Northern Trust (NASDAQ:NTRS) reported third-quarter 2026 net income of $642.9 million, or $3.40 per share, as higher trust fees, net interest income and capital markets revenue supported double-digit revenue growth excluding notable items.
Chairman and CEO Mike O’Grady said the company generated “more than 600 basis points of positive operating leverage” during the quarter as revenue, excluding notable items, increased 11% from a year earlier while expenses rose 5%. Pre-tax income increased 21% year over year and earnings per share rose 40%, according to O’Grady.
Reported pre-tax income was $804.2 million and the pre-tax margin was 34.9%. Return on average common equity was 20.1%.
Revenue Growth and Notable Items
Chief Financial Officer Dave Fox said results included a $48.7 million pre-tax gain in other operating income. That figure included a $34 million gain from the sale of the guardianship services business and a $14.7 million gain from Northern Trust’s participation in the second Visa exchange offer. The items collectively increased net income by about $36.6 million.
Excluding notable items, total revenue was flat from the second quarter and up 11% from the prior-year period. Trust, investment and other servicing fees totaled $1.4 billion, rising 2% sequentially and 8% year over year, supported by favorable markets and organic fee growth across the company’s three business units.
Net interest income on a fully taxable equivalent basis was $679 million, down 1% from the prior quarter but up 14% from a year earlier. The sequential decline reflected lower deposit balances, which more than offset higher securities yields and the benefit of a late second-quarter securities repositioning, Fox said. Net interest margin increased 2 basis points sequentially to 1.83%.
Other non-interest income, excluding notable items, rose 19% year over year. Fox said foreign exchange trading and securities commission and trading revenue remained strong despite moderation in market volatility from second-quarter levels.
Northern Trust ended the quarter with $20 trillion in assets under custody and administration, up 9% year over year, and $2 trillion in assets under management, up 11% from a year earlier.
Business Segment Performance
Wealth Management trust, investment and other servicing fees increased 9% year over year to $612 million, while segment assets under management rose 9% to $536 billion. The unit produced $392 million of pre-tax income and a 41% pre-tax margin.
O’Grady said Global Family Office fees increased 16% from a year earlier, with asset flows reaching their strongest level of 2026. Clients with at least $100 million in assets continued to outpace the broader wealth portfolio in fee and assets-under-management growth, he said.
Asset Servicing fees rose 8% year over year to $762 million, while assets under custody and administration increased 9% to $18.5 trillion. The segment earned $405 million before taxes, producing a 30% pre-tax margin. Fox said the year-over-year improvement reflected business mix and a supportive macroeconomic environment.
Custody and fund administration fees were flat sequentially at $512 million, as lagged benefits from equity markets were offset by lower transaction activity. Securities lending income rose 38% from a year earlier to $29 million, supported by borrowing demand in U.S. equities, Asia-Pacific markets and IPO-related securities.
The company also highlighted an agreement with UBS to expand its fund administration relationship, subject to regulatory approvals. Northern Trust said the mandate extension will include additional funds over the next two-plus years, including former Credit Suisse funds in Switzerland and Luxembourg, and increase UBS assets serviced by more than 50%.
In Asset Management, O’Grady said Northern Trust Asset Management posted its sixth consecutive quarter of positive ETF flows and launched 10 ETFs. The company plans to convert six Northern Funds representing approximately $33 billion of assets into ETFs in the first quarter of 2027.
Technology, Digital Assets and Expenses
O’Grady said the company is using artificial intelligence to improve client service and scalability. He said AI-enabled digitization in alternative servicing has nearly doubled straight-through processing, while client action plan agents save relationship managers two to three hours for each client memo.
Northern Trust also launched the Northern Institutional Funds Stablecoin Cash Reserves Portfolio, a money market fund intended to help stablecoin issuers meet reserve requirements with short-term U.S. government assets. The company earlier introduced a tokenized share class of its Treasury Instruments Portfolio.
Non-interest expense was $1.5 billion, down 9% sequentially and up 5% year over year. Excluding notable items, expenses were flat from the second quarter and up 5% from a year earlier, primarily reflecting technology, compensation and benefits, and account servicing costs. The expense-to-trust-fee ratio improved to less than 109%, compared with 112% a year earlier.
Capital, Outlook and CFO Transition
Northern Trust’s Common Equity Tier 1 ratio under the standardized approach was 12.4% at quarter-end, up 20 basis points from the prior quarter. The company returned $514.2 million to common shareholders during the quarter through $161.9 million of common dividends and $352.3 million of stock repurchases. Year-to-date capital returns exceeded $1.5 billion.
Fox said the company expects fourth-quarter net interest income to increase 8% to 9% from a year earlier and total revenue to rise 6% to 7%, assuming relatively stable markets and interest rates. Northern Trust expects positive operating leverage in the fourth quarter and at least 500 basis points of operating leverage for the full year.
Fox also said Northern Trust expects its effective tax rate to be closer to 25% in the fourth quarter and going forward, after the third-quarter rate of 19.3% reflected an updated assessment of international tax effects and greater expected use of U.S. foreign tax credits.
O’Grady announced that Fox plans to retire and will remain chief financial officer through the first quarter of 2027 to support a transition. O’Grady said the company will consider internal and external candidates for the role.
About Northern Trust (NASDAQ:NTRS)
Northern Trust Corporation (NASDAQ:NTRS) is a financial services company that provides wealth management, asset servicing, asset management and banking services. The company serves institutional investors, corporations, financial institutions, high-net-worth individuals and families.
Its offerings include custody and administration of investment assets, fund accounting, securities lending, foreign exchange, treasury services, investment management, trust and estate services, private banking and wealth planning.
