flex. It can flex as low as we want it to a certain extent, right?

From my perspective, it’s going to depend to a large extent on the state of the markets and our pipeline and our business and everything else. What I don’t want to do is starve the businesses of growth investments, right? If you were to see us do something, it’d be more on the growth side. I want to marry it together with the productivity that Pete’s doing. They go hand in hand. Together with his productivity, we’re looking at a model that can definitely flex every quarter and produce the kind of expense control we’re looking for. I’m hoping Mike’s always put the target out there that we want 3% organic growth, 3% market growth. That’s 6% revenue growth and 4% expense growth. That’s sort of nirvana for us. That’s sort of our overall goal, right? Overall goal is like two points of operating leverage, right?

We throw it out there as sort of our financial model that we’re trying to attain. We have to be flexible, right? If I need to take it down, I’ll take it down. I know how to do that, right? I just want you to understand that a particular number isn’t the way I look at it. It’s really positive operating leverage in all circumstances. That’s sort of the way to look at it.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Got it. The second quarter was record share repurchase, but you still have so much capital. I mean, I think over 500 basis points of excess capital. If you look at the most recent stress test, the next highest bank is like $350. I know the customer comes first, but can you do more here?

Unidentified speaker, Conference Host: Yeah, so we’ve returned 116% of earnings so far this year. We’ve already said at the second quarter earnings call we’re going to do like 100% for the year if things are panning out the way they should, which is pretty darn good, OK? In terms of our capital, it only—every $700 million of RWA is basically 10 basis points of CET1. We have a lot of clients that come to us without really any notice, which is fine, because we have some very big, big clients. They may borrow large sums of money in the billions, OK? When you think about running at $12.9, it was way too high. Running at $12.2, we’re still above our target range of $11 to $12. When we get closer to $12 or below, right, we’re in the range.

We still have to have enough buffer that if these large clients come to us, it’s not going to drive us too far down. The second thing I would just say is we have some very large clients, particularly overseas, that like the fact that we have that excess buffer, right? To the extent that we look at the other firms and the regulatory environment and we think that we could maybe run a bit lower, we might do that. At the end of the day, we want to have that relative buffer over our peer group because we just think it’s important given the size of our clients and our asset size, right? We’ll be very careful about that. $11 to $12 is sort of going to remain the target for now.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Got it. In July, you kind of increased your ROE target from 10% to 15% to 13% to 15%. Is 15% the ceiling, or do you think kind of the successful execution of a lot of the stuff we talked about today, including that one Northern Trust strategy, can get you to something higher eventually?

Unidentified speaker, Conference Host: Not the ceiling. Obviously, the wealth and asset management businesses already attain that and more. I think the idea behind moving it was, we want to be able to consistently be at the top end of our range, right? That’s why we took the 10% away, right? We thought, OK, we can 13%, OK. That’s good. If we can consistently be at 15% for a certain period of time, we can think about raising the target. It’s definitely not a ceiling. Right now, we have to prove that out. One thing to consider, we don’t manage to an ROE number. At the end of the day, it’s a byproduct of everything else we’re doing, right? We could manipulate ROE if we wanted to, right? That’s just not how we run our business.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Got it. I got to bring up the late June Wall Street Journal article, particularly because it ruined one of my Sunday nights. It mentioned Bank of New York approached Northern Trust to express interest in merging, and the CEOs talked. I know Mike was pretty direct on the earnings call in July that we never really entertained discussions regarding the sale of the company, nor do we intend to. I guess two questions. First off, why don’t you think it makes sense to at least entertain discussions? Maybe secondly, what leads you to believe that independence is the right approach, just given these are scale businesses and you’re not the largest player?

Unidentified speaker, Conference Host: Yeah, so just first and foremost, I think there was a—I’ll let Pete answer the scale side of it because I actually think it’s not as important as people say it is, particularly with the advent of AI. In terms of what Mike said at the last earnings call, I think it’s important to note, and one of your fellow analysts has this quote that banks are sold, they’re not bought, right? That’s very true. We needed to make certain that our clients, and we had a lot of phone calls from clients and our shareholders, knew that we, as an institution, had not initiated a process to sell the bank, OK? There is a reason why people come to Northern Trust Corporation versus their alternatives. They don’t like the alternatives. They like our business model the way it is. From that perspective, we had an active pipeline.

We still do. We’ve got clients that have large sums of money with us, not just on the wealth side, but on the institutional side. We needed to basically take what was, in effect, a rumor and make sure they understood that we, as a management team and as a board, were not initiating a sale of the company, right? I think that’s incredibly important for them to know that. That’s really what Mike was saying. Take into consideration, too, that you’ve got Mike’s a former investment banker, a former FIG investment banker, right? He knows about M&A in the FIG space. I was an investment banker as well. When you think about shareholder value and inorganic opportunities and things of that nature, we’re looking at stuff all the time, right? I mean, and you know, we know what’s out there. We know what the art of the possible is.

Our board understands their fiduciary responsibilities very deeply. They hold us to account. They’re tough on us. At the end of the day, when you look at our independent plan that we’ve got in place to grow the company and reach our financial targets, we have a high degree of confidence in hitting those targets as our current business is structured today, right? The other thing I would just say is, you know, when you think about the growth of our business going forward, it’s going to be primarily in asset management and in wealth management, right? It’s not going to be in custody, right? I think I want Pete now to address the scale issue, which I think I want to take off the table going forward, because I think we feel like we can compete very effectively right where we are right now in that business. So, Pete.

Peter Cherecwich, Chief Operating Officer, Northern Trust: Scale. There are two ways to get scale. One is volumes and rates. The other is being really smart about how you spend your money. In the volumes and rates, if someone has a data bill and they’re bigger and they use more data, they might get a better deal. I would argue that better deal is going to be on the margin. Where you get real scale is back to the capability of having one platform that services everything across your company and focus on only changing that one platform and managing that one platform. For example, we right now are in the midst of implementing a cloud-native accounting platform. I would argue the success of a cloud-native accounting platform, we put AI on top of that, that will dramatically increase our ability to scale because the number of FTE you would need to run accounting goes way down.

Because of our size and nimbleness, we will be able to get onto that platform much quicker than anybody else, right? Being in the middle where you have the capital to spend on the technology that you need, but you are the size where you can actually convert and change, that actually is kind of the sweet spot right now given how fast tech is moving.

Unidentified speaker, Conference Host: I guess, Dave, you opened yourself up to the last question. You brought up your investment banking background, Mike’s investment banking background. In the flip side of this, do acquisitions play a role in kind of Northern Trust’s future in terms of being a buyer?

Peter Cherecwich, Chief Operating Officer, Northern Trust: Yeah, of course they do. I mean, I think look at our history. Up until 2010, most of our acquisitions were either scale or geographic. Pete was involved in many of those. If you look at 2010 onward, it’s been more capability-driven. If you think about Paralex and you think about AV8 and Omnium and a bunch of the other tech, those were more about capabilities, right? As you look at the wealth management business, I would say it’s got a very solid platform. Capability-wise, I think they’re focused on alternative investments, right? How do we get that across the table? It doesn’t have to be an acquisition, right? There are partnerships, joint ventures, and other ways of doing it, distribution agreements, huge focus for Jason right now. Asset servicing, I think, has everything they need, all right? I wouldn’t expect anything there.

Asset management is going to be, I do think product will be an issue for asset management, looking at new product, whether on its own organically or with a partner, not out of the realm of possibility.

Unidentified speaker, Conference Host: Great. On that note, please join me in thanking Pete and Dave for their time today.

Peter Cherecwich, Chief Operating Officer, Northern Trust: See you all back here at 7:30 A.M. tomorrow morning.

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