...Thank you all. Concluding day two of our Global Financial Services Conference. Very pleased to have Northern Trust with us. From the company, Jason Tyler, Chief Financial Officer. Jason, thank you. Thanks, Jason. Congrats on the conference. Busy. A lot going on. I'm gonna sleep well. I was hoping maybe we could start out by running through, you know, what you're seeing in each of the main business units before kind of jumping into financials. So maybe start with asset servicing first. You know, our sense is you're kind of shifting the sales focus to opportunities that require, you know, lower levels of incremental cost by emphasizing approaches with multiple points of connectivity, as well as bundling sales. It's something you kind of talked about, I think, more forcefully in those earnings calls. Maybe just kind of expand upon that. Yeah. Yeah, we've grown this business quickly, historically, and it's a business that you can grow quickly, but we also wanted to make sure we were exhibiting excellent discipline in the incremental profitability. And so we took a deliberate approach to say, we're actually gonna be more disciplined and more focused on scalable opportunities. And that, practically speaking, you know, you and I have talked about this. A good example of an opportunity in that business is you go into a client, and they say, "We've got middle office, back office." They're doing that with 50 people, and we say, "Well, we might be able to do that with 40 people, and over time, change the mix and control the cost a little bit better with our efficiencies and economies of scale," but you leave yourself exposed to inflation if things go up or even whatever happens with asset values, so we want to make sure we've got more margin of safety and are focused on more scalable products. And so that's led to us bidding differently, a little bit less often, and definitely with better margin of safety in the opportunity set that we're looking at. So I guess that leads to the question, if you're bidding on less stuff and maybe being a bit more disciplined on pricing, does that kind of more focused approach lead to a lower—a slower rate of growth? It might, but in fact, so far this year, the asset servicing is still seeing good organic growth, not where they'd like to be from a target perspective, but good. We don't have to do as well on the top line. If we're more disciplined on the scalability, we'll still get the incremental margin coming in that we have historically. It's about higher quality, and the business has had. It's impressive to see the speed with which that's been reflected, and we're still getting good opportunities, and our win rate can also be stronger if we're more focused. We feel good about the long-term prospects, even with this more deliberate, more focused scalability effort. One of the things you talked about, you mentioned almost during the earnings call, you highlighted the kind of client loss in Q2. You talked about an upcoming client loss in Q3. Anything common themes there? Anything we should be worried about? You may be able to size the impact of this, and just more color there. Yeah. Well, cumulatively, between those two opportunities, it's run rate. It'll be about $10 million a quarter, starting in the third quarter when they're both reflected, but it's nothing long term. The reason that we mentioned on the second quarter call is that it's something that's large, we get good visibility into it, and we've known about these for quarters or a year and a half, and which tells us also, not knowing about any others in the future, it's not like we see this as a trend at this point. We don't have any in the pipeline to comment on at this point. Got it. And then maybe on wealth management, you know, so 9% year-over-year growth in trust fees in the second quarter, just opened your New York office four blocks away from here. Yep. But, you know, if you look, net new business was relatively soft in the region. Family office still continues to do well. You know, advisory fees are doing well, but, you know, lower product utilization. Maybe just provide us an overall update on the business. Yeah, you depicted it the right way. The family office continues to grow well, and that's been multiple years that business has been growing at a high rate, well above our target. So it's definitely been a bright spot, not just for wealth, but for the entire company. You know, we talked about the fact that we've got about 35% of the Forbes 400 as clients in that group. And there are other dynamics. From a dollar perspective, we're similar or even higher in terms of some connectivity, but the takeaway is, we're doing very well at the upper end of the market. In the regions, it's split. You alluded to the fact that the product utilization, and that's episodic, that'll come and go based on investment performance, client preference. That's ebbed. It's been a little bit lower over the last couple of years. We look at it as more of a litmus test for how the business is doing. We're looking more at the advisory fees, and, you know, that's a core element of what our clients are asking us to do in helping manage, oversee, and advise assets for them. That's been better, positive organic growth thus far this year. Still not at the point where we'd like to see from our overall financial model target. Got it. And then maybe on asset management, we've seen kind of mixed trends there. Positive liquidity flows for six straight quarters, strong performance with active fixed income. You've been raising assets in the private equity space. Still, index flows have been soft. You know, last year, you brought a new head of asset management from BlackRock. Maybe just update on your thoughts and kind of growth opportunities you're most excited about. Yeah, let me start at the end. Daniel Gamba came in from BlackRock last year, and he's been a super energetic guy and absolute industry expert and knows the space so well. And he quickly embraced the relationship that we have internally and the connectivity of dealing with asset servicing and wealth management. And so they're doing a lot of calling activity together. He's encouraging that for his teams and just thinking about how to bring things together. So even as they're bidding on new pieces of business, they're thinking about that collaboratively with asset servicing to ensure the clients and prospects know that there's benefits from dealing with Northern. And so very, and his leadership has been, it's been great. In the core product areas, you're right, the liquidity business for us is great. It's not the most fun thing to talk about, but our 2a-7 fund business is great, and we're close to $300 billion. The investment performance is outstanding, and so we feel really good about that. And so there's some good opportunities for us to continue growing that area. Still want to get that organically at a higher rate than what it's been, though. Got it. And then before jumping into the financials, you know, one of the things that stood out to me was you and Mike both used the word resiliency. We counted 10 times on the second quarter earnings call, you know, referring to investments you intend to make. And it just kind of brings a bunch of questions to mind. Is it something the regulator suggested? Are you behind peers? And just maybe talk to that, and then, you know, where is this money going? What are you trying to accomplish? Yeah, and it's a great topic. It doesn't necessarily resonate as well for people, but for us, first of all, it is, in our minds, about modernizing and adding resiliency to where we are from an operations platform perspective. And to answer your question, nothing happened, but you can also see the kind of clients are more demanding about this. They're asking questions about resiliency, and do you have redundancies, and what's your uptime in different platforms and technologies? And of course, I mean, you look at regulators, they want to ensure that the system is safe and sound. And we've got to remind people, we're a Category Two institution, and so the expectations for Northern are very, very high in this area. So we want to make sure we don't fall behind. There are some areas where we need to catch up, but overall, this is about making sure we don't fall behind. I think the Visa monetization in particular gave us an opportunity to say, "Look, we're not gonna be overly aggressive in looking at acquisitions. We're not going to. There's a pace with which we can do additional stock buybacks." What we can do is invest and get some of the infrastructure work done faster. If we can get that done in 2024 or early 2025, it sets us up much better going forward. But I was just in reading how other banks are talking about their investments. In some ways, you can take off the name, and it's the exact same conversation that firms are having. And that's part of why I think a lot of it is client-driven. Our clients are now asking the same questions to us all. We've got to make sure we respond to that. Helpful. Maybe we'll put up the first ARS question after you, Jason. Don't worry, but I hope maybe we shift gears and flip to the financials and maybe run through the income statement. Maybe start with deposits. I think they're up in the second quarter, and better than I would have expected. You know, deposit costs increased slightly. Appeared to be a handful of large, thinly priced deposits. Maybe talk to kind of what you're seeing this quarter, and then assuming the Fed cuts 25 basis points next week, just how you expect deposits to behave, and maybe if you can talk about kind of the asset servicing deposits and then the wealth management deposits would be helpful. Yeah. So first, on levels, we usually see a dip around this time of year, but we've instead seen deposits holding well, a little better than we anticipated. And so overall, you know, no significant change to what we were anticipating to note quantitatively at this point, but definitely better than we had definitely better than we anticipated, particularly given a predicted August lull. And then in terms of the Fed actions, we saw other currencies move already, and we saw really high betas, which is good on the way down. And so I think if the Fed going in, you know, soon, presumably, it'll be we feel it's going to be similar. We'll be able to see high ability to pass that along, the reductions. And so we feel like the betas will be particularly high. The institutional space, we think, very high. You know, a lot of that business is priced off of central bank minus, and in the wealth segment, it's similar, that it's on determined rate cards on a spread to central bank. But we expect that we might have to not pass on as much of the cost reduction we might have, that might hurt in spread a little bit, but not a lot. And then, of course, you've got to remember that, you know, 15%, 16%, 17% of the deposit base is non-interest bearing, and so there's some spread squeeze there as well. Got it. And then, you know, one of the surprises, I guess, not from Northern, but from others last quarter, was particularly the wire houses, increasing pricing to advisory account fee products, and a lot of that's facing kind of lawsuits and regulatory actions. I know Northern kind of has a different approach. Maybe kind of expand on kind of what you do and then, you know, maybe kind of what you think, what others are doing and how that all plays out. Yeah, I'll try to stay on top of it. But yeah, we've got three different platforms. We've got the banking platform, which is where obviously virtually all the deposits are. Second, our trust account business, and that's where the $400 billion in AUM is. The cash component of that, it all goes to money market funds. None of that. Where Where we have discretion across the organization, we are not sweeping any discretionary or any advised dollars onto our balance sheet. And then the third area in the brokerage business in particular, which is where this issue arose for other institutions, is brokerage advisory accounts. Again, nowhere in Northern Trust are we sweeping or moving client cash to our balance sheet. It all goes to money market funds. Well said. May I put up the next ARS question? I think these are the wrong ones. Anyway, Jason, you previously pointed to kind of three NII flat, but I think when you kind of gave that guidance, you were talking about much lower deposits and mid seasonality offset by some security repricing. As we fast forward today, it sounds like deposits are behaving a little bit better than expected. Security repricing, I'll let you tell me, but maybe a little bit worse than expected. Just how do you kind of think about near-term NII? Yeah. No quantitative update from what we said, and there's nothing outside a range of what we would've wanted people to interpret coming out, which is we felt it would be flattish. But again, it is important to note, at this point in a quarter, deposit level is a little better than we anticipated. Got it. And I guess as we kind of to think about 2025, maybe talk to some of the puts and takes in net interest income and just, you know, given maybe the forward curve, which I'll admit, could change tomorrow. Right. Yeah. In general, as we look at it, first of all, it's a little early for us to give too much commentary, but presuming rates come down, NII should come down for us, but it's just difficult to tell. There could be offsets with volume. From a deposit perspective, there's an argument that with rates lower, clients prioritize convenience more of how they deal with their deposits, and so that might mean you do better from a deposit volume perspective, but ultimately, we also have to look at what's happening with the industry and with our peers, and I've always said we are a follower when it comes to spread. We protect deposit volumes very aggressively. We think we want to be a liquidity provider for our clients. We're somewhat agnostic, whether it's in money market funds, the balance sheet, treasuries, but we want those assets inside Northern Trust, and so to the extent we have to adjust, we will. But, and again, agnostic about where they go. But, and that's why it's hard for us to tell further out, because I think the market's going to have a decision to make with rates coming down, not one or two cuts, but if we get seven, eight, nine, then we'll see what happens strategically in the marketplace, and we'll respond to it. Got it. And then on the fee income side, you talked earlier about the impact of lost business. You know, the markets, you know, with some volatility in here, it seems like FX volumes of volatility have been up. Just maybe expand on kind of what you're seeing within the fee income area. Yeah, I'll separate it in a couple of areas. One, on FX, I mean, we definitely saw volatility up higher. That didn't translate from our perspective. It's not huge dollars, but it didn't lead to us to any type of meaningful increase in FX. And again, those are small, smallish dollar amounts. In the much larger trust fee area, the business is continuing to perform well, and so that's been good. It's been solid. Nothing to update in terms of guidance or anything, but definitely feel good about how the business is doing. Got it, and then maybe on expenses. You know, the start of the year, you were thinking expense growth 5% or less. You know, growth will close in the 6s in the first half of the year, probably make 5% or less challenging. I think you're talking about expenses up 1% in the third quarter. Just maybe how you're thinking about the full year. I know at one point you were talking about positive fee leverage in the third quarter and kind of overall positive leverage in the fourth, but maybe kind of update us on your expectations. Yeah. In the last couple of years, we've. I feel like we've accomplished a lot, and a lot of it, a lot of the accomplishment, I think historically, we've particularly in asset servicing, we come into a year anticipating growth in the business, and we would hire in advance of that. And that usually worked out for us because you've seen the growth that we had in the business. But as we became, as we become more disciplined about what types of business to bid on and it being more scalable, we, the first thing we did was say, "That's not the way we're going to handle headcount in the business." And so the last 18 months or so, you see a very different trajectory in headcount for Northern Trust, much flatter than it has been historically. So that in 2023, you see it in early 2024. And that's—you look at that relative to history, it's a, that's a meaningful shift that we've had in headcount growth, which is very strong. So we came into this year feeling very good about where we're going to be from an expense perspective. Then first quarter hits, and you see equity markets up 11%. And by the way, that's great, but because even though we're gonna have expenses up. Our revenue is gonna be up by much more than that in terms of dollars. But if you just—if we're isolating expense trajectory, it—it increased expenses more than we were anticipating for the first quarter. Then you go into the second quarter, Visa gets done. We decide to take a more aggressive approach in investing of what we knew were gonna be future expenses to address modernization, infrastructure, resiliency. Let's get some of those things done faster, and so all for what we think are good reasons, expense growth has been higher than the 5%, but it also does set us up better going forward for better expense growth into 2025. Got it. Maybe go to the next ARS question. I think I missed one. You could skip this one. Let's go to the next one, about 2025 expenses. So you mentioned kind of accelerating some of this investment spend. You also did some pension repositioning. There's been some severance of late. You front-loaded some donations with this Visa gain. So it, you know, it sounds like, you know, all that combined should, you know, over time, lower the expense growth rate of the company. I guess, as you kind of put together the 2025 budget, you know, can you get back to that 5%? Can you do better than 5%? Just how are you thinking about that? Is it gonna be- Yeah ... you know, return to positive operating leverage, where you're going to point this to? It just, it's because expenses have kind of been- Yeah ... you know, something that's certainly weighed on the story, for sure. No, we should get back to and do better than five in 2025. You know, it should be we should be somewhere below five, and a lot of that is we have set ourselves up well. We have pulled some things forward. Now, I should give all the caveats. If we see equity markets up, and I hope they are, by 20%, then that'll be different, and we'll see elevated expenses again, and we'll be happy about that. But if you take the markets in a normalized way, based on what we see now, we should be able to do better than that next year. And again, back to what has been the journey of expenses for us, it's been good for us to get the headcount story in the right shape. Technology is another element that we've got to, we've got to make sure we're working that down over time. It's been elevated. I think about expenses in terms of three different buckets. I think about them in terms of what's labor cost, what's technology cost, and what's everything else. And labor, I feel like we can, we can have below 5%. I think we can all the way down. I think we can get that at a 4% rate. In general, that's, that's hard to do. It doesn't leave you a lot of room for headcount growth, but I think we can do that. And then if you think about everything else, we've got to use productivity there to ensure that we're well below even that 4%. That should be in the 3% or, or lower. That's travel, occupancy, things like that. That leaves that middle big chunk of technology, which has been elevated for the last several years as we're trying to get all this stuff down, and we know that's going to be elevated for a while, but we're continuing to bring that down every year, and we've got line of sight to see that being at a better level. Got it. And maybe looking a bit further out, I know in the past you kind of used to talk about this 105%-110% expense to trust fee ratio. I think you're 116% in the second quarter. I mean, do you think you can get to this 105%-110% range? And, you know, if so, when? Yeah. Yeah. Absolutely, we can get there. And it's important for us because that reflects the earnings power of the company. When that ratio is really high, we're heavily reliant on net interest income to drive profits for the company. When that ratio is low, then if we have decent NII, then we can be really profitable. The reason that it went up was largely because of inflation, and we had expenses go up, but the revenue increase wasn't trust fees. It was NII, and that's why we were able to maintain decent profitability, good returns and decent profitability, even though expenses and trust fees went to the mid-120 s, where we do not like to see it. But you have to earn your way down on that by being very disciplined on expenses, growing the business, and hopefully getting some help from the markets. And all those things are happening, and so that's why you've seen it reduce. And so if we get more years of being disciplined on expenses, help from the markets, decent organic growth, we'll be in good shape there. But it. The answer to your question is, it depends on largely, if you think about the math, it depends a lot on the equity markets. And that's why it's just difficult to say when will it occur, but there's nothing in the model to say we can't get to that point again. And so we're not, at this point, definitely not coming off of that target. Got it, and then I usually don't have to talk to you about credit quality, but we do read the 10-Qs, and we do see watchlist loans jump 30%. I know it's off a low base, but I just had to ask. Yeah. Yeah. Somebody said, "30%? ... It's, I hear you. But anything, anything to note? Yeah. You have, obviously, a very strong customer base. Yeah. No, there's a couple, a very small number of loans in that space we're not worried about. I mean, over 90% of the loan book is guaranteed. The office component's less than 3% of the book, and the credit quality in general, you think about, look at nonperformers, not just those, but you look at nonperformers, and it's lower than I can remember in following this company for 15+ years. And so the loan book is in very good shape as we look at it today. That is not to say that we are not constructively paranoid about what could happen in credit at any given point in time. So we're not waving the all clear, but at the same time, there's nothing today in the book that gives us a sense that the quality of the book in general has changed. We feel excellent about it. Yeah. Maybe throw up the next ARS question while I ask mine. But you did pick up, you know, the CET1 ratio, CET1 ratio in the second quarter, went up, like, 120 basis points, obviously aided by the Visa gain. So you talked about, you know, maybe, you know, accelerating some spend, but that's still a lot of capital- It is. in an environment where, you know, I don't think banks are expecting a ton of balance sheet growth. You know, you stepped up the buyback a little bit, but clearly capacity to do more. Just maybe talk in terms of how you're thinking about capital. Yeah. A couple things. One, you know, just earlier today, you and I were talking before we sat down about, you know, comments from regulators, and you see it doesn't make sense to jump too aggressively in front of that and then have to retrace. Now, that said, we obviously have a lot of capital, and the more we learn, the more confidence we get that there's nothing that is going to be dramatically different for us. Also, the way things are breaking, it seems to be in our favor, and that if things are more benevolent or less malevolent in terms of operational risk, and we benefit from a less blunt instrument on credit, it favors us. And so, you know, that doesn't mean that RWA won't go up. We anticipate, in general, we talked about a 5%-15% increase. We're. I I think it's safe to do a decent estimate to say, take the top and the bottom end of that range down 5%. So that means it's up, but to your point, we're in a great position from capital perspectives, great position from a liquidity perspective. I mean, if you look at us from a liquidity lens, a third of the balance sheet is in cash, a third is in loans, a third is in securities. The security, the duration of the security is less than two years. The duration on the loans is less than a year. So the balance sheet is short, it's high, the loan quality is strong, and the securities book is strong. So at this point, it's about saying, "Okay, what is the right pace of share repurchase?" And ensuring we stay not just competitive, not just good on an absolute basis, but good on a relative basis when we look at capital and liquidity. Our clients care about that. Yeah. I guess the last question we asked the audience was, you know, what's holding you back from sounding more constructive on Northern? And it looks like you had expense management and competitive pressures and pricing. We talked a bit about expenses. We haven't really talked about the competitive environment and pricing pressures. Maybe that's something you could address before I let you kind of maybe circle back on expenses and try and get your message across. Yeah. Thanks. So, on, you know, the pricing pressures in general, I'll separate it across the businesses, and maybe I'll do some. I'll start with asset management. I mean, as this audience knows better than any, there are pricing pressures in asset management, and that is not... For us, it's been okay. But every year, we come into it anticipating that we're going to give up some pricing to stay competitive. And again, it's not huge dollars. If you think about our asset management business, you know, in general, it's, you know, at $1.5 trillion, and so it's over $1 billion in revenue on a $7 billion base, but it matters. And then, if you look at the wealth management business and you separate it, you know, a portion of the business and product is exposed to the asset management dynamics I mentioned. But on the advisory component of our wealth management business, the fees have held in, the fee rates have held in extremely well, and I think our clients value the advice that we give, and we haven't had pressures there. And in asset servicing, every year, we budget for some level of compression. That level has not changed over time. And so I, there are pressures in the business. I don't feel that they're increasing relative to history. And then from a competitive pressure perspective, and I'll just talk about wealth. Everybody obviously is talking about wanting to be. Everybody wants to do more in wealth management, and particularly at the high end, where we're focused. We are more and more focused on the upper end of the market, and we're going to continue to be there. Yeah, we see a lot of pressure, a lot of commentary, a lot of marketing to that client base, but our client relationships are excellent. You know, back to what I mentioned earlier, 35% of the Forbes 400, and so you just get a sense we're highly embedded there. The higher you go in client tier, I think the more concentrated the market share gets.... And so the competitive set, it narrows a lot when you're dealing not with $2 million and $5 million accounts, but you get up to 100, 200, 500. And for the billionaires, they're very selective and there are a few firms that do very well there, and we're definitely one of them. We've been in the family office business, we started over 40 years ago. And so, the level of technology, the dedicated resources. We talk a lot about the tax expertise across wealth, and there's something called an ACTEC Fellow. You've heard us talk about this, the American College of Trust and Estate Counsel, and we've got 15-20 ACTEC Fellows in Northern Trust. So across the country, when clients want dedicated experience on trust planning or taxes, they're able to get the best in the industry coming to talk to them. That, that's still differentiated. It, it resonates very, very well. Got it. And then- You want to talk about the 38.9%? If you want to. We've spent some time on it, but- Yeah I feel like not all of it resonated. I think we're coming off of a year in 2022, where it was nine. In 2023, it was below six. It was a five. We came into this year thinking it was going to be somewhat below five, and it looks unlikely that we're going to be able to deliver on that. Again, for reasons that we feel okay about, but we, we've got to show that we can deliver expense growth at lower than what we have. And the good news, I feel better than I have in years that we're going to be able to do that. We've done the hard work. We put the things in place to be able to do that. We're going to get through what we're investing right now, and I think 2025 is going to be... it's going to be a better year. I guess the kind of step-up cost and resiliency spend, I mean, how many quarters do you think that lasts? Yeah, it's sometime mid-2025, give or take, but it'll be a few more quarters. But at that point, I can see that some of that spend, and I feel it now, it is elevated, and we've just got to get through this, get some of this work done, and get to the point where this acceleration is actually in implementation mode, and then it's much easier to, and less expensive to manage going forward. And I guess, you know, given kind of asset servicing, asset management, and wealth management, it seems like just the ability to further leverage technology and AI, it seems like it'd be right for that. Kind of where- Yeah Are you in that journey? Yeah. We use it in different areas of the business now, but we're dedicating resources to it. And a part of this spend that we're embarking upon is to ensure that we're getting automation in the business. And so it's not just AI, but it's general. The first step of that is automation, and we're doing that in asset servicing. We're doing it in wealth management, where we can take complex trust documents, we're starting to digitize those, have those read in that capacity, deliver the information to our planning, our trust advisors in ways that makes them highly efficient. And the same thing happening, we're starting to do processes, control functions in much more of an automated way in asset servicing. So it's showing up already. Helpful. As we kind of, you know, wind down the clock and, you know, maybe need to conclude, you know, a year from now, when you're kind of back at this conference, you know, I mean, what are some of the themes you're going to be talking about? And, you know, as you kind of embark on the 2025 budget, you know, anything kind of jumping out to you to take the first cut? Yeah. The three things we've been talking about, it's organic growth, it's productivity, resiliency. And that's what everything we talk about internally comes back to one of those three things. And so you start out with organic growth. I mean, it's wealth management. We've got to make sure that we are instituting programs and initiatives to grow that business better. It's scalable. We're doing well. We've got the brand, the reputation, the clients to do very well in that segment, and we can invest there and do better. And the organic growth component of asset servicing is evidencing that we're living this scalability dynamic, and early signs are great on that. And then in asset management, getting a lot of the initiatives that Daniel is putting in place from infancy into place, and so feel good about it. When you talk about productivity, we're trying to get at least 2% productivity a year. At least 2%. Really should be closer to 3%, but at least 2%. We've got dedicated resources to that and ensuring that we're willing to do to make the hard decisions to make that happen. This year, we're above that target for the first half of this year, and it's, it's high-quality items that we've identified, plus the back half of this year, some of the, the, some of the workforce discussions that you, that you referenced earlier, will start to come into play, and so we'll get even more savings there. Productivity is becoming more ingrained in the company as part of our culture. And then the third is this concept of, call it modernization and resiliency, but making sure that we can stand up to the biggest peers in the world, saying that we're just as strong as they are in terms of having redundancies, resiliency in place and uptime, and being able to deliver for clients what they want. So I think those are the things that we should talk about again next year. Any initial thoughts on the budget? No. Fair enough. On that note, please join me in thanking Jason for his time today.