Northern Trust Corporation

Good day and welcome to the Northern Trust Corporation fourth quarter 2022 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jennifer Childs. Please go ahead, ma'am.

Thank you, Marjorie. Good morning, everyone, and welcome to Northern Trust Corporation's fourth quarter 2022 earnings conference call. Joining me on our call this morning are Mike O'Grady, our chairman and CEO, Jason Tyler, our chief financial officer, Laura and Alnutt, our controller, and Mark Betty, Briar Rose, and Grace Higgins from our investor relations team. Our fourth quarter earnings press release and financial trends report are both available on our website at northerntrust.com. Also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This January 19th call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be made available on our website through February 18th. 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 13 of the accompanying presentation, which will apply to our commentary on this call. 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.

Thank you, Jennifer. Let me join in welcoming you to our fourth quarter 2022 earnings call. I'd like to start by thanking our teams across the company for their strong execution throughout the year in the face of significant global political and market turmoil. It is our partners' unwavering focus on supporting our clients in uncertain and volatile times like these that truly differentiates Northern Trust. For the full year, revenue was up 5%, including trust fee growth of 2%, and our return on average common equity was 12.7%. Excluding the impact of $303 million in charges detailed in the presentation, revenue for the full year grew 8%, and our return on equity was 14.9%. Fourth quarter results reflected trends that were consistent with those we saw through the first three quarters of the year. Namely, on a year-over-year basis, weaker markets pressured our trust fees, but this was more than offset by strong increases in net interest income. Within our wealth management business, assets under management and advisory fees grew sequentially in the fourth quarter. Total fees declined, however, due to the lagged effect of markets, strategic price reductions in our index funds, and shifts in client allocations out of liquidity products. Overall, new business generation and wealth management was healthy in 2022. However, we did see some deceleration in the second half of the year as market activity waned. We continue to execute on our growth strategy and wealth management, including increasing the size and effectiveness of our sales force, expanding our digital marketing efforts, and leveraging the differentiated capabilities of the Northern Trust Institute. In asset management, assets under management were up sequentially, but fees declined due to the outflows we experienced in our liquidity and index products as a result of the impact of both weaker markets and clients seeking alternatives. We did see solid increases in alternative funds throughout the year, including year-over-year growth of more than 20% in the fourth quarter. Our ETF complex also continued to perform well, with year-over-year organic growth of 12%. Our product launches during the year focused on ESG capabilities, including three new ESG funds in the fourth quarter. And within asset servicing, we delivered a solid finish to the year. We saw healthy momentum throughout the year with our Whole Office offering, as investment managers are increasingly considering outsourced solutions in the face of continued margin pressure and the challenging macroeconomic environment. Whole Office integrates our global asset servicing platform with innovative partners facilitating access to new technologies, services, and solutions. One recent client win offers an insight into what differentiates us in the marketplace. After an exhaustive RFP process during which we conducted a complete review of a large UK-based asset manager's front-to-back operating model, we were selected to provide a holistic, full suite of core asset servicing, capital markets, and data and analytics products and services. This client was particularly impressed with our ability to digitalize their investment process to maximize the value of their data. We learned that this client chose us because of our combination of market-leading tools and first-rate client service. We also saw continued strong demand for our integrated trading solutions offering throughout both the quarter and the year. In 2022, the number of clients on the platform increased 20% year-over-year to nearly 100. Our one-but-not transition backlog that we spoke to you about last quarter started to transition in during the fourth quarter, and our pipeline remains strong. Expense growth continued to be elevated in the quarter, reflecting investments in people and technology to strengthen our resiliency, advance our digital modernization efforts, and drive growth in the business. All critical initiatives, but the level of growth is too high. Some of the charges we announced today reflect early steps we are taking to bring down the trajectory to better align with the current operating environment and create capacity for profitable growth. To underscore our commitment, we recently launched a dedicated office of productivity to reinforce our approach to driving efficiencies throughout the company. Jason will provide more color in his prepared remarks. In closing, as we begin 2023, we remain well positioned to navigate the ongoing macroeconomic and market uncertainty from a position of strength. Our focus is on driving organic growth, improving our productivity, and continuing to bolster our foundation. I'll now turn the call over to Jason.