Northern Trust's Q2 2026 EPS nearly doubled to $4.23 on a $525M Visa share-exchange gain; excluding one-offs, revenue rose ~12% against ~5% cost growth as fees, FX trading and net interest income all climbed.
Net interest income
$676M
+10.6% YoY
Net interest margin
1.79%
Net income
$792M
+88.0% YoY
Diluted EPS
$4.23
+98.6% YoY
CET1 capital ratio
12.2%
Net interest margin (NIM): what a bank earns on its loans and securities minus what it pays for deposits and borrowing, as a share of those assets. Efficiency ratio: operating costs per dollar of revenue (lower is better). Net charge-off (NCO) ratio: loans written off as unrecoverable, net of recoveries, as a share of average loans. CET1: the bank's core capital cushion against losses, as a share of risk-weighted assets.
Overview: a one-off Visa gain doubled EPS, but the underlying quarter was strong too
Northern Trust earned $792.2 million, or $4.23 per diluted share, in the second quarter of 2026, up from $421.3 million and $2.13 a year earlier. Most of that jump came from one item: a $525.4 million pre-tax gain from swapping part of its old Visa stake in Visa's second Class B exchange offer. That gain sits alongside smaller one-offs going the other way: a $73.9 million loss from selling bonds to reshape its securities portfolio, a $61.5 million write-off of software, $51.0 million of severance and a $33.1 million one-time stock grant to employees.
Taken together, Northern Trust's own figures put those items at +$342.0 million after tax on the income side and −$109.9 million after tax on the expense side, a net boost of about $232 million, or roughly $1.25 per share. Management says EPS excluding these notable items rose 40%. So the reported 99% EPS increase overstates the trend, but a 40% rise with the one-offs removed is still very strong for a custody bank. The drivers were higher fees from rising markets, much higher trading activity, and net interest income up by double digits while day-to-day costs rose only about 5%.
Northern Trust is a trust bank. Most of its revenue comes from fees for holding, administering and managing other people's money, not from lending. It serves pension funds, fund managers and wealthy families, so fee income and the size of client assets matter as much as the loan book.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Total revenue (GAAP)
$2,698.0M
$1,997.9M
+35.0%
Trust, investment & other servicing fees
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Northern Trust does not report an efficiency ratio, ROTCE or a net charge-off ratio in this filing, so they are left out rather than estimated. The company's headline NII and margin are on a "fully taxable equivalent" (FTE) basis, which grosses up tax-exempt interest: $683.1M and 1.81%, versus 1.69% a year ago.
Stripping out the one-offs
The pre-tax figures below come straight from the filing. The "ex-items" columns are simple arithmetic on them.
Reported
Notable items
Ex-items
Q2 2025
Ex-items YoY
Revenue
$2,698.0M
+$451.5M
$2,246.5M
$1,997.9M
+12.4%
Noninterest expense
$1,638.6M
+$145.6M
$1,493.0M
$1,416.6M
+5.4%
Pre-tax income
$1,064.7M
+$305.9M
$758.8M
$564.8M
+34.3%
Underlying revenue grew about 12% while underlying costs grew about 5%. That gap is the "more than 700 basis points of operating leverage" the CEO highlighted, and it is the real story of the quarter. Operating leverage means revenue growing faster than expenses, so each extra dollar of revenue adds more to profit.
The two biggest one-offs are worth understanding:
Visa gain ($525.4M). Northern Trust has long held Visa Class B shares from the old card-network ownership structure. They carry transfer restrictions and are held at a carrying value of zero. In May 2026 it swapped all its Class B-2 shares, receiving half in Visa Class C shares and half in new Class B-3 shares; the exchange produced the $525.4M gain. According to the 10-Q, the remaining B-3 shares are still on the books at zero but were worth roughly $529.7 million at June 30's Visa price, though the filing notes this "does not represent fair value" given the restrictions. That is a possible source of a similar gain in a future period, not a recurring earnings stream.
Bond sale loss ($73.9M). The company sold available-for-sale securities "in conjunction with a repositioning of the portfolio." Banks usually do this to sell older, low-yielding bonds and reinvest at current higher yields: they take a one-time loss now to earn more interest later. The filing doesn't give a payback period; the loss was taken in the same quarter as the Visa gain, which more than absorbed it.
Fees: markets did most of the work, and trading surged
Trust, investment and other servicing fees are Northern Trust's largest revenue line. They rose 9.6% to $1,349.5 million. These fees are mostly charged as a percentage of client assets, so they rise and fall with markets. The filing attributes the increase mainly to "favorable markets, net client inflows, and net new business."
Asset Servicing fees (custody and fund administration for institutions) rose 9% to $757.4M. Custody and fund administration was up 9% and investment management up 10%. Securities lending rose 46% to $29.4M on "higher trading volumes and spreads."
Wealth Management fees rose 10% to $592.1M, with Private Wealth up 11% "primarily due to favorable markets." Global Family Office fees fell 5% from Q1 because of "lower asset values on a lagged quarter basis." Some fees are priced on asset values from one quarter earlier, so market moves reach revenue with a delay.
Client assets: assets under custody/administration (money Northern Trust holds and services but doesn't invest) reached $20.0 trillion, up 11%. Assets under management (money it actively invests) reached $1.97 trillion, up 16%. The custody figure's growth was held back by "unfavorable currency translation," so the underlying gain from markets was somewhat larger than 11%.
Trading-related income grew much faster than fees. Foreign exchange trading income rose 92% to $97.1M on "higher trading volumes driven by client activity and market volatility, particularly in Asia-Pacific markets." Security commissions and trading rose 40% to $55.6M. Both depend on volatility, so treat them as the least durable part of the growth.
Net interest income: lower funding costs, not more lending
Net interest income is what the bank earns on its loans and securities minus what it pays depositors and lenders. It rose 10.6% to $675.5M. The net interest margin (that income as a share of the assets earning it) rose to 1.79% from 1.68%. The mechanism shows up in the income statement: interest income fell 1% to $2,189.3M, but interest expense fell faster, down 6% to $1,513.8M. Management attributes the increase to "higher deposits and lower funding costs."
Lending was not the driver. Period-end loans grew just 1.2% to $43.8B. Deposits did more of the work: period-end deposits rose 6.2% to $145.6B, and noninterest-bearing deposits (money clients leave with the bank without being paid interest, which is the cheapest funding a bank can get) rose 12% to $28.2B. Average deposits rose 4% year over year but dipped 1% from Q1, so part of the period-end increase may be quarter-end timing.
Costs: headline up 16%, underlying up about 5%
Noninterest expense rose 15.7% to $1,638.6M. Of that increase, $145.6M came from the software write-off, severance and one-time equity grant. Excluding those, costs rose about 5%. Compensation and benefits rose 18% (including $84.1M of severance and grant costs, plus "higher incentives," base-pay increases and higher pension expense). Equipment and software rose 29%, including the $61.5M write-off plus "higher software support and higher amortization." Headcount was 23,600, up 1% year over year.
The segment view shows where the one-off charges landed. Asset Servicing's pre-tax margin was 23.7% after absorbing $100.6M of the software and severance charges. Wealth Management's was 37.4%. Asset Servicing's margin fell from 28.3% in Q1, which is almost entirely those charges. Adding the $100.6M back to the segment's $323.3M pre-tax income gives a margin of roughly 31%.
Credit and capital
Credit quality is a non-issue this quarter. The provision for credit losses was negative $5.3 million, meaning reserves were released. Management cited "a strengthening macroeconomic outlook and improved credit quality" in commercial real estate and commercial loans. The bank had net recoveries of $0.4M, so net charge-offs were effectively zero. Nonaccrual loans (loans no longer paying interest as agreed) were $71.3M, just 0.16% of loans.
Capital: the CET1 ratio (core equity capital as a share of risk-weighted assets, the regulator's main measure of loss-absorbing capacity) was 12.2%, against a 7.0% minimum that the Fed has kept in place until October 1, 2027. Northern Trust returned $499.4M to shareholders in the quarter ($350.6M of buybacks at an average $164.65 a share, plus dividends) and over $1B in the first half. The diluted share count is down 4% year over year. The board raised the quarterly dividend 10% to $0.88.
Takeaway: Ignore the doubled EPS. It's mostly a Visa share swap. The number that matters is underlying revenue up about 12% against underlying costs up about 5%. Fees rose with markets, and net interest income rose because funding got cheaper, not because lending grew. That makes the quarter strong, but more dependent on market levels and trading volatility than on anything Northern Trust controls.
Outlook
The earnings release and 10-Q give no numerical guidance for the rest of 2026. The CEO's comments stop at "sustainable financial performance across market environments."
Our read:
Fees should hold into Q3 if markets stay put. Some fees are priced on asset values from one month or one quarter earlier, so the rise in client assets at June 30 should still feed through to Q3 fees. A market pullback would reverse that with the same delay.
Trading income is the most exposed line. FX trading nearly doubled on volatility. A calmer quarter would likely give back a meaningful part of that $46.5M year-over-year increase.
Net interest income depends on deposit costs. The margin gain came from cheaper funding. That helps less once deposit rates stop falling. The Q2 bond repositioning should add some yield in later quarters, but the filing gives no figure for it.
One possible upside: the Visa B-3 shares, carried at zero and worth about $530M at June 30 prices, could produce another large one-time gain if Visa runs another exchange offer. Neither the timing nor the amount is predictable.
Watch the cost line. The severance and software write-offs suggest restructuring. If they are followed by lower run-rate costs, underlying operating leverage could stay positive even if market-driven revenue slows.
Source: Northern Trust Corporation Form 10-Q for the quarter ended June 30, 2026 (filed July 30, 2026), with segment and fee detail cross-checked against the Q2 2026 earnings release (Exhibit 99.1, July 22, 2026).