Northern Trust Corporation

Northern Trust reported Q2 2026 net income of $792.2 million, EPS of $4.23, ROCE of 25.9%, pre-tax income of $1.1 billion, and a pre-tax margin of 39.6%. Excluding notable items, EPS increased 40% year over year and total revenue increased 13% year over year; trust fees rose 10%, NII rose 11%, and capital markets revenues rose 69%. Reported notable items included a nearly $525 million pre-tax Visa gain, a $74 million pre-tax loss tied to securities portfolio repositioning, a $62 million pre-tax software charge, a $51 million pre-tax severance charge, and a $33 million pre-tax compensation expense. The company returned $499 million to common shareholders in the quarter and more than $1 billion year to date. For full year 2026, management now expects NII to grow 9%-10% year over year, total revenue to grow 9%-10% year over year, and operating leverage of about 400 bps excluding notable items; the full-year effective tax rate is still expected to be about 26%-26.5%.

Mike O'Grady framed the quarter as evidence that the One Northern Trust strategy is working, citing an eighth consecutive quarter of positive organic fee growth, strong execution, and significant operating leverage. He highlighted growth in wealth, asset servicing, and asset management, with emphasis on alternatives, digital lead generation, and AI as an 'augmented intelligence' tool meant to enhance service, expertise, and integrity rather than replace human judgment. His tone was constructive and confident, but he also noted the macro backdrop remains dynamic and that the firm is focused on execution, disciplined expense management, and selective investment.

Dave Fox walked through the hard numbers and emphasized that the quarter’s reported results were boosted by notable items but that underlying trends remained strong. He cited net income of $792.2 million, EPS of $4.23, pre-tax income of $1.1 billion, 39.6% pre-tax margin, CET1 of 12.2%, Tier 1 leverage of 7.6%, and $499 million returned to shareholders, with a 10% dividend increase approved by the board. On guidance, he raised full-year NII to 9%-10% growth and total revenue to 9%-10% growth, while holding the tax rate outlook at 26%-26.5% and expecting about 400 bps of full-year operating leverage excluding notable items. He also said the securities portfolio repositioning should add about $30-plus million to annual NII.

Analysts focused on second-half operating leverage, deposit stickiness, wealth fee seasonality, capital deployment after the Visa gain, and asset servicing margins. Management said the 400 bps full-year leverage target reflects expected normalization in FX, capital markets, securities lending, and deposits, and that some Q2 deposit strength was idiosyncratic and not expected to persist. On wealth, they pointed to lagged GFO billing, alternative valuations, and seasonal items as reasons fees can diverge from AUM in a given quarter, but said Q3 should look better sequentially. On the Visa proceeds, management said the capital can be used for reinvestment, RWA deployment, M&A if attractive, or buybacks, with the order of those priorities being meaningful; they also clarified that the software charge came from a subset of a fund administration infrastructure project that no longer met ROI thresholds.