Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Northern Trust Corp (NTRS, Financial) reported a strong third quarter with net income of $465 million and earnings per share of $2.22.
- Trust fees increased by 8% year-over-year, and net interest income grew by 21%, reflecting strong market performance.
- The company achieved record assets under management (AUM) levels in Wealth Management, with a 9% year-over-year growth in trust fees.
- Asset Management saw positive liquidity flows for the seventh consecutive quarter, contributing to healthy organic AUM growth.
- Northern Trust Corp (NTRS) returned $453 million to shareholders through dividends and stock repurchases, demonstrating a commitment to shareholder value.
Negative Points
- Noninterest income was down 5% sequentially and 3% year-over-year, excluding notable items, indicating some pressure on revenue streams.
- Expenses increased by 6% over the prior year, driven by investments in modernization and resiliency, which could impact short-term profitability.
- The company faces challenges in maintaining expense growth below 5%, with current growth rates exceeding this target.
- Loan growth was not a strategic focus, with loans decreasing in the quarter, potentially limiting future interest income growth.
- The company remains asset-sensitive, which could pose a risk if interest rates decline significantly, impacting net interest income.
Q & A Highlights
Q: Can you provide an update on the asset sensitivity across different balance sheet categories, especially after recent securities repositioning actions?
A: Jason J. Tyler, President, Wealth Management, stated that the floating rate mix is about 50% at this point.
Q: How much of this year's expense growth was due to investments in resiliency, and when will these investment dollars fall to the bottom line?
A: Michael O'Grady, Chairman and CEO, explained that investments in modernization and resiliency will continue for the next two to three quarters, with a decline expected late next year. There are no plans to redeploy these funds dollar for dollar once the investments are complete.
Q: With the leadership changes, what should we expect in terms of operational efficiency and incremental expense spending?
A: Michael O'Grady emphasized that the organizational changes reflect a strategy to strengthen the foundation, optimize growth, and drive productivity. The focus is on aligning the organization to achieve greater scale, operating efficiencies, and resiliency.
Q: Can you discuss the outlook for net interest income (NII) given potential rate cuts and deposit stabilization?
A: Jason J. Tyler noted that while the third quarter saw a positive surprise in NII, the fourth quarter is expected to be slightly down, in the range of $550 to $560 million, due to anticipated rate actions and deposit dynamics.
Q: How do you plan to achieve a more steady cadence of operating leverage and control expense growth?
A: Michael O'Grady highlighted that organizational changes are aimed at centralizing operations to achieve efficiencies. Investments in technology and modernization are necessary for long-term stability and client experience, which will ultimately drive high-quality growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
