Q1 2025 Northern Trust Corp Earnings Call

April 22, 2025

If a child director of Investor Relations. Please go ahead.

Speaker Change: Thank you operator, and good morning, everyone welcome to Northern Trust Corporation's first quarter 'twenty twenty-five earnings conference call. Joining me on our call. This morning is Mike O'grady, our chairman and CEO.

Speaker Change: Fox, our Chief Financial Officer, John lenders, our controller and trace segment from our Investor Relations team are.

Speaker Change: Our first quarter earnings press release and financial trends report are both available on our website at northern Trust's Dot Com also on our website you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 22nd call is being webcast live on Northern Trust Dotcom the only.

Speaker Change: Authorized rebroadcast of this call is the replay that will be made available on our website through may 21.

Speaker Change: Northern Trust disclaims any continuing accuracy of the information provided in this call. After today. Please refer to our safe Harbor statement regarding forward looking statements on page 12 of the accompanying presentation, which will apply to our commentary on this call.

Speaker Change: During today's question and answer session. Please limit your initial query to one question and one related follow up this will allow us to move through the queue and enable as many people as possible the opportunity to ask questions as time permits. Thank you again for joining US today, let me turn the call over to Mike O'grady.

Mike O'grady: Thank you Jennifer let me join in welcoming you to our first quarter 2025 earnings call.

Mike O'grady: Our first quarter results demonstrate the strength and resilience of our business model.

Mike O'grady: We generated our third consecutive quarter of positive operating leverage driven by mid single digit growth in both trust fees and net interest income while managing expenses well.

Mike O'grady: Excluding notables increased 13% and we generated a return on common equity of 13%, both while boosting capital levels meaningfully and returning $435 million to shareholders.

Mike O'grady: Our results benefited from strong underlying market performance and elevated volatility levels, which drove strong capital markets activity late in the quarter and extended into April.

Mike O'grady: <unk> also reflects continued progress implementing our one northern trust strategy, our roadmap for becoming a consistently high performing company and producing meaningful value for all stakeholders.

Mike O'grady: Let me give you an update on our progress.

Mike O'grady: First optimize growth.

Mike O'grady: We entered 2025 with good momentum continuing to embed collaboration between our business units leveraging the capabilities of the entire firm.

Mike O'grady: We advanced our enterprise wide growth initiatives, which align with key client needs and opportunities, including alternative investment solutions.

Mike O'grady: The office services and liquidity solutions, we also concentrated on our core initiatives within each of our business units.

Mike O'grady: As it relates to alternative fundraising as particularly strong within our asset management segment and we are on track to nearly double our capital raise versus prior year averages.

Mike O'grady: Within asset servicing new business activity in the first quarter was brisk, particularly within private markets, where our technology and operational expertise have been consistent differentiators.

Mike O'grady: During the quarter, we were selected as the global outsource private capital administration provider for igneous infrastructure partners, a $20 billion alternatives manager specializing in global infrastructure investments.

Mike O'grady: Expanding upon our longstanding relationship with private equity firm Alchemy partners. We were awarded the asset servicing business for a new $1 billion special opportunities fund launch.

Mike O'grady: Semi liquid funds and the democratization of private markets globally remain an important area of focus.

Mike O'grady: We extended our leading market share in the quarter.

Mike O'grady: Trust is currently supporting over half the approved long term asset funds or L task in the U K with an additional 10 in the pipeline.

Mike O'grady: Building upon the strength of our upper tier wealth business, our wealth management segment formally rolled out a dedicated ultra high net worth segment, which we've named family office solutions, focusing on wealthy individuals and families with more than $100 million in network already we've seen very good client traction.

Mike O'grady: Performance in our global family Office also continues to be strong new business activity remain robust, particularly within international markets during.

Mike O'grady: During the quarter, we on boarded several marquee relationships in EMEA.

Mike O'grady: Strengthening our position as one of the leading administrators of private investment office assets in Europe.

Mike O'grady: As it relates to liquidity, we've seen a healthy increase in deposit levels as a number of clients have taken a risk off approach reallocating portfolios and raising cash.

Mike O'grady: Asset management, we generated positive liquidity flows in the first quarter continuing the trend we've seen over the past nine quarters.

Mike O'grady: Beyond liquidity, our suite of actively managed offerings, which skewed towards high quality low volatility and tax efficient products tend to perform very well in the current environment and we're seeing significant client interest.

Mike O'grady: We had $1 7 billion of inflows into our custom tax optimized sma's, which are capitalizing on market volatility to deliver increased after tax value.

Mike O'grady: We're also broadening our ETF platform, having recently filed to launch 11, new fixed income Etfs later this year.

Mike O'grady: Meaningful progress was also made against our other two strategic pillars.

Mike O'grady: Strengthening resiliency and managing risk and driving productivity we.

Mike O'grady: We continue on our multiyear effort to uplift our risk and control system, we transitioned from design to implementation of new capabilities that will better enable us to systematically anticipate identify manage and control risks across all areas of our organization.

Mike O'grady: We also advanced along our technology journey driving towards a more stable scalable safe and secure environment for our stakeholders.

Mike O'grady: Productivity initiatives for 2025 are well on track fueling further critical investments in growth.

Mike O'grady: Within the office of the COO, we're reengineering, our operating model to enhance efficiency standardized services and streamline processes.

Mike O'grady: At the same time, we're making continued headway with workforce initiatives and third party spend including pursuing further vendor savings.

Mike O'grady: To wrap up we're off to a solid start to the year, while we face a highly challenging macroeconomic and market backdrop, we entered the current environment well positioned to navigate a wide range of outcomes are.

Mike O'grady: Our balance sheet strength allow us to meet the evolving needs of our clients, while pressing ahead with our strategic objectives.

Mike O'grady: But with that I'll turn it over to Dave to review the financials Dave.

Dave: Thanks, Mike.

Dave: Let me join Jennifer and Mike and welcome you to our first quarter of 2025 earnings call.

Dave: Let's discuss the financial results of the quarter starting on page four.

This morning, we reported first quarter net income of $392 million.

Dave: Earnings per share of $1 90, and our return on average common equity was 13%.

Dave: As Mike mentioned, we delivered our third consecutive quarter of positive total operating leverage.

Dave: We also reported our fourth consecutive quarter of positive trust fee operating leverage both excluding notables.

Dave: Relative to the prior year currency movements unfavorably impacted our revenue growth by approximately 20 basis points and favorably impacted our expense growth by approximately 50 basis points.

Dave: Currency movements were immaterial relative to the prior period as a reminder year over year comparisons reflect one fewer day. This year as last year's first quarter included an extra day in February due to leap year.

Dave: Trust investment and other servicing fees totaled $1 2, billion% to 1% sequential decline and a 6% increase compared to last year net.

Dave: Net interest income on an FTE basis was 574 million essentially flat compared to the prior period and up 7% from a year ago.

Dave: Our assets under custody and administration were up 1% sequentially and up 3% as compared to the prior year.

Dave: Our assets under management were flat sequentially and up 7% year over year.

Dave: Overall, our credit quality remains very strong.

Dave: Excluding notable items in all periods.

Dave: Noninterest income was down 9% sequentially and down 4% over the prior year revenue was down sequentially, 1% and up 6% on a year over year basis expenses were up 3% sequentially and up four 8% over the prior year and earnings per share decreased 16% sequentially, but increase.

Dave: 13% compared to the prior year.

Dave: Turning to our asset servicing results on page five.

Dave: Our asset servicing business performed well in the quarter transaction volumes were healthy capital markets activities were up double digits over the prior year and new business growth continues to be booked at attractive margins.

Dave: Assets under custody and administration for asset servicing clients were $15 eight trillion at quarter end, reflecting a 3% year over year increase.

Dave: Asset servicing fees totaled $672 million.

Custody and fund administration fees were $453 million up 4% year over year.

Dave: Largely reflecting the impact from strong underlying equity markets and new business generation.

Dave: Year over year comparisons were dampened by the client exits we discussed in the second quarter of last year.

Dave: Other fees were $48 million up 7% year over year, largely reflecting growth in our front office solutions product as well as higher seasonal benefit payments.

Dave: Assets under management for asset servicing clients were 1.2 trillion up 7% over the prior year.

Dave: Investment management fees within asset servicing were $153 million up a strong 9% year over year due to favorable markets and new business activities.

Dave: Now moving to our wealth management business on page six.

Dave: Wealth management also had a healthy quarter with continued strength in our global family office business.

Dave: Assets under management for our wealth management clients were 447 billion at quarter end up 6% year over year.

Dave: Investment and other servicing fees for wealth management clients were $542 million up 8% year over year, primarily due to strong equity markets.

Dave: Moving to page seven and our balance sheet and net interest income trends are.

Dave: Our average, earning assets were up 3% on a linked quarter basis fueled by higher deposit levels, which drove an increase in cash held at the fed and other central banks.

Dave: The duration of our securities portfolio remained at one six years and the total balance sheet duration continues to be less than one year.

Dave: Net interest income on an FTE basis was $574 million.

Dave: Flat with the fourth quarter and our net interest margin was 169% down two basis points quarter over quarter.

Dave: NII outperformed our expectations largely due to higher than expected deposit levels average.

Dave: <unk> were 116 billion up 3% compared to fourth quarter levels.

Dave: Within this interest bearing deposits increased by 4% and noninterest bearing deposits decreased by 3%, but remained at 15% of the overall mix.

Dave: Deposit pricing was largely as expected institutional deposit betas remained high and wealth deposit betas were stable.

Dave: The quarterly contribution from transactional and other items returned to more normal levels.

Dave: Turning to our expenses on page eight.

Noninterest expense was approximately $1 4 billion in the first quarter up 3% sequentially and 4% as compared to the prior year.

Dave: Excluding notable items in the prior period as listed on the slide expenses in the first quarter were up four 8% year over year, an improvement from the fourth quarter is five 5% year over year increase.

Dave: Let's go back and review our core expenses from the quarter compensation.

Dave: <unk> expense was up 8% sequentially, largely reflecting the impact of our seasonal equity incentive grants.

Dave: <unk> expense increased 3% over the prior year, resulting from modest levels of hiring associated with our modernization initiatives and underlying growth in the business.

Dave: Outside services expense increased 7% relative to the prior period, largely due to higher levels of spend associated with our modernization and resiliency initiative, but it was down 3% sequentially as the same spend started to flatten out.

Dave: Equipment and software expense increased 11% year over year.

Dave: Mostly related to higher depreciation and amortization expense and costs associated with our cloud journey.

Dave: Turning to page nine our capital levels and regulatory ratios remained strong in the quarter. We continued to operate at levels well above our required regulatory minimums.

Dave: Our common equity tier one ratio under the standardized approach increased by 50 basis points on a linked quarter basis to 12, 9% driven by capital accretion and a decline in our WMA.

Dave: Our tier one leverage ratio was 8% down 10 basis points from the prior quarter.

Dave: At quarter end, our unrealized pre tax loss on available for sale Securities was $527 million.

Dave: And we returned $435 million to common shareholders in the quarter through cash dividends of $148 million in common stock repurchases of $287 million.

Dave: <unk>, a payout ratio of 116%.

Dave: Turning to our guidance.

Dave: Starting with expenses.

Dave: We continue to expect our total operating expense growth to be below 5% for the full year. Excluding notable items in both periods.

Dave: Turning to NII, given our first quarter outperformance coupled with recent deposit growth, we're raising our full year guidance from low single digit growth to low to mid single digit growth.

Dave: This assumes continued strong deposit levels stable.

Dave: Stable deposit mix, meaning we wouldn't expect absolute levels of niv to move materially from current levels, but the percentage of overall mix could change.

Dave: Market implied forward curves as of this week.

Dave: And relatively stable deposit pricing.

Dave: And with that operator, please open the line for questions.

Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: Our first question is going to come from Steven <unk> from Wolfe Research. Please go ahead.

Speaker Change: Hi, good morning, and thanks, so much for taking my questions.

Speaker Change: Sure So wanted.

I wanted to start on a question on the deposit beta.

Speaker Change: Certainly the NII guidance and the modest upward revision is certainly encouraging.

Speaker Change: Cumulative beta of 86% so far this easing cycle, it certainly surprised positively, especially relative to the 72% beta we saw during the period of fed tightening and was hoping you could speak to what deposit beta assumption is underpinning that guidance.

Speaker Change: Just trying to gauge what sort of deposit betas, we can underwrite sustainably if we get four additional costs consistent with the forward curve.

Speaker Change: Yes.

Speaker Change: Yeah, our deposit betas remained relatively.

Speaker Change: Stable, if you look historically, but I would say that that's obviously going to be higher for the institutional business closer to a 100 and then lower for wealth.

Speaker Change: 2% to 70% roughly I will also point out though that we have.

Speaker Change: I have spent a lot of time on our deposit pricing I mentioned this in the last earnings call.

Speaker Change: I'm thinking a little bit about hearing and the size of our deposits, where we get our deposit. So I think having spent more time doing that I think it's really.

Speaker Change: It's benefited the deposit betas on the positive side.

Speaker Change: That's great and for my follow up just on the fee outlook and the impact on expenses, just given that youre going to have to absorb some of the negative marks related to month and quarter lag pricing both in the servicing side as well as in the wealth business.

David It sounds like you are reaffirming the 5% or better expense guide, but wanted to better understand how much flex you have if those fee pressures intensify and we don't necessarily see a inflection or recovery in equity markets over the course of the year.

Speaker Change: Yeah.

Speaker Change: We are dedicated to keeping that expense growth rate below 5%.

Speaker Change: Point out that at the beginning of the year as we were doing our planning we spent a lot of time identifying discretionary and non discretionary spending.

Speaker Change: So we know exactly what we have to do to flex.

Speaker Change: I think you also heard me say in the previous call that we are trying to build a more flexible business model that can basically.

Speaker Change: Adjust itself as market conditions, either get better or get worse right. So we know where we have to do it we know what our levers are.

Speaker Change: We're gonna be odd.

Speaker Change: Obviously in the consulting side outside services Tech technology spend and then potentially even on incentives as well. So we've got a we've got a management team I think thats really driving towards having strong positive operating leverage through all the cycles and that's why I'm willing to say, where we're going to we're going to obviously stay within that below five.

Speaker Change: Scent currency creates a bit of a headwind for us.

Speaker Change: From my perspective, it's neutral in the sense that it helps us on the revenue side and hurts us on the expense side and Thats, obviously going to be something we have to manage more proactively but at the end of the day, we don't control it and we are still based on the current exchange rates. We still think we can get to that 5% or below.

Speaker Change: Very helpful color. Thanks, so much for taking my questions.

Speaker Change: Okay.

Speaker Change: And our next caller with Betsy <unk> from Morgan Stanley.

Outside services Tech technology spend and then potentially even on incentives as well. So we've got a we've got a management team I think that's really driving towards having strong positive operating leverage through all the cycles and that's why I'm willing to say, where we're going to we're going to obviously stay within that below 5% currency creates a.

Betsy: Hi, good morning.

Speaker Change: Good morning.

Speaker Change: Mike during your prepared remarks, you mentioned that you had some capital markets activity that was pretty hard towards the end of the quarter and then it bled into April could you talk a little bit about what type of capital markets activity, you're referring to there and.

Bit of a headwind for us.

From my perspective, it's neutral in the sense that it helps us on the revenue side and hurts us on the expense side and that's obviously going to be something we have to manage more proactively but at the end of the day, we don't control it and were still based on the current exchange rates. We still think we can get to that 5% or below.

Speaker Change: And has it continued in.

Speaker Change: Into April meaning now thank you.

Speaker Change: Sure.

Speaker Change: <unk>.

Speaker Change: Level of volatility in the markets, obviously has different impacts one of them is that in general it does tend to drive more what we would consider capital markets activity for us.

Speaker Change: Very helpful color. Thanks, so much for taking my questions.

Speaker Change: Which would be foreign exchange I, and then also brokerage and in particular I would say within that is our integrated trading services.

Okay.

Speaker Change: And our next caller is that'd be great.

Speaker Change: From Morgan Stanley.

Speaker Change: Hi, good morning.

Speaker Change: Where we are essentially the outsourced trading desk for asset manager clients and so as the AC repositioning happening I in their portfolios thats something that flows through to us. So.

Speaker Change: Good morning.

Speaker Change: Mike during your prepared remarks, you mentioned that you had some capital markets activity that was pretty hot towards the end of the quarter and then it bled into April could you talk a little bit about what type of capital markets activity, you're referring to there in <unk> and.

Speaker Change: It was a little bit as I was saying in the first quarter and more system momentum.

Speaker Change: And has it continued in into April meaning now thank you.

Speaker Change: That's carried into April here, and we'll see where it goes from there.

Speaker Change: Sure so the.

Speaker Change: Okay got it and then follow up question is on the family Office solutions.

Speaker Change: The level.

Speaker Change: The level of volatility in the markets, obviously has different impacts one of them is that in general it does tend to drive more what we would consider capital markets activity for us.

Speaker Change: <unk> launched this quarter is that right did I get that right.

Speaker Change: You got it right.

Speaker Change: Okay. So can you talk a little bit about your plans for this new.

Speaker Change: Which would be foreign exchange I, and then also brokerage and in particular I would say within that is our integrated trading services.

Speaker Change: What should we call it sleeve offering segment I mean, you've long had this capability set but by putting it together in this way it would be helpful to understand.

Speaker Change: Where we are essentially the outsourced trading desk for asset manager clients and so as the AC repositioning happening I in their portfolios, that's something that flows through to us. So.

Speaker Change: How you see the drivers from here in terms of.

Speaker Change: It was a little bit as I was saying in the first quarter and more just the momentum that.

Speaker Change: Rebranding within your current clients that.

Speaker Change: First is attracting new customers and is this something that you would be taking beyond the U S. Thank you.

Speaker Change: That's carried into April here, and we'll see where it goes from there.

Speaker Change: Okay got it and then follow up question is on the family Office solutions, which launched this quarter is that right did I get that right.

Speaker Change: Sure.

Speaker Change: And you have it right there Betsy as to how we're looking at this which is from a capability perspective, we have.

Speaker Change: You got it right.

Speaker Change: Family office capabilities as part of our global family office business and have been very successful in serving clients and growing the business on that front and then from a segment perspective the.

Speaker Change: Okay. So can you talk a little bit about your plans for this new <unk>, what should we call. It sleeve offering segment I mean, you've long had this capability set by by putting it together in this way it would be helpful to understand.

Speaker Change: The ultra high net worth segments, So think about 100 million and above we've also been very successful in serving that segment of clients and what this is about is trying to deliver that capability set.

Speaker Change: What how you see the drivers from here in terms of.

Speaker Change: Rebranding within your current client set.

Speaker Change: Family Office services to the Ultra high net worth segment. So right now for an ultra high net worth client for the most part we're providing a very bespoke.

Speaker Change: Verse is attracting new customers and is this something that you would be taking beyond the U S. Thank you.

Speaker Change: Sure.

Speaker Change: And you have it right there Betsy as to how we're looking at this which is from a capability perspective, we have family office capabilities as part of our global family office business and have been very successful in serving clients and growing the business on that front and then from a segment perspective.

Speaker Change: Service offering to them, they're surrounded in at the high level of service.

Speaker Change: For that client base and yet we have clients in that segment that are looking to outsource more of more of those activities.

Speaker Change: To us.

Speaker Change: And it's a broader set so beyond what you would think about as far as traditional wealth Advisory Trust fiduciary banking, they're also looking for a more robust reporting capabilities.

Speaker Change: The ultra high net worth segments, so think about $100 million and above we've also been very successful in serving that.

Speaker Change: Segment of clients and what this is about is trying to deliver that capability set.

Speaker Change: Capability Theyre looking for outsource bill payment.

Speaker Change: Theyre looking for more of an <unk> type investment service. So it's those capabilities that we're already providing to family offices, just being able to do it on an outsourced basis.

Speaker Change: Our family office services to the Ultra high net worth segment.

Speaker Change: Right now for an ultra high net worth client for the most part.

Speaker Change: For Ultra high net worth clients and to your point. This is both the opportunity to.

Speaker Change: We're providing a very bespoke.

Speaker Change: Service offering to them, they're surrounded in at the high level of service.

Speaker Change: They improve or enhance the service to existing ultra high net worth clients, but absolutely.

Speaker Change: For that client base and yet we have clients in that segment that are looking to outsource more of more of those activities.

Speaker Change: An ability for us to grow that base of clients with these services.

Speaker Change: Thank you.

Speaker Change: And it's a broader set so beyond what you would think about as far as traditional wealth Advisory Trust fiduciary banking, they're also looking for a more robust reporting.

Speaker Change: Sure.

Speaker Change: And our next caller is going to be can you stem from autonomous research. Please go ahead.

Speaker Change: Hey, guys good morning.

Speaker Change: Nice to see that.

Speaker Change: Capability Theyre looking for outsource bill payment.

Speaker Change: Little incremental buyback just wondering.

Speaker Change: We're looking for more of an <unk> type investment service. So it's those capabilities that we're already providing to family offices, just being able to do it on an outsourced basis.

Speaker Change: Now, even with even higher CET, one ratio of 12 nine.

Speaker Change: I know you had previously talked about doing greater than the 78% total capital return you did last year can you talk about your comfort with that or just given the environment and where capital still is going.

Speaker Change: For Ultra high net worth clients and to your point. This is both the opportunity to.

Speaker Change: Could you still move that up forward more and get more back to shareholders. Thanks.

Speaker Change: Improve or enhance the service to existing ultra high net worth clients, but absolutely.

Speaker Change: Yes, so I'll take a crack at that.

Speaker Change: Ability for us to grow that base of clients with these services.

Speaker Change: We love our flexibility.

Speaker Change: And it's hard in a point in time, they know exactly where you're going to land, particularly in uncertain markets you want to make sure you're there for your clients and so it trended up this quarter. There is obviously some room to take it down.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: And our next caller is going to be can you stem from autonomous research. Please go ahead.

Speaker Change: Hey, guys good morning.

Speaker Change: I will remind you that we did pay out 116% of earnings which is an insignificant versus the 19%. We did in Q1, so yeah our.

Speaker Change: Nice to see the little incremental.

Speaker Change: Mental buyback just wondering.

Speaker Change: Now, even with even higher CET, one ratio of 12 nine.

Speaker Change: Our range is 11% to 12% on CET one.

Speaker Change: That hasnt changed we do watch our capital levels compared to our peers.

Speaker Change: And so we like the the higher payout levels I think going forward of around 100% could be something that we could get any more towards going forward.

Speaker Change: Could you still move that up forward more and get more back to shareholders. Thanks.

Speaker Change: Makes sense, great and a follow up on the expense side, so expenses to trust fees.

Speaker Change: Yes, so I'll take a crack at that.

Speaker Change: We love our flexibility.

Speaker Change: Calculating around <unk> about flat year over year I know you have the long term goal of $105 10.

Speaker Change: And it's hard in a point in time, they know exactly where you're going to land, particularly in uncertain markets you want to make sure you are there for your clients and so it trended up this quarter. There is obviously some room to take it down.

Speaker Change: And I know Theres a direction of travel that you are aspiring for but just given stephen's prior comments about the market headwinds that youre facing.

Speaker Change: And I will remind you that we did pay out 116% of earnings which is an insignificant versus the 90%. We did in Q1. So our range is 11% to 12% on CET one.

Speaker Change: Do you expect to see directional improvement there.

Speaker Change: As we move forward.

Speaker Change: I guess, there's a push and pull with.

Speaker Change: As you already mentioned you were trying to get the expense growth rate lower so just how do we just think about that thanks.

Speaker Change: That hasnt changed we do watch our capital levels compared to our peers.

Speaker Change: Yes, well, there's obviously two components to that ratio.

Speaker Change: And the trust fee environment right now given what's happening in the capital markets is going to be something that we again, we don't control what I, what I tried to focus people on is organic.

And so we like the the higher payout levels I think going forward of around 100% could be something that we could get any more towards going forward.

Speaker Change: Organic trust fee growth and organic expenses those are the only things that we really have pretty much complete control over so what we tried to do is drive those down as much as we possibly can and then we have to confront whatever market environment that we have at the time and there are certain things that are going to sort of we're just going to have to accept them. So the more we draw.

Speaker Change: Makes sense, great and a follow up on the expense side, so expenses to trust fees.

Speaker Change: Calculating around <unk> about flat year over year I know you have the long term goal of $105 10.

Stephen: And I know Theres a direction of travel that you are aspiring for but just given stephen's prior comments about the market headwinds that youre facing.

Speaker Change: Down the organic side and drive up the trust fees.

Stephen: Do you expect to see directional improvement there.

Stephen: As we move forward.

Speaker Change: We're gonna be in better shape, so thats sort of how we think about it and then it all ends up being in the expenses to trust fees, but again that doesn't that that includes all the market gyrations that are in there as well.

Stephen: I guess, there's a push and pull with.

Speaker Change: As you already mentioned you were trying to get the expense growth rate lower so just how do we just think about that thanks.

Stephen: Yes, there's obviously two components to that ratio.

Speaker Change: Clearly our targets are much lower than where we currently are.

Stephen: And the trust fee environment right now given what's happening in the capital markets is going to be something that we again, we don't control what I, what I tried to focus people on is organic.

Speaker Change: Got it thank you Dave.

unknown: And our next question is going to come from Mike Mayo.

Stephen: Organic trust fee growth and organic expenses those are the only things that we really have pretty much complete control over so what we tried to do is drive those down as much as we possibly can and then we have to confront whatever market environment that we have at the time and there are certain things that are going to sort of we're just going to have to accept them. So the more we draw.

Mike Mayo: From Wells Fargo Securities. Please go ahead.

Mike Mayo: Hi, just some clarification on your other answers so badly office solutions you have global family Office, that's one fifth of your wealth.

Speaker Change: Revenues, So family office solutions.

Speaker Change: What do you imagine as the total addressable market.

Stephen: Down the organic side and drive up the trust fees.

Speaker Change: Much of that.

Speaker Change: Of your current.

Speaker Change: Family Office revenues is that today.

Stephen: We're gonna be in better shape. So that's sort of how do we think about it and then it all ends up being in the expenses to trust fees, but again that doesn't that that includes all the market gyrations that are in there as well.

Speaker Change: What geographies are you targeting are you hiring people for that because it seems like you certainly talk a lot about this especially relative to its side in terms of revenue contribution side. If you could just flush that out a little bit more effects.

Stephen: Clearly our targets are much lower than where we currently are.

unknown: Got it thank you Dave.

Speaker Change: Sure so.

Speaker Change: As far as the addressable market the ultra high net worth market very large.

Mike Mayo: And our next question is going to come from Mike Mayo.

Speaker Change: From Wells Fargo Securities. Please go ahead.

Speaker Change: If you look at just our client base.

Mike Mayo: Hi, just some clarification on your other answers so family Office solutions, you have global family Office, that's one fifth of your well.

Speaker Change: The number of clients that would fall into this category is is in the hundreds at a 3% to 400 existing clients that would fit this profile.

Speaker Change: Revenues, So family office solutions.

Speaker Change: I don't have I'll say a.

Speaker Change: What do you imagine as the total addressable market.

Speaker Change: Percentage of revenue number for you on that front.

Speaker Change: Much of that.

Speaker Change: And so it's already a large client base for us. It's just one that we think with the growth in that market and our brand in that market and our capabilities. It's one that we can both grow with the market, but also take share in doing that and then to your point on on hiring people absolutely are adding resources.

Speaker Change: Your current.

Speaker Change: Family Office revenues is that today.

Speaker Change: Sure so.

Speaker Change: To this.

Speaker Change: It is a different model than what we've had where I in this case here as I mentioned, it's like an outsourced family office capability and so the primary interface for those clients is essentially the quarter back for that relationship. So in our family office situation.

Speaker Change: As far as the addressable market the ultra high net worth market very large.

Speaker Change: If you look at just our client base.

Speaker Change: The number of clients that would fall into this category is is in the one hundreds kind of 3% to 400 existing clients that would fit this profile.

Speaker Change: I don't have I'll say a <unk>.

Speaker Change: That person is unemployed if you will of the family.

Speaker Change: Percentage of revenue number for you on that front.

Speaker Change: Is directing all of that activity in this case here, that's a northern trust employee.

Speaker Change: So it's already a large client base for us. It's just one that we think with the growth in that market and our brand in that market and our capabilities. It's one that we can both grow with the market, but also take share in doing that and then to your point on on hiring people absolutely are adding resources.

Speaker Change: Who is that the quarter are accurate the director of all of those activities. We absolutely have people that do that now but as we are growing this business we are adding.

Speaker Change: Additional.

Speaker Change: Talent to be able to continue to resource the growth there.

Speaker Change: To this.

Speaker Change: It is a different model than what we've had where.

Speaker Change: And then I would just also add to it there are also technology capabilities that are a part of this.

Speaker Change: In this case here as I mentioned, it's like an outsourced family office capability and so the primary interface for those clients is essentially the quarterback for that relationship. So in a family office situation.

Speaker Change: For the family office business, that's all delivered through a comprehensive.

Speaker Change: Technology platform, if you will.

Speaker Change: Where we act as essentially the overall integrator of the various types of technology for our family office and in this case here to be able to provide that on a more ala carte basis. If you will for the ultra ultra.

Speaker Change: That person is unemployed if you will of the family who is directing all of that activity. In this case here that's in Northern Trust employee.

Speaker Change: Who is the quarterback for the director of all of those activities. We absolutely have people that do that now but as we're growing this business we are adding.

Speaker Change: Altra high net worth clients. There is some technology build that we're investing in as well.

Speaker Change: So our family office solutions, Northern would kind of be the CFO on behalf of the family as opposed to existing family office, Okay got it and the other question relates to.

Speaker Change: Additional.

Speaker Change: <unk> to be able to continue to resource the growth there.

Speaker Change: And then I would just also add to it there are also technology capabilities that are a part of this.

Speaker Change: It relates to the question about.

Speaker Change: About capital I mean, yes, so Mike do you want it went up so much more again, you're so far above your minimum.

Speaker Change: For the family office business, that's all delivered through a comprehensive.

Speaker Change: On the one hand, I think a lot of your stakeholders like that you survived the great depression.

Speaker Change: Technology platform, if you will.

Where we act as.

Speaker Change: Essentially the overall integrator of the various types of technology for our family office and in this case here to be able to provide that on a.

Speaker Change: Two big banks that didn't cut the dividend during the global financial crisis, you'd like that perception of trust and resiliency I get it on the other hand, it's hard to know where that line is between having enough for that resiliency and having some by state you have some trapped capital so what.

Speaker Change: More Ala Carte basis, if you will for the ultra.

Speaker Change: Our high net worth clients. There is some technology build that we're investing in as well.

Speaker Change: What are your thoughts about.

Speaker Change: Acquisitions are accelerating the buyback I know thats already come up or and what kind of deregulatory benefits are.

Speaker Change: So our family office solutions, Northern just kind of be the CFO on behalf of the family as opposed to existing family office, Okay got it and the other question relates to.

Speaker Change: You could potentially get under the new regime. Thanks.

Mike O'grady: Sure. So your preamble there Mike covered a lot of it.

Speaker Change: Thanks to the question.

Speaker Change: About capital I mean, you have so much CET one it went up so much more again, you're so far above your minimum.

Speaker Change: Things that I would start with as well so all of that said.

Speaker Change: We are in a very good position from a capital perspective to the extent that we.

Speaker Change: On the one hand, I think a lot of your stakeholders like that you survived the great depression.

Speaker Change: Thought that there was something inorganic that we could do which would be a good deployment of that capital we would consider it I would say at this point.

Speaker Change: Two big banks that didn't cut the dividend during the global financial crisis you'd like that.

Speaker Change: <unk> Trust and resiliency.

Speaker Change: That's not a priority on that front. That's why we are in a position to do higher repurchases.

Speaker Change: Got it on the other hand, it's hard to know where that line is between having enough for that resiliency and having so much that you have some trapped capital so.

Dave: As Dave mentioned.

Dave: In the quarter, we were over 100% all else equal as we go forward here, we think that 100%.

Speaker Change: What are your thoughts about.

Speaker Change: Acquisitions are accelerating the buyback I know that's already come up.

Dave: Is the right level.

Dave: Think about it.

Speaker Change: Or and what kind of deregulatory benefits our.

Speaker Change: To your point as far as any changes in the capital regime, we'll start with what we think.

Speaker Change: That you could potentially get under the new regime. Thanks.

Speaker Change: Sure. So your preamble there Mike covered a lot of the things that I would start with as well so all of that said.

Dave: Is the necessary amount of capital, but we've also talked.

Dave: Previously about the importance of being at or above the level of some of our peers. So to the extent that it changes within the industry that changes that constraint. If you will as well and gives us even more flexibility to do things like that.

Speaker Change: We are in a very good position from a capital perspective to the extent that we.

Speaker Change: Thought that there was something inorganic that we could do which would be a good deployment of that capital we would consider it I would say at this point.

Dave: Alright, thank you.

Speaker Change: That's not a priority on that front. That's why we are in a position to do higher repurchases.

Dave: Sure.

Dave: And our next question is going to come from.

Speaker Change: <unk> from Bank of America. Please go ahead.

Speaker Change: As Dave mentioned in the quarter, we were over 100% all else equal as we go forward here, we think that 100%.

Speaker Change: Good morning.

Speaker Change: Thank you I wanted to follow up I guess <unk> on the expense front.

Speaker Change: Is the right level to think about and to your point as far as any changes in the capital regime.

Speaker Change: If you go back when you took over as CFO, we had done sort of leadership changes.

Speaker Change: Talked about the focus in terms of creating a CE auto.

Speaker Change: I'll start with what we think.

Speaker Change: It is the necessary amount of capital, but we've also talked.

Speaker Change: And the focus on vendor contracts on just moving business heads.

Speaker Change: Previously about the importance of being at or above the level of some of our peers. So to the extent that it changes within the industry.

Speaker Change: Manage some of these things just give us a sense of any proof points on what you achieved youre seeing so far I know, it's early days, but as we think about the expense flex in the operating leverage in the business that will come through over the next year or tool.

Speaker Change: Changes that constraint, if you will as well and gives us even more flexibility to do things like that.

Speaker Change: Alright, thank you.

Speaker Change: Sure.

Speaker Change: And our next question is going to come from.

Speaker Change: It would help us inform how much we can rely on expense flex I would love to get things that have been achieved in the last sort of six seven months.

Speaker Change: Super hamper in a wallet from Bank of America. Please go ahead.

Speaker Change: These changes occurred and.

Speaker Change: Good morning.

Speaker Change: I think we're going to do.

Speaker Change: And what's the runway yet in terms of what inning are we in in terms of identifying productivity opportunities. Thank you.

Speaker Change: Follow up I guess, Dave on the expense front.

Speaker Change: If you go back when you took over as CFO, we had done sort of leadership changes.

Speaker Change: Sure.

Speaker Change: That's a good framework to think about it.

Speaker Change: You talked about the focus in terms of creating a C oil well.

Speaker Change: Dave mentioned, a number of things that we have been doing and that you are asking about the timeframes in front of us so on that front again.

Speaker Change: And the focus on vendor contracts I'm, just moving business heads.

Speaker Change: Managed some of these things just give us a sense of any proof points on what you achieved <unk> seen so far I know, it's early days, but as we think about the expense flex in the operating leverage in the business that may come through over the next year or tool it.

Speaker Change: <unk> been very focused on it.

Speaker Change: Making sure that we have an efficient workforce and that has produced efficiencies for us in the most recent periods of course, we will continue to do that there's still more opportunities to look at the way that we're organized spans of control location strategy a number of initiatives across that front that will that will.

Speaker Change: It would help us inform how much we can rely on expense flex I would love to get things that have been achieved in the last sort of six seven months since these changes occurred and.

Speaker Change: Continue to deliver productivity for us.

Speaker Change: And what's the runway yet in terms of what do you think are we in in terms of productivity opportunities. Thank you.

Speaker Change: We're also in the earlier stages of continuing to deploy I'll say technology, and I say that in the sense of.

Speaker Change: Sure.

Speaker Change: Technology that have been available like machine learning.

Speaker Change: And I think that's a good framework to think about it.

Speaker Change: Natural language processing that we're able to deploy it to <unk>.

Dave: Dave mentioned.

Speaker Change: A number of things that we have been doing.

Dave: And that you are asking about the timeframes in front of US. So you know on that front again.

Speaker Change: Create efficiencies and productivity and then in the earlier stages of generative AI.

Dave: I been very focused on.

Speaker Change: So areas where.

Dave: Ensure that we have an efficient workforce and that has produced efficiencies for us in the most recent periods of course, we'll continue to do that there's still more opportunities to look at the way that we're organized spans of control location strategy a number of initiatives across that front that will that will.

Speaker Change: We're using get hub for example for <unk>.

Speaker Change: Our software development automation.

Speaker Change: Which again, we're getting I'll say very good results on that front, but it's in the very early days of deploying that and.

Speaker Change: And also looking to deploy more for Digitization of all of the documentation.

Dave: <unk> to deliver productivity for us.

Speaker Change: That we utilize.

Dave: We're also in the earlier stages of continuing to deploy <unk> technology, and I say that in the sense of.

Speaker Change: And have to process for our clients.

Speaker Change: And along those lines. If you think about a lot of the activities in the asset servicing business and our operations that relate to workflow management.

Dave: Technology that have been available like machine learning.

Dave: Natural language processing that we're able to deploy.

Speaker Change: That's something where we're deploying the technology to continue to automate that much more.

Dave: To create efficiencies and productivity and then in the earlier stages of generative AI, so areas, where we're using get hub for example for it.

Speaker Change: Then to your point of even beyond that we've talked about the fact that we.

Speaker Change: We've reorganized but that's only part of it when we think about the CLO organization. That's been set up it's also a change in our operating model.

Dave: Or software development.

Dave: Automation.

Which again, we're getting I'll say very good results on that front, but it's in the very early days of deploying that.

Speaker Change: Where we're moving towards a more capability driven operating model, that's where we're taking common services or activities or processes that cut across the company.

Dave: And also looking to deploy more for Digitization of all the documentation.

Dave: That we utilize.

Dave: And have to process for our clients.

Speaker Change: And looking to centralize and standardize and automate those processes, so thinking about client onboarding, which happens across the company or portfolio accounting.

Dave: And along those lines. If you think about a lot of the activities in the asset servicing business and our operations that relate to workflow management.

Dave: That's something where we're deploying the technology to continue to automate that.

Speaker Change: And those capabilities and also our client.

Speaker Change: Platforms are portals, our passports, where we have multiple passports to the extent that we can standardize those across the various businesses geographies that creates those longer term.

Dave: More.

Dave: And then to your point of even beyond that we've talked about the fact that.

Dave: We've reorganized but that's only part of it when we think about the COO organization. That's been set up it's also a change in our operating model.

Speaker Change: Productivity and efficiency opportunity. So a number of things that we're doing now but much more that we can do as we go forward to ensure we're getting consistent productivity.

Dave: Where we're moving towards a more capability driven operating model, that's where we're taking common services or activities or processes that cut across the company.

Mike Mayo: That's good color, Mike Thanks for talking through that and maybe even one day of heard your guidance on NII.

Speaker Change: Mind us in terms of sensitivity to.

Dave: And looking to centralize standardize and automate those processes, so thinking about client onboarding, which happens across the company or portfolio accounting.

Speaker Change: Rate cuts, how we should think about that going forward.

Rapid rate cuts is that a negative how do you think how are you just going about managing the balance sheet from an Alco perspective. Thank you.

Dave: And those capabilities and also our client.

Speaker Change: Yes, we have.

Speaker Change: Our model, we've got two or three rate cuts potentially in there.

Dave: Platforms are portals, our passports, where we have multiple passports to the extent that we can standardize those across the various businesses geographies that creates those longer term.

Speaker Change: From our perspective.

Speaker Change: It doesn't really impact it all that much to be honest with you. The NIM compression really doesn't start until we get a much much lower rates.

Dave: Productivity and efficiency opportunity so.

And if you want to think about it roughly speaking at 25 basis point rate cut.

Dave: A number of things that we're doing now but much more that we can do as we go forward to ensure we're getting consistent productivity.

Speaker Change: It translates into less than $1 million a month for us. So so it isn't it isn't something that we we anticipated business something thats going to go to.

Speaker Change: That's good color, Mike Thanks for talking through that and maybe even one do you hold your guidance on NII.

Speaker Change: Prevent us from hitting our goal.

Dave: Mind us in terms of sensitivity to.

Speaker Change: Thank you.

Speaker Change: Rate cuts, how we should think about that going forward.

Speaker Change: Thank you.

Speaker Change: And our next question is going to come from Glenn Schorr from Evercore. Please go ahead.

Speaker Change: Rapid rate cuts is that the negative how do you think how are you just going about managing the balance sheet from an Alco perspective. Thank you.

Speaker Change: Hi, Thanks, and talk about one of the alternatives. Good morning, maybe talk about some of the alternative initiatives you have in motion is talk maybe.

Yeah, we have in our model, we've got two or three rate cuts potentially in there.

From our perspective.

Speaker Change: Asset and wealth management first in terms of.

Speaker Change: Doesn't really impact it all that much to be honest with you.

Speaker Change: Delivering a more complete set of solutions I'm curious if you get what you could tell us on whats in motion in terms of both proprietary and third party product that you might be onboarding, what signposts, we might be looking to see throughout this year I appreciate it sure absolutely so ill.

Speaker Change: The NIM compression really doesn't start until we get a much much lower rates.

Speaker Change: And if you want to think about it roughly speaking at 25 basis point rate cut.

Speaker Change: It translates into less than $1 million a month for us. So so it isn't it isn't something that we we anticipated business something that's going to go to.

Speaker Change: Alternative solutions definitely important growth initiative for us across the company.

Speaker Change: Prevent us from hitting our goal.

Speaker Change: Alright, thank you.

Speaker Change: To your question as it relates to wealth management, what we're looking to do there Glenn is to enhance and expand the opportunity set for our clients and it is a combination of both.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: And our next question is going to come from Glenn Schorr from Evercore. Please go ahead.

Glenn Schorr: Hi, Thanks, and talk about one of the alternatives. Good morning, maybe talk about some of the alternative initiatives you have in motion just talk maybe asset and wealth management first in terms of delivering a more complete set of solutions I'm curious if you get what you could tell us on whats in motion in terms of both proprietary.

Speaker Change: Proprietary but also third party funds, so 50 south capital.

Speaker Change: Is our alternatives.

Speaker Change: Investment manager within and Tam and on that front.

Speaker Change: We've been very successful with our wealth clients and raising funds overtime combination of fund to funds, but also other types of.

Glenn Schorr: Third party product that you might be onboarding, what signpost, we might be looking to see throughout this year I appreciate it.

Glenn Schorr: Absolutely so.

Speaker Change: I'll say direct to capabilities, such as secondaries and co investments.

Glenn Schorr: Alternative solutions definitely important growth initiative for us across the company.

Speaker Change: And we look to this year essentially double.

To your question as it relates to wealth management, what we're looking to do there Glenn is to enhance and expand the opportunity set for our clients and it is a combination of both.

Speaker Change: <unk>.

Speaker Change: The fund raising capacity or actual fund raising amount to what we've done in previous years on average and then on the other hand, we have.

Speaker Change: Our wealth management alternatives platform, which has third party funds on that and Thats an area were likewise, we're looking to increase the number of funds. This year that we offer to our clients.

Glenn Schorr: Hi.

Glenn Schorr: Proprietary but also third party funds, so 50 south capital.

Glenn Schorr: Is our alternatives.

Glenn Schorr: Investment manager within and Tam and on that front.

Speaker Change: And also look to potentially increase the size of the average offering on that front.

Glenn Schorr: We've been very successful with our wealth clients and raising funds overtime combination of fund to funds, but also.

Speaker Change: That does require an investment so that's why when you say.

Speaker Change: What's happening on that front, there is a lot happening to ensure that we do that in a way.

Glenn Schorr: Other types of I'll.

Glenn Schorr: I'll say direct capabilities, such as secondaries and co investments.

Speaker Change: It gets the right outcomes for our clients ensuring that.

Glenn Schorr: And we look to this year essentially double.

Speaker Change: We provide the right education around alternatives and how it fits into the portfolio of our clients and so yes big area of focus for us.

Glenn Schorr: The fundraising capacity or actual fund raising amount to what we've done in previous years on average and then on the other hand, we have.

Speaker Change: Both on our own I'll say and through third parties.

Glenn Schorr: Our wealth management alternatives platform, which has third party funds on that and that's an area where likewise, we're looking to increase the number of funds. This year that we offer to our clients.

Speaker Change: Great maybe I'll.

Speaker Change: The team and just ask a follow up on the servicing side in your prepared remarks, you talked about.

Speaker Change: The Semiliquid funds important focus and doing like have you said or a little more than half of what's going on in the U K U S is obviously a huge market.

Glenn Schorr: And also look to potentially increase the size of the average offering on that front.

Glenn Schorr: <unk>.

Speaker Change: For semi liquids I'm, just curious if that technology backbone that youre, having success with in the U K.

Glenn Schorr: That does require an investment so that's why when you say.

Glenn Schorr: What's happening on that front, there's a lot happening to ensure that we do that in a way.

Speaker Change: Is literally the same thing or can be tweaked to to go after the U S market and then if that is.

Glenn Schorr: It gets the right outcomes for our clients ensuring that.

Glenn Schorr: We provide the right education around alternatives and how it fits into the portfolio of our clients and so yes.

Speaker Change: A clear plan.

Speaker Change: So yes.

Speaker Change: To your point.

Speaker Change: The markets are different.

Glenn Schorr: Yes, big area of focus for us.

Speaker Change: Similar but different.

Glenn Schorr: On our own I'll say and through third parties.

Speaker Change: So that capability with the <unk> in the U K for example, there is a similar structure investment vehicle structure in Luxembourg.

Glenn Schorr: Yeah.

Speaker Change: Great maybe I'll continue on the theme and just ask a follow up on the servicing side in your prepared remarks, you talked about.

Speaker Change: And that in that market. If you will and as you know that then is a market where you can distribute across Europe.

Speaker Change: Semiliquid funds important focus and doing like have you said or a little more than half of what's going on in the U K U S is obviously a huge market.

Speaker Change: Likewise, we've had success on that front and I would say there is activity there Similarly, Ireland.

Speaker Change: <unk> has its own structure. So yes, you need the expertise, yes, you have the capability. It does require I'll say customizing for that marketplace.

Speaker Change: For semi liquid so I'm, just curious if that technology backbone that youre, having success with in the UK.

Speaker Change: Is literally the same thing or can be tweaked to to go after the U S market and then if thats clear.

Speaker Change: So we have the ability to do that.

Speaker Change: And within the U S again, it's a different approach and structure for that market.

Speaker Change: Clear plan.

Speaker Change: I appreciate it yeah. So yes, so to your point.

Speaker Change: But one that we've had growth in the U S.

The markets are different I'll say similar but different.

Speaker Change: With private capital and expect to going forward as well.

Speaker Change: So that capability with the <unk> in the U K for example.

Speaker Change: There is a similar structure investment vehicle structure in Luxembourg.

Speaker Change: Alright, thank you.

Speaker Change: And our next question comes from Gerard Cassidy from RBC. Please go ahead.

Speaker Change: In that in that market. If you will and as you know that then is a market where you can distribute across Europe.

Speaker Change: Good morning, David wondering Mike.

Speaker Change: <unk>, we've had success on that front and I would say there is activity there Similarly, Ireland.

Speaker Change: Good morning can you guys.

Speaker Change: Share with us.

Speaker Change: And it might be difficult to do this but.

Speaker Change: It has its own structure. So yes, you need the expertise, yes, you have the capability. It does require I'll say customizing for that marketplace.

Speaker Change: How can you calibrate the fee revenues for asset values versus volumes, so if the global asset values.

Speaker Change: Continue to decline this year, how much can that be offset on your revenues with increased volumes.

Speaker Change: And so we have the ability to do that.

Speaker Change: Within the U S. Again, it's it's a different approach and structure for that market.

Speaker Change: Yes, I mean so.

Speaker Change: But one that we've had growth in the U S.

Speaker Change: Our AUC is about 50% equities.

Speaker Change: With private capital and expect to going forward as well.

Speaker Change: And 30% fixed income AUM is about 56% equities.

Speaker Change: So we are levered towards the equity markets right from that perspective.

Speaker Change: Alright, thank you.

Gerard Cassidy: And our next question comes from Gerard Cassidy from RBC. Please go ahead.

So it's going to be volume and it's going to be mix, obviously, it's going to be super important theirs as well also keep in mind that within the AUC bucket.

Gerard Cassidy: Good morning, David and Mike.

Gerard Cassidy: Good morning can you guys.

Speaker Change: Share with us.

Gerard Cassidy: And it might be difficult to do this but.

Speaker Change: A lot of the stuff that we do in asset servicing is custody agnostic, we're moving more towards a solution based revenues like front office solutions and.

Gerard Cassidy: How can you calibrate the fee revenues for asset values versus volumes.

Global asset values were too.

Speaker Change: Integrated trading solutions and things of that nature, So while assets under custody are super important, but we've added a ton of extra services around all of that that's less affected by that by that volume.

Gerard Cassidy: The decline this year, how much can that be offset on your revenues with increased volumes.

Gerard Cassidy: Yes, I mean so.

Our AUC is about 50% equities and 30% fixed income AUM is about 56% equities.

Speaker Change: Yeah.

Speaker Change: Very good and then as a follow up a broader macro question.

Speaker Change: Obviously change coming on the regulatory front.

Gerard Cassidy: So we are levered towards the equity markets right from that perspective.

Speaker Change: We have seen.

Speaker Change: Recently as Friday MPR come out from the Feds on the stress capital buffer can you guys give us your views on the Basel III end game, what changes might what it might mean for Northern Trust also there's talk about excluding government securities from the supplementary leverage ratio if you wrap it altogether.

Gerard Cassidy: So it's going to be volume and it is going to be mix, obviously, it's going to be super important there as well also keep in mind that within the AUC bucket.

Gerard Cassidy: A lot of the stuff that we do in asset servicing is custody agnostic, we're moving more towards a solution based revenues like front office solutions and integrated trading solutions and things of that nature. So assets under custody are super important, but we've added a ton of extra services.

Speaker Change: How are you guys looking at it and how it might impact the way you run your business going forward.

Speaker Change: Sure so the.

Speaker Change: The regulatory.

Speaker Change: Environment and framework is absolutely continuing to change I mean, Basel III end game.

Gerard Cassidy: Round all of that it's less affected by that but by that volume.

Speaker Change: Very good and then as a follow up a broader macro question.

Speaker Change: <unk> has been out there for some time period can't quite reach the end game on that front I would say within that.

Gerard Cassidy: There's obviously change coming on the regulatory front.

Speaker Change: That aspect of that regime, it's mostly about operational risk.

Speaker Change: We've seen.

Speaker Change: Suddenly it is Friday and NPR come out from the Feds on the stress capital buffer can you guys give us your views on the Basel III end game, what changes might be or what it might mean for Northern Trust also there's talk about excluding government securities from the supplementary leverage ratio if you wrap it altogether.

Speaker Change: And how that gets treated from a capital perspective.

Speaker Change: To the extent that.

Speaker Change: It is a more I'll call. It refined model that relates to your particular operations and the actual risk that you have.

Speaker Change: That tends to be favorable from our perspective as opposed to more blunt instrument approaches to operational risks which tend to.

Speaker Change: How are you guys looking at it and how it might impact the way you run your business going forward.

Speaker Change: Sure so.

Speaker Change: Overweight.

Speaker Change: The regulatory environment.

Speaker Change: Level of risk for a lot of the activities that we have so on that front I would say.

Speaker Change: Environment and framework is absolutely continuing to change I mean, Basel III end game.

Speaker Change: Positive in the most recent developments as to how Theyre looking at operational risk <unk>.

Speaker Change: Has been out there for some time period can't quite reach the end game on that front I would say within that.

Speaker Change: To your point on supplemental.

Speaker Change: <unk> ratio leverage ratio.

Speaker Change: That aspect or that regime, it's mostly about operational risk.

Speaker Change: Again as a custody bank.

Speaker Change: We tend to be a.

Speaker Change: And how that gets treated from a capital perspective.

Speaker Change: A valve if you will or a flex point for liquidity in the marketplace.

Speaker Change: To the extent that.

Speaker Change: It is a more I'll call. It refined model that relates to your particular operations and the actual risk that you have.

Speaker Change: We have plenty of capacity on that front right now, but certainly to the extent that something like treasuries.

Speaker Change: <unk> received different treatment as a part of that calculation. It only gives us more capacity I would say at this point there is no particular.

Speaker Change: That tends to be favorable from our perspective as opposed to more blunt instrument approaches to operational risks which tend to.

Speaker Change: Need or relief that would be required for us based on our activities. It would just create more capacity.

Speaker Change: Overweight.

Speaker Change: Level of risk for a lot of the activities that we have so on that front I would say positive in the most recent developments as to how theyre looking at operational risk <unk>.

Speaker Change: Very good thank you.

Sure.

Speaker Change: And our next caller is going to be David Smith from tourists securities.

Speaker Change: To your point on supplemental.

Speaker Change: Our ratio leverage ratio.

Speaker Change: Okay.

Speaker Change: Again as a custody bank.

David Smith: Good morning can you speak some more about how the current market volatility impacts new business on the one hand and client attrition on the other our clients are less likely to make big moves.

Speaker Change: We tend to.

Speaker Change: B E.

Speaker Change: A valve if you will or a flex point for liquidity in the marketplace.

Speaker Change: In terms of custodian or manager during times like this.

Speaker Change: We have plenty of capacity on that front right now, but certainly to the extent that something like treasuries.

Speaker Change: Lastly, these trends look different in asset servicing versus wealth right now.

Speaker Change: Received different treatment as a part of that calculation. It only gives us more capacity I would say at this point there is no particular state.

Speaker Change: Thank you.

Speaker Change: Yes, I do think that.

Speaker Change: Market volatility.

Speaker Change: Uncertainty can drive client decision, making and so we haven't seen anything I would say significant at this point, but frankly, we're still in the first month.

Speaker Change: Need or relief that would be required for us based on our activities. It would just create more capacity.

Speaker Change: Very good thank you.

Speaker Change: Sure.

Speaker Change: Of this really high level of volatility.

Speaker Change: And so we'll see how that plays out but it can run counter to decision making.

Speaker Change: And our next caller is going to be David Smith from tourists securities.

Speaker Change: And then I would say as to how it might differ on.

Speaker Change: On the institutional side these tend to be longer.

Speaker Change: Longer time periods for decision, making where they tend to be running rfps over.

Speaker Change: In terms of custodian or manager during times like this.

Speaker Change: Lastly to these trends look different in asset servicing versus wealth right now.

Speaker Change: Many months and so those tend to continue along because their I'll say more accustomed to changes in the marketplace on the wealth front.

Speaker Change: Thank you.

Speaker Change: Yes, I do think that.

Speaker Change: Market volatility.

Speaker Change: Uncertainty can drive client decision, making and so we haven't seen anything significant at this point, but frankly.

Speaker Change: It can cause a pause for people to actually switchover, but frankly, it just builds up the.

Speaker Change: The pipelines to the extent that we.

Speaker Change: We've made the case to be able to switch the account, but as to the timing as to when they want to do it.

Speaker Change: Still in the first month.

Speaker Change: Of this really high level of volatility.

Speaker Change: And so we'll see how that plays out but yes. It can run counter to decision making.

Speaker Change: This may take a little bit longer to do on that front. So early days on that front.

Speaker Change: And then I would say as to how it might differ.

Speaker Change: But there certainly can be an impact from from volatility.

Speaker Change: On the institutional side these tend to be longer.

Speaker Change: And then as a follow up you've seen some some nice acceleration in expenses over the past few quarters, but it also does seem like your organic flows backing out market impacts are lagging peers at the same time.

Speaker Change: Longer time periods for decision, making where they tend to be running rfps over.

Speaker Change: Many months.

Speaker Change: And so those tend to continue along because their I'll say more accustomed to changes in the marketplace on the wealth front.

Speaker Change: What gives you the confidence that you're making all the necessary investments in growth at the same time that you're working to bring expenses down.

Speaker Change: Yeah that the way you're describing.

Speaker Change: It can cause a pause for people to actually switchover, but frankly, it just builds up.

Speaker Change: Scribed as certainly the objective and that's why the productivity pillar of our of our strategy is critical because it creates that capacity to be able to invest in the growth initiatives that we talked about.

Speaker Change: Pipelines to the extent that we have made the case to be able to switch the account, but as to the timing as to when they want to do it. It just may take a little bit longer to do on that front. So early days on that front.

Speaker Change: So it's certainly on the alternatives front on the family office.

Speaker Change: Services front to be able to do it but then there are a number of other growth initiatives that we're looking in our funding to ensure that we can move that organic growth rate up most of them within wealth management and asset management.

Speaker Change: There certainly can be an impact from from volatility.

Speaker Change: And then.

Speaker Change: A follow up you've seen some some nice acceleration in expenses over the past few quarters, but it also does seem like your organic flows backing out market impacts are lagging peers at the same time.

Speaker Change: And so we've talked about some of them, but I also mentioned in my opening comments and asset management around Etfs where will be.

Speaker Change: What gives you the confidence that you're making all the necessary investments in growth at the same time that you are working to bring expenses down.

Speaker Change: Launching a number of new funds.

Speaker Change: Yep.

Speaker Change: This year on that front, we talked a little bit about tax managed equity.

Speaker Change: The way you described it is certainly the objective and that's why the productivity pillar of our of our strategy is critical because it creates that capacity to be able to invest in the growth initiatives that we talked about.

Speaker Change: Another area that we're investing not as much in the capability from a investment perspective, we are very strong but from a technology perspective to be able to do that in an even more scalable way. So yes, continuing divest invest to be able to fund organic growth.

Speaker Change: Certainly on the alternatives front on the family office.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: A them within wealth management and asset management.

Speaker Change: And our next question is going to come from Jim Mitchell from Seaport Global Securities.

Speaker Change: And so we've talked about some of them, but I also mentioned in my opening comments and asset management.

Jim Mitchell: Hey, good morning.

Jim Mitchell: Maybe just a couple of follow ups on wealth and.

Speaker Change: Round, Etfs, where we'll be.

Jim Mitchell: In the family office solutions business.

Speaker Change: Launching a number of new funds.

Jim Mitchell: Obviously, some ultra high net worth clients are moving from the more traditional relationship to a family office is that more of an effort to make that relationship stickier or is there also a material revenue pick up as they convert.

Speaker Change: Later this year on that front.

Speaker Change: We talked a little bit about tax managed equity another area that we're investing not as much in the capability from a investment perspective, where we're very strong but from a technology perspective to be able to do that in an even more scalable way. So yes, continuing divest invest to be able.

Jim Mitchell: Yes, I would say, it's a combination of things.

Jim Mitchell: One is to just.

Jim Mitchell: Enhanced the service level, if you will.

Speaker Change: Well to fund organic growth.

Jim Mitchell: This idea of being able to outsource more.

Speaker Change: Thank you.

Jim Mitchell: Gives them a higher level of <unk>.

Speaker Change: Sure.

Jim Mitchell: Service.

Jim Mitchell: I would say is it's our ability to win more business.

Jim Mitchell: And our next question is going to come from Jim Mitchell from Seaport Global Securities.

We see a greater demand for that setup, where they have an outsource.

Jim Mitchell: Hey, good morning, maybe just a couple of follow ups on wealth in.

Jim Mitchell: Family Office provider, if you will where they have that quarterback so it enables us to grow and then third I would say is around the scalability of what we're doing overall this segment I would say is not a.

Jim Mitchell: In the family office solutions business.

Obviously, some ultra high net worth clients are moving from the more traditional relationship to a family office is that more of an effort to make that relationship stickier or is there also a material revenue pick up as they convert.

Jim Mitchell: Terribly scalable offering.

Jim Mitchell: It's very high needs it's very.

Jim Mitchell: Yeah, I would say, it's a it's a combination of things.

Jim Mitchell: Expert driven.

Speaker Change: In many cases very bespoke for the clients and what their needs are and so anything we can do to improve the scalability enables us to grow faster and more profitably and then to your point as well.

Jim Mitchell: One is to enhance the service level, if you will.

Jim Mitchell: This idea of being able to outsource more.

Jim Mitchell: Gives them a higher level of <unk>.

Jim Mitchell: Service second I would say is it's.

Speaker Change: We think if we do a great job will continually earn that business and the business will be sticky for us as well.

Jim Mitchell: Our ability to win more business.

Jim Mitchell: We see a greater demand for that setup, where they have an outsource.

Speaker Change: Right no that makes sense and then maybe just bigger picture. That's obviously been a pace place wealth generally you've pivoted to try to drive organic growth improvements you've highlighted a few examples of success across all <unk> et cetera. So how do you how are you feeling better worse on sort of the organic growth acceleration that.

Jim Mitchell: Family Office provider, if you will where they have that quarterback.

Jim Mitchell: It enables us to grow and then third I.

Jim Mitchell: I would say is around the scalability of what we're doing overall. This segment you know I would say is not a.

Jim Mitchell: Terribly scalable offering.

Speaker Change: We're trying to get in it do you have any intermediate targets on where you can get that organic growth too.

Jim Mitchell: It's very high needs it's very.

Jim Mitchell: Experts driven.

Speaker Change: And well.

Speaker Change: Yes so.

Jim Mitchell: In many cases very bespoke for the clients and what their needs are and so anything we can do to improve the scalability enables us to grow faster and more profitably and then to your point as well.

Speaker Change: Feel very good about the initiatives that we have in place.

Speaker Change: And our progress on them, but I would say on some of these they are in the earlier days or earlier stages on that front and the nature of this business is you earn them one by one in many respects so it's different than our institutional business, where you have very very large mandates that can drive.

Jim Mitchell: We think if we do a great job will continually earn that business and the business will be sticky for us as well.

Jim Mitchell: Right now it makes sense and then maybe just bigger picture. That's obviously been a pace place wealth generally you've pivoted to try to drive organic growth improvements you've highlighted a few examples of success across all <unk>.

Speaker Change: Drive a higher growth rate in a shorter period of time.

Speaker Change: And then I'll also say one of the keys is really being able to execute on our one northern trust strategy and what I mean by that is just delivering the entire firm. So it's not I'll say just wealth management.

Jim Mitchell: Et cetera. So how do you how are you feeling better worse on sort of the organic growth acceleration that you're trying to get and do you have any intermediate targets on where you can get that organic growth to it.

Speaker Change: It's the entire firm its asset management and when appropriate also the asset servicing and banking capabilities.

Speaker Change: Well sure.

Jim Mitchell: Yeah. So.

Speaker Change: Our wealth clients need.

Jim Mitchell: We feel very good about the initiatives that we have in place and our progress on them, but I would say on some of these they are in the earlier days or earlier stages on that front and the nature of this business is you earn them one by one in many respects so it's different than our institutional business, where you have very <unk>.

Speaker Change: Okay. Thanks, Thanks for the color sure.

Speaker Change: And our next question is going to come from diverse.

Speaker Change: J P Morgan.

Speaker Change: Hi, Thanks.

Speaker Change: Wanted clarification on.

Speaker Change: Yes.

Speaker Change: Fees in both servicing and asset management, Dave I heard you say, you're you've added a lot of services.

Speaker Change: Three large mandates that can drive.

Jim Mitchell: Drive a higher growth rate in a shorter period of time.

Speaker Change: And then you also mentioned in your release about the lagged effect that you always have.

Jim Mitchell: And then I'll also say one of the keys is really being able to execute on our one northern trust strategy and what I mean by that is just delivering the entire firm. So it's not I'll say just wealth management I, it's the entire firm its asset management and when appropriate also the asset servicing and banking capabilities.

Speaker Change: From asset values, obviously fourth quarter asset values did well, but when I look at your servicing and asset management fees, both were down linked quarter any color on what drove that down and how we should think about it given that Q1 was actually down further.

Jim Mitchell: Our wealth clients need.

Speaker Change: So.

Jim Mitchell: Okay. Thanks, Thanks for the color sure.

Speaker Change: I think <unk> talked about.

Speaker Change: So the way to think about the billing lags for 25, 25% quarterly 60% monthly and 15% daily.

Speaker Change: And our next question is going to come from diverse Jamaica from J P. Morgan.

Speaker Change: Hi, Thanks.

Jim Mitchell: Just wanted a clarification.

Speaker Change: The sort of the way we think about it.

Speaker Change: Yes.

Speaker Change: So obviously the quarterly benefit will still see it going into Q2, because March 31 wasn't.

Speaker Change: Fees in both servicing and asset management, David I heard you say, you're you've added a lot of services.

Speaker Change: It was before liberation day, so we're still going to see an impact there but.

Speaker Change: And then you also mentioned in your release about the lagged effect that you always have.

Speaker Change: Going forward as it obviously will catch up to us unless the markets.

Speaker Change: From asset values, obviously fourth quarter asset values did well, but when I look at your servicing and asset management fees, both were down linked quarter.

Speaker Change: Come back materially.

Speaker Change: Okay.

And then.

Speaker Change: No.

Speaker Change: Completely different topic, maybe Mike.

Speaker Change: Any color on what drove that down and how we should think about it given that Q1 was actually down further.

Speaker Change: Youll see revenues, both servicing and asset management, what percentage is non U S.

Speaker Change: So.

Speaker Change: And I think talking about <unk>.

Speaker Change: And as you think about growth.

Speaker Change: So the way to think about the billing lags 25, 25% quarterly 60% monthly and 15% daily.

Speaker Change: I know Jason in the past talked to on this call has talked about wanting to add a lot of growth internationally. What are you thinking as you've done your plans in terms of how much of the growth you expect coming from international.

Speaker Change: The way, we think about it.

Speaker Change: So obviously the quarterly benefit will still see it going into Q2 because March 31.

Speaker Change: And next year next three years.

Speaker Change: It was before liberation day, so we're still going to see an impact there but.

Speaker Change: Okay got that.

Speaker Change: Sure so.

Speaker Change: Roughly 25% to 30% of our revenue is non U S.

Speaker Change: Going forward as it obviously will catch up to us unless the markets.

Speaker Change: And that will vary over time quarter to quarter, but that gives you some idea of.

Speaker Change: Come back materially.

Speaker Change: Okay.

Speaker Change: The distribution there.

Speaker Change: And then what.

Speaker Change: Sure.

Speaker Change: And I would say from a growth perspective.

Speaker Change: Completely different topic, maybe Mike.

Speaker Change: That each of our businesses has a non U S or international growth component to it.

Speaker Change: Youll see revenues, both servicing and asset management, what percentage is non U S.

Speaker Change: As you think about growth.

Speaker Change: Again, the markets can change in the dynamics can change, but there are certain areas, where we think there is more of a growth opportunity internationally with the businesses. So for example, within the family office business. It will continue to grow in the U S. But we've been growing at a higher rate outside of the U S as well.

Speaker Change: I know Jason in the past talked on this call has talked about.

Speaker Change: Wanted to add a lot of growth internationally too what are you thinking as you've done your plans in terms of how much of the growth you expect coming from international.

Speaker Change: And next year next three years.

Speaker Change: Meaningful wins, even in the quarter here, where we think that that opportunity in.

Speaker Change: Sure so.

Speaker Change: Roughly 25% to 30% of our revenue is non U S.

Speaker Change: And our capability set continues to offer a higher growth.

Speaker Change: And that will vary over time quarter to quarter, but that gives you some idea of the the distribution there.

Speaker Change: Opportunity and then in asset servicing.

Speaker Change: Much as we've had good success for example in the quarter here with.

Speaker Change: And I would say from a growth perspective.

Speaker Change: That each of our businesses has a non U S or international growth component.

Speaker Change: Our U S asset owner client base, we continue to win in.

Speaker Change: In EMEA.

Speaker Change: And in APAC as well, so I don't see that mix I would say meaningfully changing I.

Speaker Change: To it.

Speaker Change: As we go forward here and.

Speaker Change: It continues to have that type of balance.

Speaker Change: And then just a clarification the 25% to 30% Mike what you are referring to feed revenues I'm presuming.

Speaker Change: We've been growing at a higher rate outside of the U S as well meaning.

Speaker Change: That's total revenue.

A meaningful wins, even in the quarter here, where we think that that opportunity.

Speaker Change: And what would it be for fee revenues.

Speaker Change: I don't know offhand site, we will have to follow up with that Vivek.

Speaker Change: And our capability set continues to offer a higher growth.

Speaker Change: Dollar still represented about 80% of our trust fees.

Speaker Change: Opportunity and then in asset servicing.

Speaker Change: Okay.

Speaker Change: Much as we've had good success for example in the quarter here with <unk>.

Speaker Change: Yep.

Speaker Change: Thanks.

Speaker Change: Question is going to come from Alex <unk> from Goldman Sachs. Please go ahead.

Speaker Change: Our U S asset owner client base, we continue to win in.

Speaker Change: Yes.

Speaker Change: In EMEA.

Speaker Change: Hey, everybody. Thanks for squeezing me in here just a couple of follow ups for me first maybe on NII.

Speaker Change: And in APAC as well, so I don't see that mix I would say meaningfully changing.

Speaker Change: Understanding the environment is obviously quite volatile I think in your forward guidance you guys are assuming fairly stable deposits.

Speaker Change: As we go forward here and continues to have that type of balance.

Mike Mayo: And then just a clarification the 25% to 30% Mike were you referring to feed revenues I'm presuming.

Speaker Change: I'm, assuming that's two average in Q1, but maybe give us an update on kind of how things stand so far in April both in terms of the level and the mix just given all the volatility we've seen so far in the second quarter.

Speaker Change: That's total revenue.

Speaker Change: And what would it be for fee revenues.

Speaker Change: I don't know offhand site, we will have to follow up with that Vivek.

Speaker Change: Yes, I mean deposit levels are hanging in there.

Speaker Change: And obviously.

Speaker Change: Yeah dollar still represented about 80% of our trust fees.

Speaker Change: March 31 was a point in time, but but at the end of the day. Our clients I think are have taken a somewhat of a risk off <unk>.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Thanks.

Speaker Change: <unk> position in the marketplace and I think they view northern is a good place to put their deposits.

Speaker Change: Your next question is going to come from Alex <unk> from Goldman Sachs. Please go ahead.

Speaker Change: And so from our perspective.

Speaker Change: Hey, everybody. Thanks for squeezing me in here just a couple of follow ups for me.

Speaker Change: The deposit levels are driving a little bit obviously of the guide of giving you going forward and we don't see them abating.

Speaker Change: First maybe on NII.

Speaker Change: Understanding that the environment is obviously quite volatile I think in your forward guidance you guys are assuming fairly stable deposits.

Speaker Change: Obviously for the next couple of months and so.

Speaker Change: From that perspective, we feel pretty good about that.

Speaker Change: I'm, assuming that's your average in Q1, but maybe give us an update on kind of how things stand so far in April both in terms of the level and the mix just given all the volatility we've seen so far in the second quarter.

Speaker Change: Right, Okay that makes sense and then in terms of just the mix as well could you just kind of help us think about what should we be looking out for when thinking about the mix going forward.

Speaker Change: Yes, I mean deposit levels are hanging in there and obviously.

Speaker Change: The risk off environment doesn't seem to change the mis mis mix, rather drastically it sounds like noninterest bearing deposits is still kind of hanging in around the same level in terms of percentages.

Speaker Change: March 30, <unk> was a point in time, but but at the end of the day. Our clients I think are have taken a somewhat of a risk off our position in the marketplace and I think they view northern is a good place to put their deposits.

Speaker Change: But what would change that and what sort of the client segment that will be most responsible I guess with that shift. So yeah. So keep in mind that 50% of our securities reprice in 90 days or less.

Speaker Change: And so from our perspective.

Speaker Change: The deposit levels are driving a little bit obviously of the guide up given you going forward and we don't see them abating.

Speaker Change: And over 80% of the book is in U S dollars.

Speaker Change: And then we've got about $1 billion of fixed securities around off each quarter and are being reinvested in fixed and floating and we have our duration has gone up a little teeny bit we have been taking the opportunity.

Speaker Change: Obviously for the next couple of months and so.

From that perspective, we feel pretty good about that.

Speaker Change: Right. So okay that makes sense and then in terms of just the mix as well could you just kind of help us think about what should we be looking out for when thinking about the mix going forward.

Speaker Change: I think a little bit about protecting 26, if you will so.

Speaker Change: You know.

Speaker Change: From that perspective so.

Speaker Change: Also keep in mind that about 70% of our deposits are in U S dollars right. So there are opportunities for us to do.

Speaker Change: The risk off environment doesn't seem to change the missed missed mix rather drastically it sounds like noninterest bearing deposit is still kind of hanging around the same level in terms of percentages.

Speaker Change: Some arbitrage opportunities between those currencies and things of that nature.

Speaker Change: But what would change that and what sort of the client segment that will be most responsible for that shift. So yeah. So keep in mind that 50% of our securities reprice in 90 days or less.

Speaker Change: And as I said before a deposit betas are going to remain pretty steady until we get to a much lower.

Speaker Change: Interest rate levels. So.

Speaker Change: That's sort of what's driving the NII outlook.

Speaker Change: And over 80% of the book is in U S dollars.

Speaker Change: Gotcha, Okay, and then just another quick one on expenses. So I heard you guys in terms of our prepared remarks and the outlook for this year, just given the more uncertain macro backdrop and the effect will be delayed on fees and lower markets might have on you guys.

Speaker Change: And then we've got about $1 billion of fixed securities around off each quarter, and then are being reinvested in fixed and floating and we have our duration has gone up a little teeny bit we have been taking the opportunity.

Speaker Change: Could you just remind us the percentage of your expense base that flexes directly with lower asset levels. There are some things like sub advisor or sub custody fees and things like that that are that I think are quite.

Speaker Change: I think a little bit about protecting 26, if you will so.

You know.

From that perspective so.

Also keep in mind that about 70% of our deposits are in U S dollars right. So there are opportunities for us to do.

Speaker Change: Quite floating but if you look at your expense base more holistically what percentage of that is sort of truly variable with the fee revenue.

Speaker Change: Some arbitrage opportunities between those currencies and things of that nature.

Speaker Change: Not as much as you might think.

Speaker Change: And then as I said before a deposit betas are going to remain pretty steady until we get to much lower.

Speaker Change: Roughly it's less than half a percent.

Speaker Change: Alright, so the general Assembly to give you guys is the 10% change in the markets is about a 3% change in trust fees, 2% revenues.

Speaker Change: Interest rate levels. So.

Speaker Change: That's sort of what's driving the NII outlook.

Speaker Change: Gotcha, Okay, and then just another quick one on expenses. So I heard you guys in terms of our prepared remarks, and now look for this year, just given them more on certain macro backdrop and the effect will be delayed on fees that in lower markets might have on you guys.

Speaker Change: Unfortunately on the way down we don't get as much benefit from those kind of fees going down.

Speaker Change: Okay, great alright, thanks, so much.

Speaker Change: Sure.

Our next question is going to come from Gerard Cassidy from RBC.

Gerard Cassidy: Hi, guys just a quick follow up.

Speaker Change: David What you guys, obviously took a nice gain from your visa position last year could you just update us where it stands now on the balance sheet, what the value is and what youre thinking of doing with the remaining shares that you may own.

Speaker Change: Quite floating but if you look at your expense base more holistically what percentage of that is sort of truly variable with the fee revenue.

Speaker Change: Not as much as you might think roughly it's less than half a percent.

Gerard Cassidy: <unk>.

Gerard Cassidy: So.

Gerard Cassidy: On the balance sheet Gerard it's at zero.

Speaker Change: Alright, so the general Assembly to give you guys as a 10% change in the markets is about a 3% change in trust fees, 2% revenues.

Gerard Cassidy: So it has not been.

Gerard Cassidy: Marked up if you will.

Gerard Cassidy: And at this point I would consider it restricted.

Speaker Change: Unfortunately on the way down we don't get as much benefit from those kind of fees going down.

Gerard Cassidy: If these are it does create the opportunity to.

Speaker Change: Okay, great all right. Thanks, so much.

Gerard Cassidy: Liquidate an additional portion of that.

Speaker Change: Sure.

Speaker Change: Okay.

Gerard Cassidy: I think we'll consider it at that point and with the same decision, making framework that we did before when we decided to take advantage of that.

Unidentified Moderator: And our next question is going to come from Gerard Cassidy from RBC.

Speaker Change: Hi, guys just a quick follow up.

Gerard Cassidy: And liquidate half of our position at that time and at this point don't really have any more visibility into it.

Speaker Change: David.

Speaker Change: You guys, obviously took a nice gain from your visa position last year could you just update us where it stands now on the balance sheet, what the value is and what you're thinking of doing with the remaining shares that you may own.

Speaker Change: Got it and maybe reword. The question once the unrealized gain potential I guess was the better question since it's carried at zero on the balance sheet.

Speaker Change: About $1 1 billion pretax great Okay.

Speaker Change: So.

Gerard Cassidy: On the balance sheet Gerard It said zero.

Speaker Change: Super I appreciate that thank you.

Speaker Change: So it has not been.

Speaker Change: Sure.

Speaker Change: Marked up if you will and at this point I would consider it restricted.

Speaker Change: And there are no further questions in the queue. At this time I will now turn the conference back over to Jennifer Childe for closing remarks.

Speaker Change: If these are it does create the opportunity to liquidate an additional portion of that.

Jennifer Childe: Thanks, operator, and thank you everyone for joining us today, and we look forward to speaking with you again in the future.

Speaker Change: Well, we will consider it at that point and with.

Speaker Change: With the same decision, making framework that we did before when we decided to take advantage of that.

Speaker Change: And this concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change: And liquidate half of our our position at that time.

Speaker Change: And at this point don't really have any more visibility into it.

Speaker Change: Got it and just maybe reword the question once the unrealized gain potential I guess as opposed to <unk>.

Speaker Change: Another question since it's carried at zero on the balance sheet.

Speaker Change: About $1 1 billion pretax Greg Okay Super I appreciate that thank you.

Speaker Change: Sure.

Speaker Change: And there are no further questions in the queue. At this time I will now turn the conference back over to Jennifer Childe for closing remarks.

Jennifer Childe: Thanks, operator, and thank you everyone for joining us today, and we look forward to speaking with you again in the future.

Jennifer Childe: And this concludes today's call. Thank you for your participation you may now disconnect.

Jennifer Childe: Okay.

Jennifer Childe: [music].

Q1 2025 Northern Trust Corp Earnings Call

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