Northern Trust Corporation (NTRS) Earnings & Analysis

Latest quarter

Northern Trust’s adjusted earnings per share were $3.20, above the $2.86 consensus for the third quarter of FY2026. Revenue on the consensus measure was 1.31% above expectations, although both reported revenue and the estimate rounded to $2.3 billion.

CFO Dave Fox said revenue excluding notable items rose 11% year over year, while expenses on the same basis increased 4.9%. He attributed growth in trust, investment and other servicing fees to favorable markets and organic fee growth across the businesses. Wealth Management trust fees rose 9% from a year earlier, and Asset Servicing fees rose 8%.

Fox said net interest income on a fully taxable equivalent basis was $679 million, up 14% year over year. He also reported $48.7 million in pre-tax gains, including gains from the sale of the guardianship services business and a Visa exchange offer. Northern Trust reported diluted earnings per share of $3.40, compared with $2.29 a year earlier, and free cash flow of $1.7 billion, compared with $357.5 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Michael O’Grady said growth came from trust fees, net interest income and capital markets revenue. In Wealth Management, he said Global Family Office fees rose 16% year over year, and the company continued recruiting revenue-generating staff. In Asset Servicing, he said an expanded fund-administration agreement with UBS would add funds in Switzerland and Luxembourg, including former Credit Suisse funds, subject to regulatory approvals.

On pricing, CFO Dave Fox said competition prompted Northern Trust to reprice a Wealth Management money market fund by roughly 10 basis points, reducing revenue by about $6.0 million per quarter. He said the repricing was fully reflected in third-quarter results and that the company was not contemplating further actions.

During questions about the coming quarter, Fox said lower fixed-income market values would weigh on Asset Servicing fees, while equity markets, transaction activity and new business could provide offsets. He noted that “roughly 20% of our custody and fund admin fees are driven by transaction income” and said activity had begun to recover in September and part of October. He also said fourth-quarter deposit balances typically improve after a seasonal third-quarter decline.

Asked about scalable growth, O’Grady pointed to changes in the operating model that bring operations and technology together around client capabilities. He said asset-servicing revenue growth was accompanied by expense growth of three percent in the quarter, and that the company was pursuing custody and outsourced trading business.

O’Grady also described investment in AI, saying client action plan agents save relationship managers two to three hours on each client memo. On technology costs and flexibility, he said, “You cannot be single-threaded through one provider, one model, whatever it may be.” O’Grady said Fox plans to retire and will remain CFO through the first quarter of next year while the company considers internal and external candidates.

Guidance

Northern Trust now expects 500 basis points or more of operating leverage for full-year FY2026, excluding notable items. Its previous expectation was approximately 400 basis points on the same basis.