Northern Trust Corporation

Good day and welcome to the Northern Trust Corporation First Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jennifer Child, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to Northern Trust Corporation's First Quarter 2026 Earnings Conference Call. Joining me on our call this morning is Michael Grady, our chairman and CEO, Dave Fox, our chief financial officer, John Landers, our controller, and Steve Carroll and Trey Stegeman from our investor relations team. Our first 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 April 21st 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 May 21st. 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 in the back 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 first quarter 2026 earnings call. We're off to a strong start in 2026. reflecting our ability to capitalize on a constructive market and rate environment while continuing to advance our One Northern Trust strategic priorities. Against this backdrop, first quarter trust fees increased 11%, net interest income grew 15%, and total revenue rose 14%, all on a year-over-year basis. While continuing to invest in key growth initiatives, we generated more than 700 basis points of positive operating leverage. driving our pre-tax margin up nearly 500 basis points to 32% and fueling EPS growth of 43%. Return on average common equity reached 17.4%, which is at the higher end of our new medium-term target range, and we returned $510 million to shareholders, representing a total payout ratio of 100%. This included $359 million in share repurchases in the first quarter, contributing to a 5% reduction in share count as compared to the previous year. These results confirm that our One Northern Trust strategy is driving steady improvement in organic growth, consistent efficiency gains, and resiliency in a volatile environment. AI is increasingly embedded in how we operate. enabling our teams to deliver more value with greater consistency and speed. Moving forward, we are accelerating its deployment in ways that will further advance our strategy and financial objectives. We're applying AI not only to drive incremental efficiency, but also to scale knowledge and expertise while maintaining the resilience, governance, and client confidence that define our franchise. Our AI strategy is anchored in three outcomes, hyper-personalization, AI-generated alpha, and infinite scalability. Together, these outcomes focus investment where it matters the most, enhancing the client experience, improving decision quality, and increasing operating leverage. Hyper-personalization allows us to move toward highly contextual, tailored engagement. A tangible example is our OneWealth Assistant, which integrates the Northern Trust Institute insights directly into workflows. With future enhancements, this will equip our wealth management advisors with real-time, client-specific context, connecting market insights, portfolio considerations, and client objectives to support more informed, high-touch conversations with speed at scale. AI-generated alpha focuses on strengthening investment outcomes through faster synthesis of information and generating deeper insights. Within asset management, AI-assisted research and product construction tools are enabling teams to process significantly larger structured and unstructured datasets, identify patterns more quickly, and test scenarios more efficiently. This enhances both investment decision-making and operational execution, supporting stronger client outcomes without adding complexity. Infinite scalability is a key driver of operating leverage. By digitizing work through agents, we further disconnect the relationship between growth and staffing, allowing for consistent execution across value chains and supporting stronger controls, all of which enable us to scale while maintaining rigorous risk management. With that backdrop, let me now turn to business performance for the quarter, beginning with wealth management. Momentum from last year carried into the first quarter, as improved organic growth underpinned by both strong advisory and product fees, drove low double-digit trust fee growth. The regions delivered another quarter of solid results, with trust fee growth accelerating to 11%, supported by especially robust performance in the central region. We made good progress implementing various client acquisition initiatives across talent, centers of influence, and digital channels. Talent is our most important growth driver. we're advancing plans to increase revenue-generating roles by high single-digit percentages by year-end. This includes significant increases in critical producer roles. Centers of influence, which include attorneys, accountants, and other professionals, are a vital referral source, driving nearly 25% of our new business activity. In the first quarter, we introduced a more robust and structured outreach framework to engage key centers of influence. including hiring a senior leader to accelerate this initiative, targeting a 10% increase in opportunities in 2026. Digital channels also continue to be an increasingly important source of new business. To boost the transition from interest to conversion, we're enhancing data integration, lead qualification, and personalization at scale. Notably, the opportunities originating from digital channels in the first quarter grew by nearly 50% year over year. Within our global family office business, strength in international markets and investment management fees drove healthy performance. We also continued to scale family office solutions with early traction and client wins across several new markets. Expanding our investment offerings, particularly within alternatives, remains an important focus area. We had seven funds in the market during the first quarter, up from five in the previous quarter. Looking ahead, we will continue to build out our alternatives platform with a number of new alternative investment funds and strategies planned for launch later this year with the goal of increasing ALTS fundraising by 25%. These offerings, spanning areas such as venture capital, co-investments, and secondary funds, will broaden access and flexibility for clients seeking diversified sources of return while maintaining our disciplined approach to portfolio construction and manager selection. Collectively, these initiatives are strengthening our ability to generate repeatable, scalable growth while enhancing both the client and employee experience. Turning to asset servicing. The business delivered another quarter of solid organic growth and strengthened profitability, driven by disciplined execution of our strategic priorities. Trust fee growth of 10%, coupled with significant NII and capital markets activity, fueled over 700 basis points of year-over-year pre-tax margin expansion. Our differentiated service model, deep institutional expertise, and strength in supporting complex client needs continues to resonate. particularly with global asset owners. During the quarter, we secured nine new mandates across foundations, endowments, and healthcare institutions, including four not-for-profit healthcare systems. As a result, we now serve three-quarters of the top 50 healthcare systems in the United States. Within alternatives, we remain a market leader, with assets under administration approaching $1 trillion across hedge funds, private capital, and semi-liquid vehicles. Demand for scalable, institutional-grade services remains strong, supported by more than a dozen wins during the quarter. These included IGNIO's planned second quarter launch of a new private equity fund focusing on energy infrastructure in Europe, further expanding our global relationship across Europe, Australia, and the U.S. We also announced an expansion of our CLO middle office services, delivering a unified operational and compliance framework that supports the full lifecycle of CLOs as interest in this offering continues to grow. Strong momentum in capital markets continued in the first quarter, as elevated volatility and heightened client activity drove 34% growth, including another quarter of robust FX and core brokerage fees. We're also seeing continued interest in our digital asset strategy, particularly in custody, reporting, and servicing of tokenized assets as tokenization moves towards scale. During the quarter, we onboarded five new clients providing custody and other services for tokenized real-world assets, U.S. stablecoins, European money market funds, and carbon credits. Turning to asset management, NTAM made good progress in the first quarter. with strength across liquidity, alternatives and equities, positioning the business well to meet its 2026 targets. Within liquidity, we extended our streak to 13 consecutive quarters of positive flows with associated AUM increasing to $350 billion. Importantly, we continue to diversify our funding sources across global liquidity vehicles and third party platforms while gaining overall market share. We also launched a tokenized share class for our NIF Treasury Instruments portfolio during the quarter, marking Northern Trust's entry into the digital asset marketplace. By applying tokenization to institutional grade liquidity strategies, we're offering clients a modern digital first way to access money market investments while maintaining our high standards for risk management and service. Within equities, ETF momentum remains strong. with a fourth consecutive quarter of positive flows. This was supported by the successful launch of the Northern Trust U.S. Equity ETF, our latest active ETF designed to deliver tax-efficient outcomes for investors. We also launched our first Saudi Arabia Equity Index Strategy with $1 billion in client capital, reflecting our expanded presence and strategic partnerships in the Middle East. NTAM continued to broaden its alternatives capabilities through active fundraising, which included three new sizable custom solutions and advisory mandates spanning secondaries, private credit, and private equity. Earlier in the quarter, we announced an important milestone in our third-party distribution strategy. Our institutional quality direct indexing capabilities became available on InvestNet's platform. the largest independent TAMP, which supports approximately one-third of all financial advisors in the U.S. This will enable advisors to access our diverse lineup of equity strategies, empowering them to personalize portfolios at scale while managing tax outcomes. Finally, reflecting the strength of our active investment platform and the expertise of our investment professionals, NTAM was recognized by Barron's as a top fund family in 2025. ranking fourth overall and fifth in general equity out of 46 fund families. To wrap up, as we enter the second quarter, our priorities are clear and we remain focused on disciplined execution. With that, I'll turn it over to Dave to walk through our first quarter financial results.