Northern Trust at the 2026 BofA Securities Financial Services Conference: Asset Managment. Growth, Innovation, & Strategic Priorities

Key Takeaways

Mgmt raised mid-term margin targets (33%+), citing structurally improved biz mix and robust productivity levers. AI/automation already driving cost efficiencies, with more upside expected. Capital allocation remains conservative but open to selective inorganic growth, esp. in distribution and alternatives.

1. Asset Mgmt.: Growth, Product Innovation, Strategic Focus

• Scale & Positioning:
  • NTAM in "$1T club" w/ $1.4T AUM; ~40% active.
  • Alts (50 South Cap.): PE, private credit, secondaries, co-invest, HFoF; 25-yr track record.
  • Quant Strategies: $50B AUM, leveraging AI/alt. data; recent NL-based AI/data team acquisition.
  • Global Reach: 16 locations; strong in US, UK, Australia (superannuation), growing in ME (notably KSA).
• Product & Vehicle Innovation:
  • ETFs:
    • NTAM doubling down; double-digit growth expected; 11 new ETFs launched late '25 (laddered FI, tax-advantaged).
    • "Need to speed up launches, but also be more innovative."
  • Custom SMAs:
    • Top 3, $150B AUM, >$5B net new in '25; focus on bespoke, tax-advantaged, long/short.
  • Tokenization:
    • First tokenized share class of treasury-only fund (Feb '26); use case: clients pledging tokenized money funds as collateral for derivatives—"24/7, 365 trading."
    • Asset Servicing infra being built chain-agnostic for tokenized assets.
• Growth Outlook:
  • Alts, ETFs, Custom SMAs all targeted for double-digit growth.
  • "2025 achievements carry over into 2026."
  • Diversifying away from macro-sensitive liquidity products.

2. Tech, AI, & Productivity Initiatives

• Tech Stack:
  • "One of the best tech stacks"—Aladdin core, cloud, seamless data integration.
  • Enables customization at scale & margin preservation.
• AI Adoption:
  • Copilot rolled out to all; 150+ AI use cases in backlog, prioritizing highest prod./rev. impact.
  • Asset Servicing: AI for doc digitization, RFP automation, client prospecting, email/fax processing.
  • Internal AI engine ("MT Byron") for custom workflow automation.
  • "AI already impacting productivity, but use cases just begun—upside is enormous."
• Productivity Levers:
  • Workforce: Span of control ("eight is great"), shifting roles to lower-cost locations, reducing contractors.
  • Vendor Mgmt.: Vendor consolidation, centralized procurement.
  • Process Automation: AI-driven automation, esp. in Asset Servicing.

3. Financial Targets, Biz Mix, Margin Structure

• Margin Targets:
  • Med.-term pre-tax margin target raised to 33% (3-5 yr horizon); aim for this as a "floor" through cycles.
  • Biz mix shifting to higher-margin Wealth & Asset Mgmt.; new Asset Servicing deals at/above target margin.
  • "Want to maintain healthy margin (33%) through all cycles."
• Expense & Productivity Discipline:
  • Planning starts w/ productivity targets, not expense growth; all investments dynamically allocated based on prod. KPIs.
  • Contingency plans for expense mgmt. if rev. weakens; investments categorized as mandatory/discretionary for rapid adjustment.

4. Balance Sheet, NII/NIM, Rate Sensitivity

• NII/NIM Outlook:
  • 2026 guide assumes 2 rate cuts; NIM not pressured unless rates fall to "twos."
  • Deposit pricing actions in mid/late '25; deposit growth pipeline strong.
  • Securities book duration ~1.5 yrs; BS duration <1 yr—flexibility to reprice into higher yields as assets roll off.
  • "Feel good about 1H; 2H depends on macro."
• Risks:
  • Main NII risks: more rate cuts than expected or weaker deposit growth, but neither seen as headwind currently.

5. Wealth Mgmt. & Global Family Office