Northern Trust at Morgan Stanley Conference: Strategic Growth and Resilience

On Tuesday, 10 June 2025, Northern Trust Corporation (NASDAQ:NTRS) participated in the Morgan Stanley US Financials Conference 2025. The company highlighted its strategic focus on client service, technological investments, and disciplined expense management, while also addressing market uncertainties. Despite challenges, Northern Trust conveyed a positive outlook, emphasizing profitable growth and resilience.

Key Takeaways

• Northern Trust aims for profitable growth through new business and expanded services.
• The company is focused on digitalization and AI, with a cautious approach to implementation.
• Capital management remains strong, with a robust CET1 ratio and strategic dividend policies.
• Expense growth is targeted at 5% or less for 2025, with productivity initiatives in place.
• Northern Trust is exploring digital assets and crypto, with investments since 2017.

Financial Results

Deposits:

• Experienced an increase due to tariff volatility, with stabilization at elevated levels.
• Institutional clients were the primary drivers of deposit trends.

Net Interest Income (NII):

• Projected low to mid-single-digit growth for 2025, likely on the higher end without interest rate cuts.

Expenses:

• Expected to grow by 5% or less in 2025 through organizational changes and productivity improvements.

Capital:

• CET1 ratio at 12.9%, above the management range.
• Dividend payout ratio between 30% and 50%, with a focus on maintaining a 100% payout ratio next quarter.

Operational Updates

Strategic Priorities:

• Emphasizing client service and profitable growth through new client acquisition.
• Leveraging technology and AI to enhance operating models and client solutions.
• Capitalizing on synergies between wealth management and asset servicing.

Technology and Innovation:

• Investment in technology, with a budget of 1.3 to 2.0 billion dollars, split between business-driven tech and infrastructure modernization.
• Focus on digitalization and tokenization of assets, with ongoing investments in crypto capabilities.

Future Outlook

Expense to Trust Fee Ratio:

• Aiming for a target ratio of 105 to 110 in the medium term, with progress in the wealth business.

Alternatives and Growth:

• Expanding fundraising capabilities and onboarding third-party managers.
• Focused on organic growth, with potential M&A in wealth and asset management.

Q&A Highlights

Digital Assets and Crypto:

• Continued exploration of holding crypto for clients, with significant opportunities in data and digital sectors.

AI and Technology:

• Recognized potential for AI, although still in early stages of implementation.

International Growth:

• Robust growth in the pipeline, with synergies between wealth and asset servicing businesses.

In conclusion, Northern Trust remains committed to strategic investments and client-centric solutions to drive growth and resilience. For more detailed insights, refer to the full transcript below.

Full transcript - Morgan Stanley US Financials Conference 2025:

Theresa Parker, President of Asset Servicing, Northern Trust: Back a little bit, Dave. That way we both can Okay, super. Yeah.

David Fox, Chief Financial Officer, Northern Trust: There we go.

Betsy, Unidentified speaker: All righty. Well, thanks, everybody, for joining us this afternoon. We are thrilled to have with us today Theresa Parker, President of Asset Servicing at Northern Trust and David Fox, Chief Financial Officer at Northern Trust. Thanks so much for joining us.

Theresa Parker, President of Asset Servicing, Northern Trust: Thank you. Betsy. Great to be here.

Betsy, Unidentified speaker: So Theresa, let’s kick it off with you. You’ve held numerous leadership roles at Northern Trust during your forty plus year tenure at Northern Trust and most recently as president of the EMEA Region. And in September, you decided to defer your previously announced retirement to become president of asset servicing. Could you help us understand why you made that decision? That’s a very bold decision and very excited to hear why you

Theresa Parker, President of Asset Servicing, Northern Trust: made it. Thanks, Betsy. Well, actually I made it because we were going through an organizational change and I was offered the role in charge of asset servicing. So it was a really great opportunity to be able to help shape the company going forward with all the knowledge that I’d picked up over the years, having worked at the bank in many different regions and functions. So terrific opportunity, really.

Betsy, Unidentified speaker: Okay. And then when we think about what you are looking to accomplish, given everything that you’ve been involved in and the new technologies that we have in front of us, what strategic priorities do you have for your position here?

Theresa Parker, President of Asset Servicing, Northern Trust: I think then is the successful implementation of the change that we’re making in the organization and making sure that we keep what I think is one of the most important differentiators for us, which is around client service. So that’s number one. But then after that, really focusing on driving profitable growth with new clients that are coming on, with making sure that new business is positive in terms of our operating leverage, but also focusing on retaining our existing clients and helping to make them more profitable by broadening the services they take from Northern. So driving profitable growth would be the thing. Then I would say focusing on resiliency and productivity, ensuring that we have really consistent, really strong client service delivery.

I think we have excellent client service delivery now, but the bar keeps going up. And then the last thing I’d say is focusing on resiliency and productivity, ensuring the reliability of the services we have, but also helping to make it more productive over time.

Betsy, Unidentified speaker: Okay. So as we’re thinking about profitable growth, you’re thinking about a difference in that that I’m not close enough to. So I’d like you to help us understand where are there opportunities to improve the profitability of the growth that Northern Trust generates in asset servicing. So

Theresa Parker, President of Asset Servicing, Northern Trust: I think it does start with focusing on the new business we’re bringing on, making sure that it works for both us and the prospect, that it’s accretive to our profitability, that we have positive operating leverage. But then I think it’s also on focusing on the kinds of things that we combine with the business that we have. We have good examples of where we are starting to make very, very significant inroads on banking and capital markets with our existing clients and clients coming in through that channel, our asset management business. Those are very high margin products that help us with the overall profitability. And then I think it’s the underlying base and focusing on the opportunities that the new technology, data, digital, AI bring with us to help make the underlying operating models more efficient.

Betsy, Unidentified speaker: Okay, so it seems like all of the above. And one of the areas I did want to dive into a little bit there was with the wealth management asset servicing and the synergies that there are with wealth management. Could you help us understand where there’s opportunities for synergies there?

Theresa Parker, President of Asset Servicing, Northern Trust: Yeah. Mean, we are focused on trying to be more holistic in the way we’re solutioning for all of our clients. And I would just pull out an example on one of the areas of focus, which is on alternative markets. We are, in asset servicing, a strong provider of solutions to hedge funds and to private capital funds and have been for some time. But now taking that with the wealth business, focusing on the principles of those companies and helping them with their wealth management needs and capabilities, but also some of the liquidity they may need for the funds that they are actually overseeing.

So create that whole ecosystem and thinking about it as to how Northern can help this system from all the different dimensions.

Betsy, Unidentified speaker: Could you speak a little bit to what it is that you have in your service and product set that differentiates you in the private markets?

Theresa Parker, President of Asset Servicing, Northern Trust: So private markets, one, I would say let me just give the three different ways we think about private markets. One is private capital administration. That’s the administration of funds that have private debt or private equity or real estate in them. The would be hedge funds. And the would be a capability that I’m really excited about that we use for asset owners, which helps asset owners like pension funds sovereign wealth insurance companies be able to look at their private and their public markets together called front office solutions.

So I’d say those capabilities. And I think the differentiation, besides the length of time we’ve been working with the clients in this space, but it’s now grown as an asset class, is the ability to solution with the clients. Because each one is slightly different, and being able to put the building blocks together to create the solutions that actually help to ensure we’re supporting the investment process of a fund, of an asset owner, I think, is a differentiator. And then actually focusing on the client service that goes with that to ensure that it’s not just technology, It’s an operating model and a servicing model that actually helps them accomplish their goals.

Betsy, Unidentified speaker: And having those customized solutions for clients, how are you able to do that in an efficient way?

Theresa Parker, President of Asset Servicing, Northern Trust: Yeah. And I think it’s not as much about customization as it’s about really understanding the business and having the flexible building blocks to be able to put them together to solve the clients’ needs and that solutions orientation and having those flexible building blocks and an ecosystem that allows for that to work efficiently and scalable. We really do hear from clients. They don’t want non strategic solutions. They do want solutions that help to deliver every day, but they want flexibility.

And sometimes customized solutions can be one offs, but then actually don’t last the test of time in terms of service quality.

Betsy, Unidentified speaker: Okay. And what would you say it is about Northern Trust that differentiates your service and product set versus the competitive stack?

Theresa Parker, President of Asset Servicing, Northern Trust: Yeah. I do think it starts with that client service ethos. The client service ethos that is, one, starts with the clients, the products and solutions that we put together. We’re doing it because of clients, not because of what we think the clients want. We start with them.

I think it’s on the retention of the clients. We do think about clients as partners, and we’re looking to help support their business. We know we’re signing up for that when we focus and win new business. And then I think it’s how we invest in the business to make sure that we are servicing the clients. So I think that’s one.

And then I think that point I made earlier about the flexibility of the tech stack and how we can be solutions oriented. And we do spend a good amount of time on each time we’ve got clients coming in or prospects coming in on their operating model and how they do it. And I think that’s a differentiator, because we’re helping them to be better. But we’re also helping us to make sure that we get it right for them. And it’s all about this partnership and mutual situation.

So I think it’s that combination that makes us different.

Betsy, Unidentified speaker: And is there any investing to do to keep that tech stack at the level you want and need it to be at?

Theresa Parker, President of Asset Servicing, Northern Trust: I think there always is. Mean, the world is changing. There’s legacy tech to get off of. But we take the opportunity when we’re doing that to make sure that we’re moving into the new technology, that we’re actually reimagining the tech, and that we keep the clients in mind. It’s not about us.

It’s about the client. So very important. And then this organizational change we’re making is about that consistency of the underlying tech stack to make sure that we can get the data, the digital sort of opportunities that we think should come with that.

Betsy, Unidentified speaker: And I know that Northern Trust has the One Northern Trust efficiency initiative. How is asset servicing contributing to that? Yeah. And I think One Northern Trust is one of the elements, or one

Theresa Parker, President of Asset Servicing, Northern Trust: of the pillars is about efficiency. But it’s really about thinking holistically about Northern and how we can serve clients and come up with solutions that help those clients, and in doing that, also become more efficient for clients and for us, and so creating that value proposition across the board. I’d give an example. We talked a little bit earlier about the wealth management and the asset servicing linkage. In terms of the asset management and asset servicing linkage, we are working on increasing times where we can create solutions for clients where we can help them both for their asset servicing needs and their asset management needs.

One recent example I’m thinking about is a multinational client that we’ve had as a client for decades who actually had a need for a private capital fund for their pension fund. And we were able to help co create that with them, dollars 1,000,000,000 fund. And so good thing for both us and for them. So it’s, again, that coming up with the solutions that help us both.

Betsy, Unidentified speaker: Great. Sounds like a fun place to be. A couple of other questions here just on the product set. And one thing that we’ve been getting questions from investors on is how are you thinking about digital, digital assets? Maybe we could talk a little bit about that.

And then more recently, the SEC rescinded SAB 121, which effectively removed the barrier to custody crypto. And wanted to understand how you’re thinking about crypto broadly as an asset class. So maybe let’s just start with products. And are there any products that

Theresa Parker, President of Asset Servicing, Northern Trust: you’re looking to lean into more or acquire? If I just go to that change with the data and the digital, we do think that the recent regulatory changes will accelerate digitalization of assets and tokenization of assets. And so we have, since 2017, been investing in this space to come up with use cases that actually we think may be used in the future to make sure as our clients then start to use these more or regulatory restrictions come off that we’re able to do that. So very important space for us that we keep moving with our clients and where they’re driving us. We do have an investment in a firm that can hold crypto for clients outside of The States.

We’re now exploring what that would mean in terms of clients who may wish to do that. We haven’t had a huge surge in that, but we think the bigger opportunity may be in data and digital. And I think then the other thing in that space is around cash and how cash may change. And if that tokenization of cash takes friction out of the settlement systems. Does that actually then help to shorten settlement cycles?

We’re prepared for that if that happens as well. So we are very much forward looking on this, but investing to make sure that, to the extent things change, that we can help our investors and our clients.

Betsy, Unidentified speaker: How do you prepare for a change in cash?

Theresa Parker, President of Asset Servicing, Northern Trust: It’s actually having the actual infrastructure to be able to do that, be able to also understand how it would change the ecosystem in terms of settlements, because we do think it might accelerate it and be able to have the accounting systems that could help to support those changes.

Betsy, Unidentified speaker: Yeah, it’s a question I’ve had because I understand stablecoin a little bit. And then we also have in the clearinghouse offering real time payments, which is real time payments, as far as I understand. And so I guess I’m trying to get it yeah, what’s the difference there? And how does stablecoin potentially

Theresa Parker, President of Asset Servicing, Northern Trust: do I think it’s yet to be seen. So we need to be prepared for both of those scenarios. Real time cash may be the solution. And maybe you don’t need stablecoin. But we don’t know yet.

So that’s actually why we need to prepare for both situations.

Betsy, Unidentified speaker: Now, real time payments from Clearinghouse has been available for many, many, many years already. Have you had clients interested in real time payments? Actually, I’m probably not super expert on that

Theresa Parker, President of Asset Servicing, Northern Trust: that I’m aware of. But I wouldn’t want to lead you too far there.

Betsy, Unidentified speaker: Right. But basically, it hasn’t been a request that surfaced at your level. No. Okay, fine. All right.

Thank you so much, Theresa. Let’s switch gears to you, David, and dig into the financials a little bit, if you don’t mind.

David Fox, Chief Financial Officer, Northern Trust: Sure.

Betsy, Unidentified speaker: Yep, okay. So let’s touch on deposits. Now in 1Q, there’s a nice positive bump in deposits and driven at least tell me if this is wrong, but I thought it was driven by tariff volatility that then led clients to hold more liquidity in the form of deposits with you. And it seemed like at the time you were reasonably confident that this dynamic would support elevated deposit levels as we roll into 2Q. And now that some of this tariff volatility has ebbed a bit, you never know what tomorrow will bring, but as of right now, it’s settled a bit since the April.

And I am wondering how are deposits going in the quarter? Is what you expected, what you’re seeing?

David Fox, Chief Financial Officer, Northern Trust: Yeah, it is. Deposits definitely did spike after Liberation Day. And we’ve seen some lessening of that, obviously, as the situation’s gotten a bit more clarified. But they’ve still remained elevated. And I think part of that reason is folks don’t have complete certainty in terms of what’s going to happen, number one.

Number two, they started to think a little bit about the dollar as a reserve currency. A lot of noise about that with the budget and everything coming down. And so we’ve seen some very big, particularly on the institutional side, reallocations around transitions of big portfolios. And so when folks do that, they will also keep a lot of cash, making sure they understand when they want to deploy it. And so the combination of both of those things, I think, has kept the deposit levels pretty much where I thought they would be.

Theresa Parker, President of Asset Servicing, Northern Trust: Okay.

David Fox, Chief Financial Officer, Northern Trust: Yeah.

Betsy, Unidentified speaker: And any difference between wealth versus the asset servicing clients?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So the really high end wealth clients, like family office, always view market disruption as an opportunity. They’ve got plenty of liquidity, and they have the ability to invest at all parts of the market. Our core wealth clients, frankly, we tend to have them build a cash reserve, and they tend to be wait and see, longer term investors. So we haven’t seen a huge change in the allocations around wealth management.

I would say it’s mostly an institutional phenomenon more than anything else.

Betsy, Unidentified speaker: Okay, great. All right, very good. Now, with that as a backdrop for 2025 net interest income outlook, I think recently you guided to plus or minus well, plus I shouldn’t say minus plus low to mid single digits year on year. Correct. Is that right?

Okay. And with the deposit trends coming through, that’s still a comfortable guide?

David Fox, Chief Financial Officer, Northern Trust: Yeah. And it’s not just the deposit trends. We’re higher for longer a little bit here, too, right? Anticipated cuts didn’t happen. We have some exposure to foreign currencies, and the euro obviously has cut.

But at the end of the day, it’s a combination of both. And I would say anything about that guide. It’s not changing, but I would probably have a bias towards the higher end of the guide at this point in time.

Betsy, Unidentified speaker: Okay. With no cuts in The US and then the curve steepening?

David Fox, Chief Financial Officer, Northern Trust: Well, we’re still thinking there will be one cut in The US. But even if there was just one cut, the cut originally was going to be in December. It wouldn’t have had a material impact anyway. It wouldn’t be there enough. So it really hasn’t changed much in terms of that perspective.

But I think the higher for longer combined with the higher deposit level would be about where I thought it was going to be.

Betsy, Unidentified speaker: Okay. And does the curve steepening help you? Yeah.

David Fox, Chief Financial Officer, Northern Trust: So as I’ve said to you folks before, we’ve got about a billion of securities that rolls every quarter. When it rolls, we’re able to reinvest. And we are thinking I mean, ’25 is, from my perspective, pretty locked in at this point. So we’re thinking about 26 in terms of making sure that we’ve got some protection if there’s more rate cutting in the future. So we definitely are you’re going to see our fixed versus floating go up a little bit more as a result of that as we start thinking about protecting ’26.

Betsy, Unidentified speaker: Fixed rising?

David Fox, Chief Financial Officer, Northern Trust: Rising.

Betsy, Unidentified speaker: Yes. Okay. And so you’re taking some actions to lock that in is basically what you’re telling us.

David Fox, Chief Financial Officer, Northern Trust: We’re taking some actions to make sure that we protect ourselves there, yeah.

Betsy, Unidentified speaker: Okay. And then on expenses, you’ve been clear that you’re confident in the ability to have expense growth in 2025 of 5% or better, 5% or less. And I just wanted to understand where the confidence for that is, given the fact that you are investing in the business. So what are the areas that are yielding this ability to drive positive operating leverage?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So listen, we didn’t obviously anticipate some of the headwinds we had at the beginning of the year with currency and things of that nature. But the confidence at the end of the day really comes from a couple of things. One, Teresa talked a bit about this, the change in our business model where we’re focused in asset servicing. If you think a little bit about some of the IOO deals we were doing, they came with a lot of upfront cost.

And they were interesting deals in the longer term. But in the short term, you have to swallow quite a bit of expense. And we’re not doing those anymore really. We’re doing some selectively, but at the end of the day, we’re not going to be doing them to the same extent as we did before. So we also have a productivity office that is fully up and running, I’m very integrated with my finance team with that productivity office.

And from that perspective, we’ve gone through and identified every single save that we think we can make along the way. And so for every dollar we invest, we’re thinking a bit about what our productivity is going to be to offset that dollar that we’re investing. So we’re very conscious that if we want to keep investing, we have to drive the productivity. And I would say at this point, our productivity metrics are really holding up. And so that gives me a ton of confidence as well.

Betsy, Unidentified speaker: Excellent. And how much does AI factor into that productivity improvement?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So everyone wants to talk about AI. It’s interesting. I was checking my chat GPT this morning for personal reasons, and it was down. Yeah, there was a big outage apparently today in OpenAI.

But I think it’s one of those applications where we are using it internally. We are experimenting with it. And we’re starting to push it out. And it’s providing a ton of productivity in terms of just hours spent on things that would require a lot of manual processes that are not required anymore. But I think it’s a little bit of you’ve got to learn to sort of drive the new car a little bit.

And so I can’t give you attach an actual number to it, but I can tell you the potential is absolutely enormous on the AI side. When you think about process control, you think about manual transactions, you think about digitizing information across a wide variety of things. We’re a data house, right? If you’re in the custody business, you’re consuming a ton of data. If you’ve got an AI tool that has the ability to go in there and churn this data out and then be able to push out, whether it’s scenarios or planning or making more efficient because of that, that’s just going to be a fantastic productivity driver longer term.

Betsy, Unidentified speaker: And what kind of time frame are you thinking about when you say longer term?

David Fox, Chief Financial Officer, Northern Trust: I think it’s early days. In AI, I really do. I mean, it’s not early days in terms of adopting it and using it. It’s just early days in terms of how much cost is it really going to drive out of the system. Because as I said to you before, it has to be reliable.

It has to be secure. It has to be something that if you’re going to release a lot of resources and rely heavily on it, the analogy I tend to use is everyone uses a new GPS tool to navigate inside their car. But if it goes down, no one knows how to get anywhere anymore, right? I think you’ve to make sure you still know how to drive the car to where you want to go. And so our view is it’s still early enough that we want to have redundant systems in place so that if it doesn’t quite do what it’s supposed to do, that we can still get things done for our clients.

Betsy, Unidentified speaker: And just a couple of questions on the tech budget that you have. What is that for 2025? And is it mostly run the bank or change the bank?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So we don’t actually disclose it entirely because I think people it depends whether you include the capitalized expenses and people and all the rest. I do know I was reminded that two years ago, our chief technology officer came here and did a presentation. And he categorized, I think, our tech spend into three different categories the core infrastructure and modernization, and then risk and info security, and then what we call business driven tech. And it’s roughly fifty-fifty between business tech and infrastructure modernization, hypo security.

I’d say that within infrastructure modernization, that’s roughly 35%. And then the cyber and risk is about 15%. And I think at the time two years ago, we told you it was roughly $1.3 So you should assume it was at least $1.3 And somewhere between $1,000,000,000 and $2,000,000,000 would be the way to think about it.

Betsy, Unidentified speaker: Well, looking forward to seeing that roll through and driving the productivity and enhancements going forward, as you’ve been already generating. So let’s turn to capital and capital return priorities. You have a significant amount of excess capital. Now you have had that for many, many, many decades. We all know Northern carries a significant amount of capital, a port in the storm, and a confidence booster for your client side.

Is that fair to say?

David Fox, Chief Financial Officer, Northern Trust: That’s fair, yeah.

Betsy, Unidentified speaker: Okay. At the same time, we have regulations under review. And I wanted to understand, are there any potential regulatory changes that you’re watching that might impact how much excess you believe you have and how you would allocate that capital?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So I always get asked the question on excess capital. I don’t think we view it as excess. I mean, are some people that have no problem driving their car when it’s below a quarter of a tank, right? We like to stay near a full tank because you kind of never know what’s going to happen, right?

And we’ve got to make sure that our clients know that our balance sheet is open. We’re a very liability driven institution. And we need to get from point A to point B regardless of the weather or the circumstances, right? So from our perspective, it’s what our clients expect, and that’s our comfort area. So I wouldn’t call it super excess.

I would say that we ended up the quarter at 12.9% on a CET1. That’s obviously higher than the range we give people. We usually give 11 to 12%, which would tell you that we’ve got some room there. But you never know where you’re going to land on the head of a pin at the end of every quarter. And we do have very large clients that come to us and ask us to do a lot for them.

So we want to be in that position where we can respond to that accordingly. On the regulatory front, honestly, they’re not that onerous for Northern. We don’t really we operate so far above our minimum that at the end of the day, we’re going to watch very carefully what it does to some of the G SIBs and some of our peer competitors in terms of how they react. But at the end of the day, the changes that are being contemplated really shouldn’t affect our business model one way or the other. To the extent that our peers are able to do some loosening up or whatever, then we can take a look at where we are on a relative basis and an absolute basis as well.

Betsy, Unidentified speaker: Okay. Just wanted to lean on that for a minute. Because you mentioned capital CET1 10 to 11 as were 11 to 12. I’m sorry, 11 to 12 as you’re normalized? I don’t know what

David Fox, Chief Financial Officer, Northern Trust: Yes, that’s sort of the range we try to manage to when you’re thinking a little bit about it. But we don’t necessarily have to land there. But we’re obviously in excess of that now. But that kind of leads into we paid 116% of earnings last quarter. The next question is always about what are you going do next quarter and things like that.

We signaled 100%. So I think it just allows us a bit more flexibility to do certain capital actions that we might be contemplating.

Betsy, Unidentified speaker: Okay. Okay. And maybe you could help us understand where the dividend falls into those capital actions.

David Fox, Chief Financial Officer, Northern Trust: Yeah. So same we have a range for dividends as well, 30% to 50%. And last quarter, we were sort of in the Goldilocks zone of around think, 39%. We think about the dividend, we try to stay within those ranges. But you’re always thinking about sustainability, obviously, with the dividend.

So don’t want to get over your skis. So we’ll look at it like we look at anything else and make a decision based on what we look and our earnings are going to be going forward. So is there some room there? Potentially. But we’ll have to take a look at it and haven’t reached that decision.

Betsy, Unidentified speaker: Would CCAR results have any bearing on dividend decisioning?

David Fox, Chief Financial Officer, Northern Trust: Usually, will do some sort of messaging around CCAR. But no, I think I think our CCAR results, we kind of know what we’re going to I think we’re pretty confident we’re going to end up where we think we are. So it’s a combination of things, board appetite, market conditions, forward looking earnings, etcetera. So it’s a combination of different things.

Betsy, Unidentified speaker: Okay. Just also wondering about where opportunities for M and A line up in the capital stack Yeah.

David Fox, Chief Financial Officer, Northern Trust: And I’ll let Theresa answer her portion of it. If we were to do anything in M and A, it would be in the wealth and asset management space. But to be honest with you, we are so focused on organic growth right now that it really isn’t a top priority for us. If something were to come to us that was actionable that we thought was interesting, we’d certainly take a look at it. But at the end of the day, the organic stuff that we’re working on should be able to drive the growth we’re looking for.

And so it really isn’t top of the stack, if you will, in terms of what we’re trying to do.

Theresa Parker, President of Asset Servicing, Northern Trust: And for mass servicing, there’s not a major gap we’re looking to fill at this point. We’ve spent time filling out the geographies and the products and services we wanted, but we don’t actually see any major gaps So we’re not looking for anything.

Betsy, Unidentified speaker: Okay. Very good. And then on the other businesses, David, where does international fall?

David Fox, Chief Financial Officer, Northern Trust: Well, the international business is largely in Theresa’s Bailey Wixle. You talked about that. Do you want to talk about your international growth? I mean, the GFO, my former business that I used to run, obviously, big international push there because in the past, our wealth business has been primarily domestic. But the GFO business travels really well internationally.

And as Mike mentioned, I think, on our earnings call or one of these conferences, we’ve had some very significant wins overseas as we’ve been trying to push that business out. On the asset servicing end

Theresa Parker, President of Asset Servicing, Northern Trust: Yeah, it’s a very robust growth in our pipeline and with our existing clients. And actually, I think that’s how GFO was able to expand as well, because using some of the same locations and services and regulatory approvals that we have in those locations. So it’s a nice synergy for us between the wealth business and the asset servicing business.

Betsy, Unidentified speaker: Excellent. All right, thank you so I’d

David Fox, Chief Financial Officer, Northern Trust: just also like to add one other thing that Teresa talked about earlier on alternatives and wealth management. When you think a little bit about the unlock for wealth management going forward, to a large extent, we’ve been a little bit slower in terms of allowing alternative party investments onto our wealth platform. And if you were to if Jason Tyler was here, he would say in his new role that he’s probably spending 75% of his time focusing on alternatives. So when you think about the growth side of the wealth business going forward and the asset management business and the asset servicing business, we have a very large strategic growth objective right now in that space across the entire continuum of alternatives, right? And I think you’re expand our own fundraising capabilities within fifty South Capital.

And you’re also going to see us onboarding some more frequently, some party managers to our open architecture.

Betsy, Unidentified speaker: And when you’re talking about alts, could you just I could fill out from my perspective, but I’d love to hear from your perspective.

David Fox, Chief Financial Officer, Northern Trust: Private equity, private credit, maybe hedge funds, liquid more illiquid investments. I can go

Theresa Parker, President of Asset Servicing, Northern Trust: to forests and bridges and infrastructure and all those Yeah, everything. Real estate infrastructure.

Betsy, Unidentified speaker: Okay.

David Fox, Chief Financial Officer, Northern Trust: Yeah. I mean, our family office clients have about 40% allocation generally in that space. And our push into the ultra high net worth space for family office services, even that cohort group, which is roughly 100 to seven fifty, has a tremendous amount of interest in that asset class. And up to now, we’ve been a bit more conservative around that. But I think you’re going to see us opening up a little bit more

Betsy, Unidentified speaker: there. Okay. And as we move through adding well, increasing the volume of vaults that you’re working with, etcetera. How do you think about the pretax margin in asset servicing, Theresa? Where do you

Theresa Parker, President of Asset Servicing, Northern Trust: So that is a good amount of our new business is coming from alternatives. We have a good history and legacy around it, very strong DNA in terms of being able to service it. But we are seeing, because of the growth of the allocation to private assets and alternatives, that is part of our new business. And it’s changing the bar. It’s meeting our financial targets.

And I think, again, not only the solutions orientation, but the client service and the ability to create what’s needed in the situation has been a real winner for us.

Betsy, Unidentified speaker: So is this a sleeve that will move the pretax margin in a positive way?

Theresa Parker, President of Asset Servicing, Northern Trust: I think it will, as we add new business and then continue to work on our operating models as we get more scale, absolutely.

Betsy, Unidentified speaker: Super. And David, just lastly, I want to make sure we touch on the guidance. And we talked a bit before about NII being in the low to mid single digits year on year for the full year. And expenses and the payout ratio above 100. Is that right?

David Fox, Chief Financial Officer, Northern Trust: Yep. 100, yeah.

Betsy, Unidentified speaker: All right. And then on the medium term targets with the expense to trust fee ratio of 105 to 110, how should we be thinking about that and the time frame for that targeted outcome?

David Fox, Chief Financial Officer, Northern Trust: Yeah. So if you think a little bit about the wealth business is already there. And what we’ve done is we’ve we call it our target financial model. We’ve pushed it down into each individual business. Every individual business creates the aggregate scorecard that we’re looking at for performance.

And so what Teresa was talking about earlier is really important. When you think about the asset owner focus she has going forward, most, if not all, of those transactions that she’s onboarding already meet those targets. So over time, you’re going to see her pretax margin go up. And then with the additional focus on asset management and wealth for future investments, they’re way above the target. And so from that perspective, you’re going to see as that business becomes a greater percentage of what we’re doing as a company, you’re going to see that drift up as well.

So we’re hoping that it doesn’t take long. But I’m not going to give you an exact time frame, but we’re very confident we’re going to get there.

Betsy, Unidentified speaker: Okay. And that drives up your ROE over time as well then?

David Fox, Chief Financial Officer, Northern Trust: Absolutely. Yes.

Betsy, Unidentified speaker: And maybe we’ll get some help from the regulators too in the coming quarters.

David Fox, Chief Financial Officer, Northern Trust: You never know.

Theresa Parker, President of Asset Servicing, Northern Trust: Okay, great. Well,

Betsy, Unidentified speaker: thank you very much, Theresa and David, for joining us this afternoon. Thank you, everybody.

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