Northern Trust Corp at Barclays Global Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Goldberg - Barclays Estimates - Analyst : I was hoping maybe we could start out by running through what you're seeing in each of the main business units before jumping into financials. So let me start with asset servicing first. Our sense is you're shifting the sales focus to opportunities that require lower levels of incremental costs, while emphasizing approaches with multiple points of connectivity as well as bundling sales. It's something you talked about, I think, more (inaudible) on those earnings call. Maybe just expand upon that?

Question: Jason Goldberg - Barclays Estimates - Analyst : So I guess that leaves the question, if you're bidding on less stuff and maybe being a bit more disciplined on pricing, does that kind of more focused approach lead to a lower -- a slower rate of growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 7:30PM, NTRS.OQ - Northern Trust Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Estimates - Analyst : And one of the things you talked about, you mentioned most in the earnings call, you highlighted the client loss in 2Q. You talked about an upcoming client loss in Q3. Anything common seems there anything we should be worried about? You maybe able to size the impact of this and just more color there.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And maybe on wealth management. It's a 9% year-over-year growth in trust fees in the second quarter, just opened your New York office, four blocks away from here.

Question: Jason Goldberg - Barclays Estimates - Analyst : But if you look, net new business was relatively soft in the region, family office still continues to do well. Advisory fees are doing well, but lower product utilization. Maybe just provide us some over update on the business?

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then maybe on asset management, we've seen mixed trends there, positive liquidity flows for six to eight quarters, strong performance with active fixed income. You've been raising assets in the private equity space, still index flows have been soft. Last year, you brought in a new head of asset management from BlackRock. Maybe just update on your thoughts and growth opportunities you're most excited about.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then before jumping into the financials, one of the things that set out to me was you and Mike both use the word resiliency, we counted 10 times on the second quarter earnings call, referring to investments you intend to make. And it just brings a bunch of questions to mind. Is it something the regulators suggested? Are you behind peers? And just maybe talk to that? And then where is this money going? What are you trying to accomplish?

Question: Jason Goldberg - Barclays Estimates - Analyst : Helpful. Maybe we'll put up the first ARS question after you, Jason, don't worry. But I hope maybe we shift gears and flip to the financials and maybe run through the income statement. Maybe start with deposits. I think they were up in the second quarter, I think better than I would have expected. Deposit costs increased slightly due to appear to be a handful of large, thinly priced deposits. Maybe talk to what you're seeing this quarter. And then assuming that Fed cuts 25 basis points next week, just how you expect deposits to behave? And maybe if you can talk about the asset servicing deposits and then the wealth management deposits would be helpful.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then one of the surprises, I guess, not for Northern, but from others last quarter, was particularly the wire houses was increasing pricing to advisory account fee products, and a lot of that's facing lawsuits and regulatory actions. I know Northern has a different approach, and maybe expand on what you do and then maybe what you think what other is doing and how it all plays out? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 7:30PM, NTRS.OQ - Northern Trust Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Estimates - Analyst : Well said. May open up the next ARS question. I think that's the wrong one. But anyway, Jason, you previously pointed to 3Q NII flat. But I think when you gave that guidance, you're talking about modestly lower deposits, seasonality offset by some security repricing. Fast forward today, it sounds like deposits are behaving a little bit better than expected. So repricing let you tell me, but maybe a little bit worse than expected. Just how do you think about near-term NII?

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then I guess as we to think about 2025, maybe talk to some of the puts and takes in net interest income and just given maybe the forward curve, which I'll make the change tomorrow.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then on the fee income side, you talked earlier about the impact of lost business. The market's with some volatility in here. It seems like FX volumes of volatility have been up. Just maybe expand on what you're seeing within the fee income area?

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then maybe on expenses. At the start of the year, you were thinking expense growth 5% or less. Growth will close in the sixth in the first half of the year, probably make 5% or less challenging. Sure, I think you were talking to expenses up 1% in the third quarter. Just maybe how you're thinking about the full year? I know at one point, you were talking about positive fee leverage in the third quarter and overall positive operating leverage in the fourth, but maybe update us on your expectations?

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. Maybe go to the next ARS question. I think I missed one. You could skip this, let's go to the next one about 2025 expenses. So you mentioned accelerating some of this investment spend. You also did some pension repositioning. There's been some severance of late, frontloaded some donations with this Visa gain. So it sounds like all that combined should, over time, lower the expense growth rate of the company. I guess, as you put together in the 2025 budget, can you get back to that 5% Can you do better than 5%? Just how are you thinking about that? Is it going to be return to positive operating leverage were you going to point this to? It just gets -- because expenses have been something that certainly weighed on the story for sure.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And maybe looking a bit further out. I know in the past, you used to talk about this 105% to 110% expense to trust fee ratio. I think you're 116% in the second quarter. I mean do you think you can get to this 105% 110% range? And if so, when?

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then I usually don't have to talk to you about credit quality. But we do read the 10-Qs and we do see watch list loans jump 30%. I know it's up a low base, I just have to ask.

Question: Jason Goldberg - Barclays Estimates - Analyst : It's anything note, you have obviously, a very strong customer base.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. Maybe throw up the next ARS question while I ask mine. But you did pick up, the CET1 ratio in the second quarter went up like 120 basis points, obviously aided by the Visa gain. So you talked about maybe accelerating some spend, but it's still a lot of capital in an environment, where I don't think banks are expecting a ton of balance sheet growth. You stepped at the buyback a little bit, but clearly, capacity do more. Just any talks in terms of how you're thinking about capital? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 7:30PM, NTRS.OQ - Northern Trust Corp at Barclays Global Financial Services Conference

Question: Jason Goldberg - Barclays Estimates - Analyst : Fair. I guess the last question we asked the audience was, what's holding you back to someone more constructive on Northern? It looks like expense management and competitive pressures in pricing. We talked a bit about expenses. We haven't really talked about the competitive environment and pricing pressures. Maybe that's something you could address before like you maybe circle back on expenses and trying to get your message across.

Question: Jason Goldberg - Barclays Estimates - Analyst : Got it. And then --

Question: Jason Goldberg - Barclays Estimates - Analyst : If you want to. We've spent some time on it but I feel like not all of it resonated.

Question: Jason Goldberg - Barclays Estimates - Analyst : I guess there are the step-up cost and resiliency spend. I mean how many quarters do you think that lasts?

Question: Jason Goldberg - Barclays Estimates - Analyst : And I guess, given asset servicing and asset and wealth management, it seems like just the ability to further leverage technology in AI, it seems like it'd be ripe for that. Kind of where are you in that journey?

Question: Jason Goldberg - Barclays Estimates - Analyst : Helpful. As we wind down the clock and maybe conclude, a year from now when you're back at this conference, I mean, what are some of the themes you're going to be talking about? And as you embark on the 2025 budget, anything jumping out to you to take the first cut?

Question: Jason Goldberg - Barclays Estimates - Analyst : Any thoughts on -- initial thoughts on the budget? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 10, 2024 / 7:30PM, NTRS.OQ - Northern Trust Corp at Barclays Global Financial Services Conference