Northern Trust Corp at Morgan Stanley US Financials, Payments & CRE Conference Transcript

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

Question: Betsy Graseck - Morgan Stanley - Analyst : And Northern Trust Wealth Management has been in operation for well over 130 years. And now look, you -- not the whole time, but 40 years, you've been with Northern Trust and having served in a variety of roles and leading wealth right now. And I know that Northern recently published a book, The Secrets of Enterprising Families. Can you share some of those secrets with us? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 8:00PM, NTRS.OQ - Northern Trust Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Betsy Graseck - Morgan Stanley - Analyst : With the goal of --

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, great. Well, let's shift now to how you're managing the business from how clients should manage their business, think about intergenerational wealth transfer, et cetera. And when you're managing wealth business with a multi-year time horizon, but also, I'm sure, a day-to-day finger on the pulse of the KPIs, how are you running the business? What -- maybe you could help us understand what your top KPIs are and overall strategy for wealth. And just to put it in context for folks in the room, wealth represents close to 40% of Northern Trust's revenues. And the wealth AUM has been growing at about a 6% to 8% CAGR over the last 5 to 10 years, with family office having, I believe, the highest underlying growth out of all of the sleeves that you run. And it's 30% of your overall wealth management in Northern, so a big piece of the business. So just to step back, strategy and how are you keeping on top of that strategy.

Question: Betsy Graseck - Morgan Stanley - Analyst : And the peers that you're looking at, are you able to see this from -- would I be able to see this kind of data? Or is this data that you share amongst peers that have winded and then --

Question: Betsy Graseck - Morgan Stanley - Analyst : Sure. And then one of the other elements of differentiation comes from the client market that you are servicing. And if I recall correctly, you're really focused on the ultra-high net worth, high net worth. Can you remind us what that -- how you define that group of folks in terms of ultra-high net worth and high net worth, average AUM, or things like that? And then is there any interest or how you're feeding that, right, that group? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 8:00PM, NTRS.OQ - Northern Trust Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Betsy Graseck - Morgan Stanley - Analyst : And can you talk a little bit about client acquisition? What are the funnels that are delivering new clients to Northern Trust?

Question: Betsy Graseck - Morgan Stanley - Analyst : That's great to hear. That's a very interesting insight. Thank you. Let's lean into growth a little bit. So when you see -- everything you're looking at, what are the biggest opportunities to accelerate growth from here? Where is the next leg of the growth coming from?

Question: Betsy Graseck - Morgan Stanley - Analyst : And one of the other potential channels, more advisers or folks that are providing support and advice. Is that a potential for delivering more client inflow?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And any challenges that you're looking to address?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then lastly just on the wealth business. In the -- on the first-quarter conference call, we learned about a bolstering of the team in asset management that collaborates with wealth. Maybe you could speak to what's going on there. Why was there the call out? And what are you looking for in the partnership there with Northern?

Question: Betsy Graseck - Morgan Stanley - Analyst : Got it. Okay. Very good. Thank you for that. Okay. Jason, we're going to turn over to the bigger picture, Northern Trust as a full company. Talk about the financials a bit. First off, any updates to the guidance that you have outstanding?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. So everything's going smooth sailing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 11, 2024 / 8:00PM, NTRS.OQ - Northern Trust Corp at Morgan Stanley US Financials, Payments & CRE Conference

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. So can we just ask a few questions on deposits? The -- in 1Q, you had a positive bump in deposits, and that helped drive the net interest income beat. And you indicated back in April that deposits have begun to move a little bit lower in the beginning of the quarter. Is that trend still underway here?

Question: Betsy Graseck - Morgan Stanley - Analyst : And are we seeing still the shift from non-interest bearing to interest bearing. Is that still happening?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. So then lastly, on NII, you have the Visa B share, which you are taking advantage of, right? And so that's going to have a bit of an impact on NII in the quarter, right?

Question: Betsy Graseck - Morgan Stanley - Analyst : Right. Can we dig into that a little bit? How are you thinking about that with regard to share repurchase? Because clearly, there's a nice capital benefit to this for you, which you've always had. But now, it's just realized and it flows into the reported regulatory results. And the underlying question here is, with the higher capital ratio, how long are you okay with holding this level of capital, which is a lot of excess capital relative to regulatory minimums? Is there a desire to lean into growth more organically to the degree that there is demand versus M&A versus buybacks? How are you thinking about that?

Question: Betsy Graseck - Morgan Stanley - Analyst : So when you're thinking about this, you've got quite a bit of capital over and above minimum right? And as long as that's attracting new clients that's helping generate growth -- so in an environment where you're tracking those clients fine, I'm assuming you're measuring this to assess that activity level because to the degree that net new clients are coming in slower, you might want to dial up back.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then one more ticky-techy question. We've got CCAR coming up. And it looks like a very similar test to last year. Anything we should be thinking about with regard to Northern because I'm kind of going into this expecting similar SCB as last year, but am I missing anything there?

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay. And then lastly, on expenses and operating leverage. Can you talk through expectations here as we go through the rest of the year? In 1Q,

Question: Betsy Graseck - Morgan Stanley - Analyst : 5% or better.

Question: Betsy Graseck - Morgan Stanley - Analyst : Right. So 3% is as low as it goes. But if it's a little higher, you're still generating positive operating leverage.

Question: Betsy Graseck - Morgan Stanley - Analyst : Well, I know the market has appreciated the incremental insight on expense outlook that you have communicated over the past several quarters. So keep it going and looking forward to hearing you on the next conference call.

Question: Betsy Graseck - Morgan Stanley - Analyst : All right. Thank you so much for joining us today, Jason and Steve.