NTRS - Earnings call transcript Q2 2021 | Northern Trust Corporation

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Operator

Good day, and welcome to the Northern Trust Second Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mark Bette, Director of Investor Relations. Please go ahead.

Mark Bette

Thank you, Stephanie. welcome Call. Trust and XXXX Second everyone, Conference Earnings morning, to Corporation's Northern Quarter Good

on call Chief me from and Allnutt, Joining our Controller; our CEO; our Michael our Jason Chairman Investor O'Grady, Relations Tyler, Brian our and Financial team. Wareen this Officer; Rose morning are

we report review call provided rebroadcast Trust will Web at Northern use is second being this on northerntrust.com. XXst in will Our trends webcast site that our earnings live presentation, the find on our conference available on Web today. XXth. July release press information northerntrust.com. August disclaims both The call after quarter any you our Also of only call earnings quarterly our which will financial site, today's authorized This guide through and on are Web continuing this to be accuracy site available replay the is call. of

could subject Exchange difficult Commission What forward-looking Trust's is conference report for detailed you safe course, today's and these results we actual because could results, harbor during risks for of those about that XX-K and estimates differ many future affect current which Now and statements, events that results. expectations of Actual the are from results. implied Form expressed on of realization statement. read our by uncertainties our or or with say filed statements those future include to Securities the and urge are I materially annual predict. to to may call XXXX other factors reports Northern information

again This the as ask joining the and us question to to through enable as and you time limit to today. for please session, will During queue today's question-and-answer query initial opportunity as Thank move one one us follow-up. permits. allow questions people possible related your

turn me to Michael call O'Grady. the over Let

Michael O'Grady

you, Thank Mark.

to in join welcoming everyone XXXX our call. quarter me second Let earnings

of our of levels. with our and execute second driven each strategies Management our business, our continue the Wealth Trust During goals satisfaction growth to to increasing across businesses. Institute continued quarter, year's In client successfully Northern we approach launch on further our the clients, last resonate

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stocks, focus low the volatility Index. to launch earlier sustainable maintaining world low continue quality, focusing strategy, low an on And to low MSCI strategy carbon high announced investment month, quality, We this footprint relative volatility, solutions. carbon managed the of expanding actively a the on while World

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office underscores in trust combined XX% waivers. our of strategies growth our execution the to our of acquisition us as despite headwinds front continue from solutions fees We market by to servicing growth significant favorable solutions markets Investment our finalizing invest The year-over-year money commitment and business. expand which resulted fee evidenced Paralex asset with Technology, in our

marking a staff growth leverage. both as investments points workforce of the well and build settlement new technology pension report with to as diverse, clients, positive term decade company. fee draw X% in Our for key towards we want latest employees, The our expense responsibility of social corporate expense reporting creating week, to shareholders, published as charge our about and last details future. skills growth engaged report, which value also the inclusive our progress reflected our other X of operating your a business The transparent, long we full a of to I for attention detailed CSR communities continue generated stakeholders.

as XXXX the mode, Moving providing what the respect the With means employees rate in manner. clients into low the remain of of driving interest remotely. persistent profitable on to call greater majority we're focused of continuing continue resiliency which on focusing we operate working grow to scalable effectively while our and to continuity organically second in half worldwide efficiencies we and our public navigate to on well focused beyond, as environment, we are a health environment, service continuing

quarter, to during However, expect locations. the staff third more respective of our the returning we see to

and office by second, being are by lines. time needs to to return specific Our protocols health function plans business driven and first robust location and each safety

want I professionalism for be my to express expertise and employees appreciation whose to Finally, our commitment, continues exceptional. sincere

review Now greater results let call the the Jason detail financial to for me quarter. our turn to in

Jason Tyler

Mike. you, Thank

Let earnings call. our me quarter join second Mark and XXXX Mike in welcoming you to

$XXX.X Let's for financial were $X.XX return we million. our results on was Earnings XX.X%. X. the morning, the into equity reported second net quarter, Page quarter dive income and per on starting This common of share

charge This within included expense settlement the benefits pension category. employee quarter's million $XX.X results

significant on performance on during or lag strong bottom asset lag our see XXX based trust well of are quarter quarter. and calculations. a As that fees levels, the can Page [ESOLocal] X, S&P both equity based month those had on you portion sequential performed Recall of the the and markets

during average expenses. on a quarter favorable declines. dollar was stable three on month US were and one page, unfavorable year-over-year weaker but shown with month is the to had rates which revenue on modest our our a only LIBOR reported this basis, As impact

interest X% the income sequential XX% up revenue down our Let's up move net the of income were net XX%. Page both was Expenses income with financial and In Year-over-year, and increased and second comparison, X noninterest to was revenue highlights quarter. expense review flat. X%. X% up while

million release income, credit quarter for losses $XX of net provision account, to taking reflected provision prior The Return million compared prior the and and ago a of current with prior and the X%. provision taxes reserves for the down a of the While on common the up in our $XX year in in quarter. credit a was into was equity XX.X% average XX.X% year in million release $XX quarter, from the consistent quarter.

administration of trillion Assets sequentially. XX% from ago a and under grew and custody X% year $XX.X

X% $XX.X Assets of trillion under sequentially. grew from custody a and year ago XX%

trillion, a from were $X.X XX% X% year Assets under management up sequentially. ago and

results last with Trust X. investment the representing billion servicing other starting on were revenue at look sequentially. let's up largest detail, component revenue, greater and Page X% up our and Now year from $X.X in XX% and totaled fees, of

down volumes revenue. Foreign driven brokerage sequential of noninterest The one driven $XX income within was from sequential and totaled with commissions and income and client totaled quarter, down $XX business, was and this by Other million was The management by X% later, Net the lower operating year year in higher in more year core lower ago transition from X% quarter, the X% income, down prior was performance partially our income $XXX X% the trading sequentially. decline remaining trading sequentially. well Within exchange X% $XX million sequentially. down securities down volatility. discuss one X% which the down million offset quarter, by down trading income sequentially. XX% year The in components was sequentially. interest ago lower X% as down from down and as in million second ago detail one X% and year-over-year and was I'll flat

at and look investment of the X. Page Let's on our components trust fees

sequential XX% up For Institutional currency our fees year-over-year year-over-year year-over-year translation up Both fund on benefiting benefited down total Services by year-over-year and translation. comparison currency X fees favorable $XXX the and business, sequentially. were were and fees with points. increases basis. were Favorable Corporate X% business a administration million $XXX also new a & up from year-over-year on basis X% Custody approximately markets by X% sequential million totaled C&IS driven and and the and and

in Assets Higher by million growth sequentially. down Investment clients with driven favorable trillion in benefit year-over-year XX% the key the million money XX% a the markets fee fees administration quarter up $XXX translation quarter business. C&IS up million fund in currency $XX to second business waivers Both markets new C&IS quarter. in X% and for at in sequentially. compared waivers favorable management were C&IS driver were and year-over-year offset were comparison. the under market new year-over-year partially and also Fee down by were XX% the prior both sequential and custody totaled declines, $XX and and $XX.X end, of year-over-year of

flows markets Securities primarily by X% flows. was lending decline up and million, was for were sequentially. sequentially. driven by lower net was prior growth C&IS and translation. favorable driven fees $X.X up XX% were markets, sequential under favorable partially volumes. and year-over-year spreads, The XX% down by year-over-year management driven The up X% higher favorable from trillion, growth and year-over-year offset by client currency the year The Assets $XX

year-over-year was sequential X% driven volumes. up the and While Average higher performance sequentially. up by spreads levels were collateral XX% and

$XX.X in Wealth X% Wealth markets the the to $XX.X quarter. and million sequential regions, fee waivers fee quarter our markets quarter. up in fees the from offset Across offset business. and prior business, up compared higher were growth by prior Family Global Trust by prior both Office, other Management current year impact the in the higher of partially and Moving impacted totaled compared business to year-over-year and $XXX million Within new and were were investment favorable to million were by XX% the waivers. the favorable Fee new and servicing waivers. Management

were growth while $XXX markets sequential markets. up favorable for performance The and X% client driven at our the Wealth sequentially. and was end, flows Assets Management under year-over-year management reflected year-over-year primarily quarter XX% clients by up billion favorable

year, lower sequential were in to X.XX% interest decreased margin X% compared Average average due ago. interest $XXX balances the versus the to quarter to balances declined up sequentially, income averaged basis as quarter balance were net prior down The to assets $XXX was a billion loan were and points Average in X% X% net was billion versus the net income The up lower earning XX mix primarily due within well basis year points margin each interest sequential as while average increased average a X%. shift margin quarter and deposits interest rates rate. $XX X X%. and XX% declined XX% was were the a on million assets basis up Page down interest the prior sheet. X. year. loan average quarter, On prior interest was net year. up basis, primarily and The the from while from billion averaged in Moving Net deposits prior the $XXX year. Earning the and

expense and well $XX.X the within currency X% attributable Page accruals quarter. was as to with second in salaries based associated X. unfavorably million was current impacted in the prior than growth. were driven and also X% translation. as points prior comparison by X% prior the X the employee pension represented was charge of staff. was year of $XX $XXX to down approximately totaled sequential higher retirement expense billion This X.X in equity were growth Expenses The benefits to year-over-year category. quarter prior The included Turning million and $X.X salaries. eligible including the quarter by higher incentives, flat and currency primarily Compensation sequentially. for The year-over-year to compared settlement the cash year-over-year decline primarily was with growth growth. higher and was The sequential expenses quarter's points charge due million by primarily translation up The year incentive unfavorable approximately

year legal pension medical Excluding higher one up XX% accounted million up from related decline of was benefits ago year expenses a up of quarter. year volume higher as investment from with category of and from expense and higher software sequentially. The were Occupancy higher miscellaneous real million and account and miscellaneous expense, and and the costs. year to Equipment the down primarily ago the expense nearly and of sequential half in and year-over-year down settlement prior down XX% The million The The compensation and by was reflecting Other one mutual our support medical the the The to from strategies. The ago thirds business previously from decline the staff $XX increase growth. operating nearly withholding, was and XX% offset the promotion X% one mentioned as of sequential while higher a down estate year-over-year expenses, and year-over-year X% charge, Revenue lower the two costs $XXX of and co-administration lower growth workplace included driven for partially sequentially. services up expense was expense $XX costs within $XXX was ago up employee due million engagements. was including Outside growth year year-over-year consulting X% plan X% activities, expense, expense expense. remaining year fund by due by ago prior XX% business XX% growth technical offset sequentially. up amortization was from well decline costs. timing expense, and software payroll associated included reflected partially X% sequential supplemental lower business to was related expense. services, sequentially. was servicing

to X. Turning Page

our the X common with prior flat Tier strong approach the Our equity XX% capital with standardized of remained under ratio quarter. ratios

X was the quarter. Tier from prior slightly leverage up X.X%, in ratio X.X% Our

XXX,XXX During quarter, the at we $XX cost common shares repurchased million. second a of stock of

also per share to needs. to stockholders. us. of We The expect profile and dividends to demonstrate our continues common clients cash clients’ totaling base service exceptional liquidity continue the our to they’ve solution with strong declared importance provide from million and we a capital come expertise environment support of $X.XX And the $XXX current to

each resonate our Wealth well continues Management Our of and the to marketplace. competitive Asset across Management, in positioning Asset businesses, Servicing,

your Lauren questions. today. thank I you happy second participating please be Trust's answer line? again in Mike, for will Northern to So Mark, the earnings Stephanie, quarter conference would you open call and

Operator

Our Instructions] Goldman from first [Operator with Blostein Sachs. question Alex comes

Alexander Blostein

in non-comp maybe I'll look both we I the equation. expenses. hoping, of of trends was you So that kind side Jason, just the the when And I seasonal with explained really start of all of side and the decline on almost at unpack guess the some And the sequential could comp on by effects. is compensation, comp

of pretty environment. gets in especially controlled, context the is So well comp better revenue

there should higher question things, things should non-comp line So at that expenses and the we of the about weeks second of were, about things on kind similarly, the of the expected for for there think for half? non-comp the I originally guys line And bit guess, off rest you side on enough how then is year? -- that we Are of kind the the to hold a points think of that you few ago. little conference the a of than a side previewed similar the But how equation? jumping would for

Jason Tyler

them take order. me let in So

period was think walking you this in that I hit comp it controlled. into the well

Alex, you and million, through We've for exercise. in a $XX was If that to I'll trying we of look second second of expense pretty quarter savings. the which part going of were we've what that do. question, about is the about not made a And the second. talked a Earlier At trajectory. also range in year, we're that maybe into to that some the we through of in million we which go year, part been your terms we the gotten savings plays reinvest that executed that in through to come somewhere to of at managing what this $XX that But evidences for look of the we continue did row, announcements which of thinking downward how point, January see in to headcount rest well. flat particular, saying and in that's forward in savings, to part that

investments and Now we're traditional cause of have start some to to making might business going a business of the more growth forward. I think, feel frankly, in the that the

the and services. is I think and come So be reference line looking going Alex, anticipated. item probably outside you're mean I we a there area probably that. about at, I sequentially to then -- did non-comp there's that I than got increase the to we've talk $XX side if was higher million that did

to outside makes been categories. way unpack probably line, group. that is it for service outside we've -- a for services it bit category me to thinking about the two little And sense so And the that separate

are of business lot a expenses related there. there's First, that in

about And business business so growth growth And of clearing, sub-custody, to litmus trust items of growth. third-party the can it's that the line that, are sequentially that the even related ex of we $XX waivers. fee is about half and compare see kind brokerage And that about market trend that's are the those to growth it's $XX test in the say $XX of and you saw if data. million, we to going advisory, fact half million with million that that

got expect of in had you very there that that consistent and those technology, say to we've then reinvest savings lot be of And we're that's services lift the kind up, goal should you'd increase. some experience. is category, of improving fees, we've exercises. for that well about on are that a strengthening And to data And be expect doing architecture and cost of growth exercises to so client these bad. that coming since that deliberate going markets And within there's want we related when line. technology headcount into accounts And some not our of increase a the big of back trust second business outside we're on and our half technology. And foundation

components be the kind continue investment question, consulting over the had how should we quarters. The a others actually activities front-load technology next the few there. of engagements that some we with relate of and got flat funds to should And going think your $XX at grow Now is forward? of it not All million to services outside about going to that to tech quarter. we've

be this And so component point, that at we're should flat. thinking

that's the with back even business. charges this to example business. good a in the in of about the of trend component, talked about January, deployed advisory, in for to that brokering, we thinking sub-custody, continue technology reinvest going some in to we've areas other those talked And third-party savings the how The hindsight we is to broadly

Alex Blostein

then Obviously, ratios. buyback talk bit you bit even guys to capital of their because And The I maybe have little continue that think peers a sort have around was inform just did. construct squeeze sheets peers you how we've the for a management given Street below willingness kind as sort absolute about opposed does your targets very return dynamics. quarter. to backdrop could yourselves? follow-up for go And I seen yourselves little relative you're late balance about incentive this curious and capital internal to much of another the [NBK] the How of and appetite your about that But ballooned as at vacuum. all share guys know the thinking they to for as repurchases? State repurchases of share strong sort

Jason Tyler

you factors level, firms consider a roughly about and keep to acknowledge of is have we No, as think of a repurchase. to lot repurchase got how to share aggressive other And then tied lot those then growth earnings. we deploy us two To share levels talked to you're share kind repurchase. factors. required capital to One, we've lastly, managing support RWA of to dividends, predictable capital consider which about

consistently we last net look So third -- of and five are interesting. They're years actually pre-pandemic the if about income. at dividends you at a looked

third pandemic, significantly. the RWA And the five RWA into split between our supporting coming growth and wasn't share changing other years repurchase. two Over think so that about

XX% earnings that growth that the RWA increase of actually flipped. were of to relationship though, to that share leaves retention our the between is saw So redeployed we crisis, and the the repurchase. and about Since just about is start repurchase health related XX%

little and maybe And loans balance are leads RWA. But see in a the you to still the increase roughly third, securities an that sheet in that so dividends a rise on higher.

of have half kind where That's of the to left to in about been XX% gotten redeployed narrow maintain for about we retention capital the we've lens -- the that overall So are. earnings levels. And form repurchase. of the how

of long But to we happened capital say levels we and repurchase saw that how, wouldn't crisis pre-pandemic. that in easily five have in or the that lot Now the pre-pandemic and explains that We levels term at our see that years you lower what change point, a things in this scenarios a to at trends our could of RWA different is what midst not the are is least predict. RWA could phenomenon. the share and coming change then health you light how the changed relative saw there, in

Operator

from with Our Glenn Schorr comes next Evercore question ISI.

Glenn Schorr

better, NIM, thoughts do So a start on another cadence as is of in the level to general. nonoperating here. there Flat waivers declining? to or bottoming think about might we impact just rates finally the see deposits and question from or your rate fee NII from and signs out, Just curious get here

Michael O'Grady

band level, has think at a I the High narrowed point this lot.

still then see two people, the of securities $XX you've of runoff to thirds if once billion, points. billion but about was. as people we're there's have losing XX we what as $XX there basis about Fed. only in significant think one runoff obviously, still another through component, way I $XX think impact not it so there, cash the about $XX the billion, we're And seen up. the But about got billion And note IOER in we we've at thing and And the it's portfolio, doing that's

or million be a from over that you the basis down million in much big lift. so XX not $X quarter. saw LIBOR actually to $X.X come went impact. and translates little to quarter. bit It's a continues And XX a to And that LIBOR points

at moves, things $XX quarter, point or million talking million, together million, moves we're offsetting and million a at those $X and least talking each And about million, all about they're other not $X this we're million $X $X largely. so $XX

are the in across what income. think portfolio the going interest be So where I net driver happens of the a in to we're volumes band

Glenn Schorr

floating either again the rate as curious locking have in or the portfolio? in just on side yet I'm about you if expand mix fixed your moved just could debt both lower. of you're Wonder securities just rates if and comment versus thinking

Jason Tyler

moves constantly recent we change. us cause to how on thinking and market broadly the a about No, out make the -- feel wouldn't it. looking We're just about it wouldn't cause us

X.X, we out on X.X in It bit. the we're extending went with And and conscious of X.X, we've so have from the strategically. we to step been portfolio. duration right maybe But we longer journey securities inconsistent return ALCO somewhere But about in range. and reflective a little that's more been did we've that X.X to the and anything now talked not And strategy about to what try chase mix. and where talked by are about doing at duration has in get

And so no want forecast significant up. would changes that coming I to

Operator

Our next question comes RBC. with from Gerard Cassidy

Gerard Cassidy

up the money market I follow mutual fees. fund Can on waiver

there's been could Now Reserve. fees increase Federal slight area with rates actually decline peers funds that money now mutual money the where the many in that in sense Some engaged your mutual have the Do a are market waiver pointed sequentially? that out. reverse your repo fund of market you of

Jason Tyler

changed million a early and June. And June where rate or pretty rate run run XXth we like quickly And quarter after run the actions we now get we $XX in at the a the was Yes, end about today, Fed million of million what but as in a sit to short rate And I it that of think is they of more $XX waivers. can think were happened that's for it yield quarter. if will, unless We mid-June where the -- I tell all, peaked a math were. helpful the we you first curve, significant was. whatever just of well, change $XX

there's I in XX% that terms think the over the much more have and short less said, or that's turned probably run come mutual them portfolio, much in point, going funds on market think duration rate. -- days not that so already there's in they've so money are XX average reinvested. I And because of don't at this to of Now and

that gave overnight in so benefit reflective But run post of the there the largely and facility repo And came from is yes, mid-June. IOER actions is changes. you Fed rate I a

Gerard Cassidy

a Fed. then your a as the follow-up And reserves bit you've little at about talked

what's all future, more normal at would maybe your banks the into in number $XX at sheet that tell that's normal balance once what environment number. point around we banks, central number your on comfortable lower think if is more you'd Can total a be get me the deposits you with? billion, right a be some I the

Jason Tyler

are, that's -- held right that kind it's billion just the level what there's $XXX the at there talk sure in for about in liability the lower. the we a a layer in just if while about banks, currencies is tell. Fed normal. that's billion, if -- in they've too but not what's pretty of what's on have the I $XXX at other -- forget $XX $XXX clients a -- side. held in billion, liquidity deposits now, $XXX other central interestingly to at the billion, overall lot And billion, billion, it's I'm all anticipated $XX on $XX other longer hard by are is asset And billion-ish we're than we to that it's Well, now think level. driven It's average the just deposits, deposit driving general, and post-pandemic base. would it's we And $XX And this, flat billion, in

Operator

comes Our with Brennan UBS. next Hawken from question

Brennan Hawken

about loan curious growth. Jason, the

pretty that than some was the what's some higher mix was around the well? And growth? end simply of loan that was the in so this and average, yield, that or a it as quarter. also decline there contributing function Can driving quarter that to was the loan LIBOR of maybe robust the period So was give certainly color you actually the steady suggests through

Jason Tyler

like activity more up do as types more of with lender. buckets. even being but it, been I've level a deliberate we leading I'd them in to So those for clients to an of the a the about the for is two it year an of that initiative, talked reluctant put and there's loan ongoing growth, maybe One to last a desire, And we're this explain several of to perceived with them, willing we clients. do loans months,

we've do more. clients saying so And talking to been we'll

rest the particularly portfolio, that our continued to lift what a in has to so of I And the loan relative seen industry. think, been we've

of increase big probably particularly fact Now chunk portfolio a But about that of or come of large is you come deposits a impact we've loan that that also mentioned yield. would the of episodic. an the very going basis back LIBOR both the can to And the we view and we did the points, that's and also that there's a on driver that also talked whole. obviously leading to from part an there's and it couple the that's in spikiness And is a clients element down see owners. have asset said, more as episodic as to that a spiky GFO

Brennan Hawken

in And the hold then typically the sense organic you can maybe think of business growth come this after that this there be thinking do growing? in disclosure any getting is pandemic the to growth, organic growth So what particularly pick recently did when up side, with quarter, about did on disruption? things on had Wealth how you being metrics Management for that the and were signaled any organic some all that that starting Wealth order we'll a quarter? back you guys in And about new chance assets use to at have formal metrics some all gauge those better of we consistent how more point clear so is like disclosure, are Management growth? net around And

Jason Tyler

family Well, we by and numbers splitting out region business. we're office revenue also the giving feel

items. wealth, in more growth we start maybe growth of in call organic think quarter. was you'd company the strong C&IS but questions. sequential out lift growth to can at And We portion much growth it's it's year-over-year has to in element, looking business. in bit market disclosure can good But Wealth we onboarded the then the it a and Management business been new very just a and at sequentially as that also strong a as well. year-over-year. was very like, it and help. wealth unpack fruition, I'll the good, was little C&IS with that to coming to that's deeper numbers so that and growth a your the and organic It's The more look and nonrecurring basis. seeing came from across of benefiting come also exposed there's the So for try being the the good sequentially back had lot. that's some a we're you see, business It's difficult business But on what if been

was and We out can Management items we how have those that also be so in alternatives. state Wealth Coming be trust have C&IS we It of account for those but settlements. the and in out call those and $X we business, can good the lift huge -- the had, but not that million, organic million the overall nature. it call we we'd very But a for strong say enterprise. amount quarter $X it in growth nonrecurring a of income statement,

Operator

Our next comes Wells question from Fargo with Securities. Mayo Mike

Mike Mayo

impact will seeing and and you that some the level high now. Mike, right connect it's more how your changes can digital maybe on opening very we're a concrete That's and strategy made comment you some and out the it's that's results But results comment, metrics you actually that the mentioned how ahead? helping that appreciated. impacting to

Michael O'Grady

I'll with ways Wealth Management. there, A Mike, think digital, in But I number with there's a of opening look particularly my to comments is, this in lot start to reference the it, it. at of So switching as been historically generation is more I've digital. you about model that new talked phone, call to or business on person if will, the previously either primarily, be in from a

that, was talked by generate more the essentially, from was that. that so about The the online an driven we when Now I from so how Campaign or Navigate that And key to campaign. digital do leads opportunities And it

And advertisements. with leads profile the followed for get could at fit to it with that. through some doing and a through worked it of supportive so way a thousands then traditional leads which that then was been online up, high to our level, in That traditional us be call media then have both what more in more generated was I'll

is Policy it's also our base which new significant is, to Northern And part launched point has a one is knowledge mention why then business generated Institute. digital, that our to other when your new we talk is, Resource also that's clients leads. generation the reason that but that the is while the online I'll that a we leverage essentially lot we that Center, specifically Mike, asset. referred significant I which center, The for about, Trust Tax of And

the since over doesn't new those then the again, work mean gives down going XXX,XXX with are resource which follow-up been that ultimately, And that it's to, center. clients. of had quote that. policy through you unquote from data, the So it's funnel, to good will, of if those be will them that with that, leads, us the then center, we've but that just And launched, XXX,XXX to you views then that

digital, entire new what the broadly that point, our also that's, on with then that that's was slides drive So technological mentioned digital to our I for our with just front. that efficiencies for in to model. when clients capabilities much but doing more broader capabilities business regard both And with we're your business, reference

Mike Mayo

potential, relationship? talk targets, context and on costs, you way there around efficiencies you Any And size when is about point the model, your that last feed can the unit that? you business can aspirational lowering for the of expense any improving put kind

Michael O'Grady

you know number there's expenses, but that time. it fees. through think perspective So to, And do metrics the that looked continued it a financial to that's highlighted one as to I come at and there, we've drive the that try you a to down just trust is which going financial level tangible. we've where to see you're and make And more high of over

is on in one that asset first So is Matrix our in investments focused platform, our agency. big of transfer servicing

us. clients’ And experience, efficiencies plan call is first, is business the because And but our to going so will better clients investment. because right, asset also clients, that we're yes, behalf significant capabilities. manager provide for funding with the make doing a of call that other, business that it it, then I'll the much it, the that's I’ll mechanism for generating of on Essentially to of course, yield new for it,

Operator

question comes Chubak next Steven Wolfe Research. from with Our

Steven Chubak

could environment. know you current growth With the loan our some you I was base. client you regards provide some was strong driving the I I what's But increased appetite of could and across just Jason, in the demand speak outlook, to just to -- hoping hoping talked about really a to up half given the much factor the context the remarks? trajectory headwind, for drove implications seasonality, in maybe this step your the earlier that there's in NII tax of around how you some cited securities whether had was just the seasonality and a offset back sufficient yield that

Jason Tyler

for There's not all, deposits the the loan the but lot loans. of side a seasonality us on some not at on on

and I either the about and but is dollar maybe about want amount come of very so how about there And layer less to seasonality a to just some selling large high avoid happy something very, public more loans can avoid in we're asset, imagine a increase sale you the assets. those needs. isn't meaningful incredible their help either. also extremely on earlier was spikiness our clients talking that's of say, large there driving to to clients And on But we what of borrow quality sometimes them us large will NII that's very pricing are large they're to liquidity

volume so over it -- in than will in time. levels don't it probably levels think that think I I NII more And out sticks

Steven Chubak

the as surprisingly sufficient relatively a excess I of And continued or just liquidity saw funds expand. back that thinking growth incremental about parked to a buffer, the not very was I Fed? excess securities healthy sense to get securities? you're those to managing want step for has been as of the some And have on get into some sequentially. my whether You tepid liquidity hoping a to also reserves excess sense as how you up at have NII. follow-up to

Jason Tyler

park increase of we're do clients and to the work we sheet now HQLA saying, if significant with we've of wanted resource the But we sheet flexibility. this our balance our of for incredibly plenty $XX like billion engaging clients to strategic to from non-HQLA, wanted with whether talked about got being we size the receptive the balance on to $X wanted to were We've organizations whether billion a calls not driver room the got can always balance right being Again, move don't point, we sheet? we We've feel at clients. from lot a phone there it's for we to and saying there increases. us

the gives of non-HQLA billions looking leverage X that that we of in asset classes dollars in also that in. at look based Tier and of of in bring profile you how we're X.X of that plenty and we we an room and to HQLA room think risk assets on across would deploy as it, on the we itself additional indication of terms could different have then have what there's and between to of I include and see market at tens invest move we attractive the of

Operator

question Stanley. next Morgan with Our Graseck comes from Betsy

Betsy Graseck

thinking it questions digitization on how that initiatives ETF launch the particular, as I asset over or the rollout, some and years about of Is client through initiative? recently, you've likely the is should to next in this to we couple earnings the impact? of sense of a announced had can Maybe the a European the in time couple you acquisition give servicing initiative. be of us type come alternative timing, the

Jason Tyler

moving And we've the income example, assets, billion both in in and mostly comes we've but AUM needle take, the perspective. for not it Europe got ESG. from in business term, Europe important is ETF, to ESG statement European to related in launches. long fund strategically term Headline nice short a when And dealing overall got $XXX with

a they to Management us And clients good with about incremental to Asset of so provide clients important thinking our for for and working what can that's long do example what's term. the determine resources business

want trillion that mover add. think that is Asset know, have trillion really the business of needle about assets AUM think anything you but anything also in add. and not to something to you the that's in Mike, we important. Management be you strategically You to don't $X.X going to size $X.X I want in if a

Michael O'Grady

comments address digitalization fact the to Betsy, we that then efficiencies often is And one, first on my the the it the into and fits it. from that get other driver

the entire there that through much learning announced asset more to we will, ability processed to order digitize for process. and what in use them, assets machine is be can the on they alternative the if data you side then efficiently so essentially So alternative capture all the

so efficiency side. on something will productivity that us and And the benefit

Betsy Graseck

pension just involved Could you're I of frozen what that believe then you nicely. a OCIO of as wave equity that We're in and like is looking put a opportunity the for you're And separately, how hands you are a sense to here? get markets to providers. business. about know hearing plans into positioned seems obviously, up us are give lot of

Jason Tyler

little that I'm think I leader a was right, in our pension OCIO we're we one last in business if point business were years And on about way. You're is within space. particularly a and the in -- you the but stale North numbers, that America it mean, good few the plans,

good And spot OCIO very falls the sophistic We've on client DP the very expertise, particularly so well. our into of got base, sweet it market. side

that Now flip as things side sometimes who, lot of you. portfolios, to against their do they clients a is get can with derisk and work other it you

strategically very billion And with us talented about fees. think team. as is so in clients I for don't needle and move going quality extremely where big we've to that it a business done But very again $X high the a well that's on wave a time over important

their for be about very we're outsourcing plans, well there's positioned. to firms think I thinking And DB so money there when in motion

Michael O'Grady

anybody. And through biggest think we and I well foundations if but continue want the same about that cover Jason we outsource to where relationships through but have as as that and some read investment will it, to exposure as well connections you going whether the because have Betsy, you just Wealth Management that you do the think not of through believe be have activity the might for number broadly of think, what also particularly business a we are we we're into that in would there. as we OCIO model, decision and part just again, positioned office as they talked would that making said trend, add, because practice about, And I the of addition our say, large about, Jason family we of that

Betsy Graseck

forward? any talked just we should dividend the dividend. going And the question but we buyback, in on be earlier the squeeze expecting one know changes I about then to

Jason Tyler

the income consistently XX% to over Well, of if that which right if falls goofy a it is of dividend to where this And range. of look but year, last look it's in you the particularly is kind you middle pretty and XX% quarter consistent. XX% XX% at very been falls, pre-XXXX, few years, net our

interestingly, interesting And or RWA, do something at way down returns. a we ratio so think people to also raise an -- would which combine think nothing flag up there and payout don't relative I And look lot. it's we that attractive. dividends with thinking very a is We about to

also you that and consistency the look And to it different own, we peers to on relative we well can at, really how again of at and of look it ratio lenses. those peers of payout, level is relative both and payout basis we our pick terms to so as a but score your on returns the both earnings, RWA, relative the percent which to in gets

Operator

comes question Our from with Jefferies. Ken Usdin next

Ken Usdin

just shareholder ratios a combined further. capital I It on I capital want make you on sure that mentioned that. return. act like the point much seems you're clear versus focusing on balancing maintaining to Just on follow-up RWA with that as just

absolute to maybe this historically, some others maybe but think mix post of Northern your Is want bit you absolute where to understand regard? inorganic that you it's or but changed, usage know guys But has how have of levels. don't to formal are. on give for I think in us I wondering might have I you might lived a the little Just we thinks like relative Trust changed, about live has keep difference about usage targets. So where capital you I the aside just the pandemic how opportunities? thought want mix of

Michael O'Grady

you I factors the on and hit time. over change those think do how key

operating while environment. the said that, So feel pandemic to may is your that point, about criteria you the you how and

at be. operating So we think determining to where looking need we're we environment, always that

And about And but we partner, think about of the the but place think to second, all very, we certainly partner I the just vis-a-vis a third, there long that they lens part to right where The a the today it's to we that's then types regulatory that and a that that's around and instead, the the that good very make Ken, capitalization. be a around not and financial will, process through sure and feel are have time. CCAR we we another and would amongst absolute, need they ratios, perspective. when that and is trust, be Trust -- environments but that, it I mean has from pitch, around that strong capital mentioned a say, around ratios have for again, in you we're part you strength I'll considerations have of is Northern relative financial call that which be very everything. will know whole also the capabilities as all is if all the be been of clients

that's that down. as is over change why So point their that up can And criteria our important. time to levels your peers and move capital

Ken Usdin

It would smaller become room room like plus to a plus capacity got sheet we you've on as seem for the of just seems balance of saw growth, obviously, buyback proportion, it for but all has factors, that plenty quarter? me of just mix this the those buybacks,

Michael O'Grady

and you gone intentional, will, would talked clients about Yes, through, get it we a where in six we've Jason quarters, last broader opportunity through as just the not just in as support that increase went saw but if credit did. clients really to meaningful prospects Largely But relationships. Jason the be to RWA.

a change that went time years as these the did things at and the Does to in the he saw Obviously, stay tend six know. the a over quarters more don't opportunity we business going as forward? meaningful five speaking, same said, previous in we generally way. so RWA that time. up, it in redeploy But better to And than in that

Ken Usdin

into on on low the though do growth, housing balance in vehicles? deposit question the of contemplate even which or you stickier low has off-balance it to comfortable all one at remained mentioned. you're you sheet, as some returns have move environment sheet Are trying just And relatively guys off getting rate you

Jason Tyler

best we clients. what's for money And the very in clients US, there prevalence be It's is money $XXX in funds, to billion more. attractive time, same some got a saying good. on to geographic. some much the the we've like really our balance like set mutual start Obviously, performance where European some market clients with sheet the market At the in of instance is there's We and of And that funds. family. sheet more to use the can balance it use of funds want

it or in another a offer to for sheets bank what in one about have just for in them the depositors. are nudge. attractive can environments. We We one X.X% sophisticated to have room good where that this conversations and in we we and I room with not at That that think think that Don't we're us. really we on balance can inflated, position us sometimes can things, value operating with position we've but a said, nudge platform got the point environment sense where about all a makes different lead on another look versus both sides, clients offerings both about this clients good Again, need to lot can to proposition gives to be in do large able think pricing. most sides. of way

Operator

comes Our with Juneja next from JPMorgan. question Vivek

Vivek Juneja

attention. me the go question into everybody's since caught and back have capital let Just dividends the buybacks

the up imply you're versus a is that ratio that CETX would that your you the it you're you do and so peers that of of gap to some it balance sheet, peers. focused Can we the versus what do, basis is focused you're -- weighted it assumptions on is it us that in we watch points, assets, Is keeping comment on give risk make, on above the versus gap of Following is -- your we XXX peers, be maintain to think that about sort mind? how should whatever sense XX? you what as in constructs it trying

Jason Tyler

the is relative Tier litmus -- we test at morning time, wouldn't as I credit we to strength that risk, that's framework are but There's looking other other not just want a quality always ago. walked of environment in want we we're at that. just things that interest about not absolute people And engaged also not be, like few regulatory no the lot duration on so as where particular, and balance strategically. ways And to minutes in same this we about times like. mentioned a thinking then around our just at, Mike We're through at We're and look call. at there CETX. Board then making internally, ratio to conversations terms how unilaterally might the sheet and and And well level about sheet the this what we've remind even where talked an and with of the the thinking well there's only to and take have balance also just -- this this few what good decision that that's the really topic a leverage factors X and and exposures that all rate we've look I we gap say --

But it's many people growth give what's sense know we're are that floor that’s ways think And can is I earnings that to RWA of reinvestment expected trying the some so we we're miss future that the and potential just opportunities at. and And where we’ve building let earnings set also tempting And opportunity so earnings. are the theoretically think like. grow factors there's drag, in that's to look what grow look a the isn't should a to okay, I that and future that looking well, RWA and you are there kind if going? got what’s say,

RWA so think some thinking growth sometimes long toward of can things redeploy pull over And reflective the we about share that repurchase, is business base the But have. way of at as that in looking and I those dividends the the earnings. better run to narrative ways

think would had significant Now then come talked that say that period. to again, down. we've could in the not away RWA in down. come If we something going about mentioning it Even is growth continue goes a it's is increase to year increase, RWA the this to that loan a RWA

try so table do when want there's not earnings, factors on talk to so elements. these just things where about But specific CETX. we that to got a certainly each about of gap and in are with going around of redeployment sit we where are And the predict things but broader it's and where than go thinking we've many

Vivek Juneja

expenses, us from do that you environment big expenses, an to other trajectory what at you be. that to seeing talk look to your inflationary able other Are the you you expect operating the that? about the the as standpoint? what told offset do Any in And are overall any color given you impact inflation, on

Jason Tyler

I to say to word you looking think that? Are in we operative see there. what missed the any -- we did changes

Vivek Juneja

are inflation, you in rise expenses, your that? -- what the to do [creep] being able impacting how Jason? inflation are you are From if And to you offset so,

Jason Tyler

about earlier weren't issues and detail dealing sure address just everybody on make in another overall expenses on in and The of showing not what price ways, were just an unit that's inflation It technology the In And cost in And then business. inflation that in cost mean component a there. of we on it to of there. is well services, the significant about And areas it. other that talked some business. the having. unit cost, is every as we're in was doing talking doing made experience business the levels I the just the up question, of areas. in inflation outside understands it's we expenses. we increased comments different how is is talking just increase to pressure the see some at about the management We the it talent is firm and certainly It's with different across inflation we but cost oriented business. but some see of and inflation it

So in the organization. up it's ways showing different across

Michael O'Grady

to ways. context, add, you In a think number would on you manufacturing to a question said, I your a context, would not way the consumer? that's relates we're if That if our it operating how model on asset set lot about end we level. up. to the a you And pricing about is Jason's be, the that to point, in we're side Vivek, do, think pass manufacturing generally cost of seeing of just what it inflation the able in are

on So you're of also levels, to that AUC that what through extent the expect that to you as as capturing we the we increase. interest impact AUM, extent horizon there's there. inflation to some well and would be is where rates going well, know you to those that And it then on inflation the to up would rates are the extent and go the believe that

Operator

Deutsche Bank. with question comes Brian Bedell next Our from

Brian Bedell

and to have but questions been second come the my of just in seasonal Most expenses answered, maybe on the half. asked back

in software the least You gave bump at expense. Typically, that's you over the see years. on seasonal the been reliable service pretty outside color and a last expense equipment three us

don't could if other just that XQ? Trust whether comment if but to be for Northern to you it dynamic? going a I And in expenses, open is just we know factor on So maybe expect see then it's the missed that I similar

Jason Tyler

probably should an earlier. Thanks for bringing likely increase Yes, there. software, be and equipment that referenced the to have up there's

one place, you see normal-ish increase start slightly lot some the even -- and you're come you want in areas there it's capital a to of in in the expenses should there, depreciation maybe above up there As some in you or that the terms -- to the up it's there. a year. where that? line could it's but are Mike, I that tends we happening we over of equipment just put be And then different of of right, items. -- take two software. dynamics tick point what's up, to, expenses that But we And a And that of think tick to not or remainder that about some

Michael O'Grady

be will It in the third quarter…

Jason Tyler

not look XXXX, there's to second the but you could through line, third that's at you promotional about $XX it. to quarter. million if mean And XXXX I it though up looked at step even business to there from was all $XX million seasonality

numbers to And everybody about be that's for marked way the be are year, people that's one wondered pandemic as lower. to normal people be important came because whether thinking think about would Speakers]. the it should the as a year, of we throughout [Multiple more would think away. it into take Last those probably decent of I thing numbers a So

Brian Bedell

just ESG, back then And that, just question. maybe two on to part

mentioned you -- You that Mike, you launched. think, the vector ESG I score mentioned

more there I charging not if think or is, offering? asset guess you with for you for increasingly management clients And investment managers the on then are the And I'm are is architecture something the on built platform? I from overall that's are that service mistaken. invest separately own side, owners, question that seeing or that other through meeting social your investment demand in you to your wealth into responsibility? wealth the open

Michael O'Grady

Yes, fronts the Brian, we are demand, about. talked that you of the kind seeing across

let So it. more a to give me detail just little

our that. clients, reporting to support the all, with and they ESG, your asset need of in First as on servicing they to point, analytics invest data more

one that Management, Spencer area. it are with ESG base in the in quarter of I open that and our we an And them. And is model have of an for much example. Marks so in as service their & providing earlier, And Wealth investable serviced that had was through the we architecture as NTAM. with is increasing we Wealth type the service, Management, much as And to just mentioned examples of that client assets mandate interested then that absolutely,

that benefit and so is in addition own seen it fulfilling And side the on in as well. of we've the And seeing NTAM NTAM. its that on demand or institutional

year are so $XXX on XX% to from a up put assets And just is numbers that, NTAM at our over which billion, about ESG ago. and now some

that healthy area us a focus as growth of area in for So an it’s and company.

Brian Bedell

Thank color. great That’s Okay. you.

Operator

the Thank session. joining for you Q&A today's concludes This you. concludes today's call. Thank presentation. This

You may now disconnect.

Northern Trust (NTRS) 21 Jul 212021 Q2 Earnings call transcript