Northern Trust Corporation (NTRS) Earnings

Management highlights

### Core Strategy Execution - Delivered 8 consecutive quarters of positive organic fee growth and significant positive operating leverage, demonstrating strength of the diversified One Northern Trust strategy across varying market conditions. - Realized a $525 million pre-tax gain from the second tranche of the Visa Class B common stock exchange offer, offset partially by restructuring and other charges, with a net $232 million favorable impact to net income. - Returned $499 million to shareholders in Q2 via dividends ($148.8 million) and share repurchases ($350.6 million), with a 90% payout ratio excluding notable items. The board approved a 10% increase to the quarterly common dividend, reflecting confidence in earnings power. ### Wealth Management Strategic Progress - Grew global family office (GFO) revenue 9% year-to-date 2026, with revenue from ultra-high net worth clients (over $100 million in assets) outperforming the broader portfolio; the expanded Family Office Solutions offering, which extends the GFO playbook to additional clients, is seeing strong market reception. - Made solid progress adding revenue-generating producer talent, with pending hires driving confidence in H1 2026 growth momentum, supported by Northern Trust's differentiated brand and fiduciary expertise. - Expanded alternative investment offerings across secondaries, buyout, venture, and growth strategies, with year-to-date 2026 capital raised approaching 80% of 2025's full-year total. Launched Lead Labs digital lead generation, driving a 50% year-over-year increase in marketing qualified leads. ### Asset Servicing Strategic Progress - Grew alternatives assets under administration to over $1 trillion, with 50% quarter-over-quarter growth in new product launches from existing hedge fund clients and two new semi-liquid mandate wins in Q2. - Continued targeted, disciplined development of digital asset servicing capabilities, bringing institutional-grade risk management and control to tokenized markets for institutional clients. ### Asset Management Strategic Progress - Delivered 5 consecutive quarters of positive ETF flows, with strong Q2 inflows into U.S. quality large cap, U.S. equity factor tilt, and tax-efficient fixed income strategies, supported by cross-enterprise collaboration with wealth management. - Extended the streak of positive organic liquidity flows to 14 consecutive quarters, with a record Q2 for liquidity inflows and continued market share gains in the U.S. and EMEA; Northern Trust is a top 10 U.S. money market fund manager. - Maintained its top 3 position in direct indexing, continued growth of long-short tax alpha strategies for large taxable clients, and sustained fundraising momentum for custom alternative solutions. ### Artificial Intelligence Strategy - Frame AI as augmented intelligence, a force multiplier to enhance (not replace) human service, expertise, and integrity, rather than just delivering baseline efficiency gains. - Deployed client action plan AI agents to help relationship managers synthesize client data for more meaningful engagement, AI tools to enhance investment research and idea generation in quantitative strategies, and AI-powered horizon scanning agents to strengthen cybersecurity vulnerability detection.

Guidance

- Full-year 2026 net interest income is now expected to grow 9-10% year-over-year, an upward revision from the prior guidance of mid-to-high single-digit growth. - Full-year 2026 total revenue is now expected to grow 9-10% year-over-year, an upward revision from the prior guidance of mid-single-digit growth. - Excluding notable items, full-year 2026 positive operating leverage is expected to reach approximately 400 basis points, with solid positive operating leverage expected in the second half despite tougher year-over-year market comparisons. - The full-year effective tax rate is expected to be between 26% and 26.5%, maintaining prior guidance. - Management expects Q3 2026 revenue growth of 5-7% year-over-year, assuming stable interest rates and flat equity markets, with idiosyncratic temporary large institutional deposits from Q1 and Q2 not expected to persist into the third quarter, which is typically the weakest quarter for average deposits.

Segment performance

1. **Wealth Management**: Trust, investment, and other servicing fees totaled $592 million, up 10% year-over-year, contributing 29% of total segment fees across the firm. Assets under management (AUM) reached $534 billion, up 7% sequentially and 14% year-over-year. Average deposits were $26.7 billion (+1% sequential), average loans were $35.8 billion (+1% sequential). Pre-tax income was $334 million, with a pre-tax margin of 37%. 2. **Asset Servicing**: Total asset servicing fees reached $757 million, up 9% year-over-year, contributing 37% of total segment fees across the firm. Assets under custody and administration hit $18.6 trillion, up 10% year-over-year, with AUM for asset servicing clients reaching $1.4 trillion (+46% year-over-year). Average deposits were $101 billion (-1% sequential), average loans were $5.8 billion (+3% sequential). Reported pre-tax income was $323 million with a 24% pre-tax margin; excluding notable items, pre-tax margin exceeds 30% with 800 basis points of year-over-year margin expansion. 3. **Overall Corporate Results**: Reported Q2 2026 net income was $792.2 million, with EPS of $4.23 and return on average common equity of 25.9%. Excluding notable items (a $525 million pre-tax Visa stock exchange gain offset by $220 million in restructuring/other charges), total revenue increased 13% year-over-year, non-interest expense increased 5% year-over-year, and operating leverage reached over 700 basis points. EPS increased 40% year-over-year excluding notable items.

Risks & headwinds

- Intense competition for top producer talent in wealth management slows hiring and growth trajectory, as targeted recruitment of qualified advisors aligned with Northern Trust's model takes longer than broad-based hiring. - Sustained pricing pressure on retail liquidity products in the wealth segment creates modest headwinds for fee growth. Tougher year-over-year equity market comparisons in the second half of 2026 may moderate revenue growth relative to the first half. - Idiosyncratic, temporary large institutional deposit inflows are not recurring, creating expected sequential NII moderation in Q3. - Ongoing large technology infrastructure projects carry risk of cost overruns or underperformance relative to return targets, requiring periodic review and potential write-downs of in-progress work that no longer meets ROI hurdles.

Analyst Q&A

• Q: Analyst asks how 400 basis points of full-year operating leverage can be achieved, and how second half operating leverage will look after the strong Q2 result. /

  A: Management notes full-year operating leverage is primarily revenue-driven rather than expense-driven. Tougher year-over-year comparisons are expected in H2 2026, since the S&P 500 rallied 20% from Q2 to Q4 2025. Elevated Q2 activity in foreign exchange, capital markets, and securities lending is not expected to persist, and temporary large idiosyncratic institutional deposits from Q1 and Q2 will not carry over into Q3, the seasonally weakest quarter for deposits. Assuming flat markets and stable rates, Q3 revenue will grow 5-7% year-over-year, putting full-year 400 basis points of operating leverage within reach.

• Q: Analyst asks how Northern Trust plans to deploy proceeds from the large Visa stock exchange gain, and what order of priority capital deployment will follow. /

  A: Management confirms the gain provides full flexibility across three priorities, in order of: First, repositioning the available-for-sale securities portfolio to improve its earnings profile at current yield curve levels. Second, reinvesting in organic growth initiatives and pursuing inorganic tuck-in acquisitions that accelerate the existing organic strategy. Third, returning excess capital to shareholders via additional share repurchases, which will bring the CET1 ratio back down to the 11-12% target range after the gain temporarily strengthened capital ratios.

• Q: Analyst asks what are the core drivers of top-of-funnel new client growth for wealth management, outside of market-related AUM gains. /

  A: Management identifies three core drivers: First, targeted hiring of new producer talent, which expands prospecting capacity, though competitive labor markets slow recruitment pace. Second, deepening relationships with centers of influence (estate planning attorneys, accountants) that serve ultra-high net worth clients and provide referrals ahead of client transitions. Third, expanded digital marketing powered by AI, which improves lead qualification, increases qualified lead volume, and lowers cost per lead while boosting conversion rates.

• Q: Analyst asks how asset servicing margin targets are progressing, what the pacing is for rolling off lower-margin business, and if this strategy is creating revenue headwinds. /

  A: Management clarifies that the reported 24% pre-tax margin includes notable items; excluding those, the current pre-tax margin is close to 30%, on track to reach the high-20s long-term target. The strategy of selective new business underwriting focused on higher-margin scalable opportunities continues to progress, with recent large, high-margin wins in the Americas and Europe just now beginning to transition onto the platform. Expanding higher-margin cross-sell services (such as outsourced trading and currency management for existing asset manager clients) is also driving margin expansion, with no meaningful negative impact on topline growth.