- Key insight: Northern Trust's gains were fueled by proceeds from capital raises flowing onto its balance sheet and into money market funds.
- Expert quote: "When there is greater capital raising, those dollars need to go somewhere." — Michael O'Grady, CEO of Northern Trust
- Forward look: Northern Trust Chief Financial Officer David Fox cautioned that elevated foreign-exchange trading, securities lending, capital-markets activity and deposit inflows are unlikely to repeat cleanly in the second half of the year.
Northern Trust reported a strong second-quarter performance, riding the same wave of IPO activity and capital markets strength that lifted its custody-bank peers earlier this earnings season.
Virtually all of the big U.S. banks
Chief Financial Officer David Fox attributed the growth to "elevated demand" for equities and "robust borrowing of Asia Pacific and IPO-related securities," among other factors.
The firm benefited from the active IPO market, in addition to revenue from wealth management and stock loan services, according to Northern Trust CEO Michael O'Grady,
"When there is greater capital raising, those dollars need to go somewhere," O'Grady said.
He explained that capital-raising proceeds initially flow into Northern Trust's balance sheet and money market funds, and once new issues are trading, "the ability to potentially short the stocks or any other hedging activity" around them boosts the securities lending business, both in volume and in spread.
In short, O'Grady said the upsides from IPO activity and "favorable market conditions" have "cut across the business."
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Mike Mayo, an analyst at Wells Fargo, inquired on Wednesday's call whether Northern Trust is at a "competitive disadvantage" to investment banks because it does not offer IPOs to high-net-worth clients.
Fox conceded that Northern Trust is "set up differently" than investment banks and does not get the same referral opportunities from "very robust IPO markets and capital markets activity." Still, he said, the Chicago-based company benefited from working with executives from "notable recent offerings" on how they can manage their wealth.
"Being a holistic provider, there were things that we could do with them when it came to banking that were valuable to them," Fox said. "We benefit as their company goes public, and some of that wealth gets monetized. So it's still a positive for us."
Like his fellow executives, Fox cautioned that this quarter's strength leaned on factors that are unlikely to repeat cleanly — including elevated foreign-exchange trading, securities lending, and capital-markets activity, plus deposits that "arrived" unexpectedly and will not carry into the latter half of the year.
Fox described large institutional deposit inflows during the first and second quarters of 2026 — including one tied to a fund parking cash temporarily in the midst of a liquidation— as idiosyncratic. He said he does not expect those balances to persist.
Northern Trust's strong performance in the second quarter mirrored those of peers
Northern Trust reported an 88% jump in profit on its second-quarter earnings call, helped largely by a one-time gain tied to a Visa share exchange offer. Its net income grew to more than $792 million, or $4.23 per share, beating consensus forecasts handily. Excluding notable items, earnings per share increased 40%, buoyed by fee growth and healthy capital markets activity.
