Yeah, I'll sit here. We'll,
Why don't you go?
We'll have you there so I can just kinda turn. We'll stick, I feel like, with our usual setup. By the way, our original place is the auditorium in 200 West, so it's like going through total renovation. You and I had our original catch-up there.
Yeah.
Like 15 years ago, however long that was.
Yeah. 14.
I.
Yeah.
I'm still kinda like out.
That was, that's interesting. I wonder what they're gonna do with that place.
Yeah.
I remember that. I was trying to think that literally.
Random guy.
Yeah.
Yeah, exactly. I'm like.
Yeah. I don't think I've ever been to that part since.
Yeah.
That's right.
Yeah.
Great. Well, I think we'll get started with our next session. Thank you, everybody, for joining us.
Hope everyone's still having a productive day here at Goldman Sachs. It's my pleasure to introduce Michael O'Grady, CEO of Northern Trust, and Dave Fox, the firm's CFO. With about $14.5 trillion in custody assets and $1.8 trillion in assets under management, Northern Trust is one of the largest global custodians, with unique capabilities in the ultra-high net worth space within the wealth management channel as well. Over the course of 2025, Northern continued to pivot the business towards more profitable areas of organic growth, delivered better-than-expected NII results, while also remaining hyper-focused on operating expenses. So with lots going on in the business, thank you guys for joining us. Always a pleasure to have you here.
This time of the year.
to get your thoughts, you know, into how you're wrapping up 2025 and your early thoughts in 2026. So we'll get to all of that. So thank you for being here.
Right. Right.
Look, why don't we start kinda there, right? So over the course of 2025, you've made several strategic shifts, including kinda leaning more into the more sort of profitable institutional growth, managing the balance sheet really well, making also a number of leadership changes. As you look out into 2026, talk to us a little bit about your top priorities for the firm and also some of the key milestones, we should be mindful of, for next year.
Great. So, once again, thanks for having us here, Alex. Always pleased to participate in your conference, and where I'd like to start is actually to go back two years just because that's where we set out the One Northern Trust strategy and have been executing on that strategy for the last two years.
Yep.
And the strategy is centered on three strategic pillars: one around optimizing growth, the second around strengthening resiliency, and then the third around driving productivity. And over that time period, of course, it's all about execution of that. And I would say that we feel very good about the progress that we've made over the time period. If you look at it from an optimizing growth perspective, it was about, you know, how do we grow our Wealth and asset management businesses faster?
Mm-hmm.
Very strong profitability, organic growth, but we would like to see it higher. And we'll talk a little bit more as we go forward, but the whole idea there is investing more in the way of resources in order to accelerate that growth rate.
Yep.
And at the same time, improving the profitability of the Asset Servicing business. So continuing to grow it but moving the margins up from in the neighborhood of kind of the low 20s up into the high 20s.
Mm-hmm.
And once again, making progress on that front as well. A lot of progress on strengthening resiliency. We talked about some of the investments we were gonna make in technology and building out the risk and control environment. All of that has proceeded well and feel like we're kind of on the back half of that part of the pillar. And then driving productivity, again, levels of productivity that we haven't achieved in the past, just meaning a higher percent of our expense base, which has given us both the capacity to make some of those investments.
Yep.
But also, as you talked about, you know, bending the cost curve in a very disciplined way.
Yep.
So feel very good about that. Also trying to, you know, hit our target financial model.
Mm-hmm.
And over that two-year time period, revenue growth on average about 7% over that time period, positive operating leverage of about 2 points on average for each of those two years, you know, 13+% ROEs, double-digit EPS growth. So hitting on that.
Yep.
But as we go into 2026, it's, yes, those are the same three pillars, but how do we accelerate on those with the particular emphasis on growth and productivity to fund that growth?
Got it. Okay. So we'll get into all of that. That's a good way to kinda set up the conversation. Maybe starting with the asset servicing business. Over the last several quarters, you really emphasized a sharper focus on profitable growth, even kinda the way you just described it now within the institutional servicing, even if that means perhaps being more selective on kinda what type of business you're bringing on and perhaps what kinda lower-return, lower-margin business you sort of let roll off. Help us think through what that sort of comes down to when we think about the multi-year fee growth algorithm.
Sure.
In that business on a net basis.
Yeah, so I think one way to think about the algorithm, if you will, would be three variables in the equation.
Mm-hmm.
The first being around retention, right? So we have this base of business. As you know, the nature of what we do for those institutional clients is very relationship-oriented, multi-year-oriented, recurring services and recurring business on that front. So high levels of retention.
Yep.
Kinda high 90s on that front. Now, that doesn't come easily. That's why we have to put so much in the way of service and capabilities to be able to retain that business. But there's a tremendous amount of power in having that recurring base and having it be at that kind of high 90s level.
Mm-hmm.
that also does entail, certainly at times, things are either gonna break your way or against you from the perspective of consolidation of clients.
Mm-hmm.
So you can have two businesses, you know, two plans, whatever it may be.
Sure.
That margin, we can win or we can lose on those, but that can affect that as well.
Mm-hmm.
And there's other situations, of course, where the client has grown, and that's, that's great, but we do have to look at the pricing, the fee levels to make sure that it's still a relationship that is, you know, economically attractive to both sides of that relationship.
Mm-hmm.
So that's on the retention side. And just think about it this way, like one additional point of retention is the equivalent of one additional point of growth.
Sure.
You know, of a new client, and in many ways, you know, more attractive, more profitable.
And you guys are at around 90, you said, and the goal is to.
high 90s.
Probably saying that, right?
Yeah, and great, so do that. We have that, I would say, long track record on that front, particularly in the areas that we control, so not truly.
Yeah.
I'll say, losing a client.
Yep.
The second variable, expanding client relationships. So roughly half of our new business comes from existing clients, doing more with existing clients. Some of that can just be from offering them additional services, capabilities that we have.
Yep.
Some of it can be from the success of the client, the distributive growth of the model.
Mm-hmm.
So if you have, you know, won the client, when they're a, you know, small asset manager, for example, but they're very successful and have flows and become a much larger, you know, that's going to expand the relationship on that front. And so we spend a lot of time trying to expand the relationships. It can be in capital markets. It's in asset management. So once again, the One Northern Trust strategy, that's a lot of that focus is not necessarily just new clients, but existing clients. How can we do more for them?
Mm-hmm.
It's also this point, Alex, of if you have client relationships that are not attractive from a financial perspective, how can you make them more attractive by doing more for them?
Yep.
Or if you have to adjust the pricing the other direction, that's what you need to do in order to get a balanced relationship.
Mm-hmm.
So it works on both sides. Maybe we've talked a little bit more recently, you know, about the fact that we wanna make sure that we have the right profitability kind of across the portfolio of our clients.
Mm-hmm.
And then the third variable certainly is winning new clients. And it's critical to the long-term sustainability and health of the business to win brand new clients.
Yep.
And on that front, you're in the competitive marketplace, right? So you're likely either, you know, taking that client over, you know, from a competitor, you know, or, you know, winning a new entity, if you will.
Yeah.
Regardless, you know, the process to win is highly competitive.
Mm-hmm.
Right? And so that's where we've talked a lot about ensuring that the new business that we win is attractive, accretive right out of the gate. And you might say, like, well, why wouldn't that always be the case?
Mm-hmm.
Well, some of it is because, one, you're in a competitive marketplace, so you don't know how others are, you know, say, bidding the new client. But also with long-term client relationships, often, you know, there's an investment period before you get to the level of profitability that you're looking for, you know. And what we've been saying is we, over the last several years, have built out, particularly for the asset manager side of the business, kind of the full footprint for that business. And some of those clients were more investment-oriented clients, just meaning taking them on at lower margins.
Yeah.
So that we can build out the capability and move them up to being, you know, more attractive from a profitability perspective. Now that we have it built out, we're not doing, I'll say, nearly as many investments on that front. We want to be profitable from the beginning.
Yeah.
Both in the types of clients. So you've seen kind of a greater lean towards asset owners.
Mm-hmm.
Which are just higher margin clients for us overall, but also, you've seen it on the services that we offer, so certain capabilities, just by their nature, are lower margin. You take those on in the beginning with the expectation you can, once again, expand the relationship later, and what we're saying is we're not willing to make as many bets on that front. We want that new bulk to be accretive right from the beginning.
I gotcha. I gotcha. So in terms of, I guess, what it means for organic growth in that part of the model, in the past, we talked about, like, kinda low to mid-single-digit organic growth. I think on the wealth side, it was a little different, but, like, on the institutional side, does this materially change that? Should we still kinda be in that zip code?
Yeah.
Or again, does that mean it just kinda comes down to?
It's close. It may come down a little bit.
Yeah.
I mean, frankly, we've still seen a lot of opportunities and have been very successful, you know, with this screen and this approach.
Mm-hmm.
You know, to it. That said, we do understand that, you know, we're taking the risk, if you will, of not winning as many.
Mm-hmm.
You know, new opportunities because of that, I'll call it, price discipline.
Yeah, but then the upside to that, obviously, is, like, the incremental margin on the business that you do bring in should be significantly higher.
Correct.
I know you alluded to that in a couple of places, but maybe we'll try to put a bow around that discussion.
Sure.
So if I look at the asset servicing platform, margin is in mid-20s. You guys are hoping to obviously get that higher, and really, in the context of the whole firm, moving into kinda 30%-plus pre-tax margin, where are you in that journey? How long do you think it'll take you guys to get the margin in the asset servicing side of the business to a level that's more appropriate?
Yeah. I would say we have a couple more years to get it to that high 20s level, you know, that we're targeting.
Mm-hmm.
Nice improvement this year, but it'll take a couple more years of that type of progress to get it to where we think that's the appropriate margin.
Got it. Okay. That helps. All right. Let's pivot a little bit. We spent a decent amount of time over the last two days talking about the digital asset ecosystem, and it kinda hits financial services in a number of different ways, so I was hoping to get your perspective how that might affect your guys' business across probably a number of verticals. I could see how it could be relevant in the obviously traditional custody space.
Yeah.
How that could be relevant on the investment management side and some of the tokenization of money market funds? So evolution of the space, the role you guys see Northern playing there?
Yeah.
Any of that particular needle moving over the next two, three years, or not worth talking about?
Yeah. It's worth talking about.
Yeah.
I mean, obviously, it's an exciting time with digital assets and what's happening, and I'll say the marketplace is moving very quickly, and part of that's because the regulatory framework and environment is moving quickly now too, and I think about it in kind of two ways or two buckets. One is capabilities, and then the other is commercialization. On the capabilities front, you know, with the role that we have with our large, particularly institutional, investor clients, we have to have the capabilities for them to interact in the capital markets.
Mm-hmm.
And so, you know, we can think before digital assets, you could think of other capital markets innovations, which, you know, were new and required different, administration, custody, and processing. So think about, like, derivatives and all types of new instruments.
Yeah.
We have to figure out how to do that for the clients.
Mm-hmm.
This is the same thing. So whether it's stablecoins or, you know, tokenized assets, we have to have the capability to do that. Where we've been investing over the years here is making sure that that's an interoperable platform, if you will. In other words.
Mm-hmm.
It can be both digital and a part of the, you know, traditional platform that we do have so that we can provide those services to the clients. Importantly, you know, the other side is the commercialization.
Yep.
You know, to your point, are there opportunities to generate new revenue, new revenue streams from that? And that's where I think with tokenization, there will be opportunities because different assets or asset classes can be tokenized in such a way that there'll be new services required for it. You know, one example would be on the asset management side, you know, for example, tokenizing, a money market fund, which we would look to do. And you can also see, as you know, there's so many other types of assets that right now are not really even kind of tradable or liquid.
Yeah.
But in a tokenized form could do that, could be that way. And as a result, you know, could be a new type of fund or service we have to provide to that fund to be able to do it. If you said, "Okay, project out or forecast those revenues," that's the part where I would say, you know, like, too early to determine what that is. Build out the capabilities and try to be innovative with what some of the opportunities on the commercialization.
How far in this capabilities build-out process are you guys? Is that, you know, and is that sort of embedded in your overall expense framework as you think about areas where you need to kinda deploy incremental investments?
Yeah, so I would say that we have tried to be, as you would expect, you know, very targeted in the investments we're making there and the capabilities. That's a big part of how we have to approach everything, right?
Mm-hmm.
We're not in a position where we can try everything and put big dollars to it and hope it works out. So.
Yeah.
That's the way we've been very focused. If you've looked at some of the examples where we've done this, so, you know, tokenized carbon credit, capabilities, right? So it's an area where, hey, we can differentiate ourselves on this front.
Mm-hmm.
And it's not going to be a, you know, multi-hundred-million-dollar investment to be able to do that. And where I would say, you know, from a journey perspective on it.
Yeah.
A lot of the activity so far has been kind of private blockchain, if you will.
Mm-hmm.
Where we're moving now is public blockchain. It's gonna require some investment to get there, to be able to do that. That's the next big stage. We're very much in that right now. That's in the marketplace, but also, you know, within Northern Trust.
Got it. Okay. Perfect. All right. Let's shift gears, spend a few minutes on the wealth business. The wealth business continues to be a really, really important business for you guys, highly profitable. That incremental disclosure has been helpful on just, you know, how well the margins held up in that business for some time, but at the same time, it's a really competitive space and a lot of companies that I cover on the pure wealth side of things continue to talk about going up market, going after the more higher net worth end of the end of the wealth spectrum. How do you defend your market share there? How do you think about organic growth in that business and working on both kinda the traditional sort of high net worth business as well as the GFO business?
Sure. So I think that's the right place to start, which is thinking about the marketplace. And as you point out, like, there are multiple tiers or portions of the market. And historically, we cover, you know, most of those segments of the marketplace.
Mm-hmm.
Okay? Where we've been the strongest is at the highest end. So if you start at the highest with Global Family Office, we have differentiated capabilities on that front, largely because of the integration of the businesses that we're in, you know. So being in the asset servicing business, having those capabilities to deliver to family offices that want an institutional, you know, offering.
Mm-hmm.
But it also is differentiating with wealth management expertise at that level, so the trust and estate type expertise, and on the asset management front, knowing what Global Family Offices want from an asset manager, so being able to provide OCIO specifically for the needs of family offices.
Mm-hmm.
So, that's where we've been differentiated the most. And to your point, what we're trying to do then is use those capabilities and go down to the additional tiers.
Mm-hmm.
In a more differentiated way. So over the last year, where we spent time is what we've called Family Office Services. So basically, on that front, say, take those family office capabilities but provide them to ultra-high net worth families that may not have a family office but want the capabilities.
Mm-hmm.
So think about, like, hybrid family office, you know.
Mm-hmm.
or virtual family office capabilities. and there, you know, it starts with, y'all say, listening and doing the diagnostic as to what are the needs of, you know, that tier or those sets of clients. Once again, that has been very successful so far, much more to go because not every, ultra-high net worth family is gonna necessarily want all of those services. so it's a question of, like, how do you curate those in a way that fits their needs?
Mm-hmm.
And as we go into 2026, a lot of the focus then is going to be kinda the tiers below that, being able to differentiate more with what the needs are for those types of clients, and that it's more than just saying, you know, the services part or the product aspect of it, but it's actually saying everything down to what type of technology platform.
Mm-hmm.
Should they have for, you know, a segment that doesn't have all of those complex needs so that we can compete even more effectively?
So really kinda locking in the client with extra capabilities as you kinda trickle that down the ecosystem.
Exactly.
Got it. Okay. Look, another important theme across the wealth space, which has been, you know, not surprising to you guys, has been alts. We spent quite a bit of time on this theme as well. Talk to us a little bit about what percentage of your high net worth business even has an allocation to private markets, and as the world continues to shift towards more assets going into the wealth space among privates, how do you think about that revenue opportunity for Northern Trust? Obviously, you have some capabilities internally.
Yeah.
I imagine it's gonna be a mix between your sort of proprietary products from, you know, 50 South Capital, maybe third party. How do you balance those two out, and how meaningful a revenue driver do you think that could be?
Sure. So first, just to talk about the opportunity, obviously tremendous, you know, tremendously large, you know, market already, but one that's growing at a higher rate. And so in that sense, big, big opportunity. And then when you just start to think about from a Northern Trust perspective, once again, we cover all of those tiers of clients, and the need and use of alternative is very different, you know, as you go through those tiers. So once again, at the highest level with Gobal Family Office.
Mm-hmm.
Much higher allocations. Now, a lot of those allocations, we're providing the custody.
Mm-hmm.
But we're not actually providing the asset management for alternatives. But it's still an opportunity. We know, we know where the dollars are. We know where the opportunities are. We just have to be able to provide the right private capital.
Mm-hmm.
Investments, on that front. So, that's at that end. And then if you said, you know, below that, $500 billion in total of assets under management, again, it's going to be different for, you know, a trust that has been set up, you know, for a particular purpose, you know, versus an ultra-high net worth family where the wealth is still growing, and they should have a higher allocation to alternatives.
Yep.
If you look at it overall, the overall allocation is below 5%.
Mm-hmm.
On that $500 billion. So that just gives you an indication of the upside opportunity to the extent that we can provide the capabilities to do that. And I think about it in a couple of ways. The capability part, you summarized it well there, but we've had 50 South, as a capability for 25 years. Their primary client base is our wealth management client base.
Mm-hmm.
Right? And they are providing products that are tailored to the needs of that wealth client base. So it can be fund of fund, and it can be other, you know, more tailored alternatives that fit for that client base. That will continue to grow. They doubled the capital raise that they did this year from 2024.
Mm-hmm.
So it has momentum on that front. And the key there is just to continue to innovate with what's best for that wealth client base.
Mm-hmm.
So you'll see more of the kind of semi-liquid and other types of private alternatives that fit with the needs, you know, of our wealth management clients. That said, we wanna make sure we're providing, you know, the fullest set to the clients.
Yep.
That's what we call wealth management alternatives or WM Alts, and that's where we're putting the third-party managers, you know, on a platform.
Mm-hmm.
And then we're curating for the client base.
Mm-hmm.
There, in 2025, we'll more than have doubled the number of funds that we put onto the platform for that year.
Mm-hmm.
There's still the upside to do even more next year to provide more selection.
Yeah.
You know, for the client bases. Again, the key is going to be, yes, have the core building blocks, but provide differentiated opportunities.
Right.
We actually can leverage some of the relationships that 50 South has over a long time period to do one-off funds with some of those managers.
Mm-hmm.
That are in, you know, particular sectors or capabilities.
Yeah.
on that front. The last thing I would say on the capability front there is it's more than just say, you know, do you have the product and it all happens, right? You have to have, you know, the education, the technology platform, you know, those foundational elements.
Mm-hmm.
To be able to make that client experience not only the investment performance but the experience overall.
Yeah.
Something that's very positive and favorable. And we've made a lot of advances in the last year on that.
Yeah. No, it requires a lot of hand-holding, and advisors need that.
It's different.
You know, and you need that access for the third-party products that are coming onto your platform. Would you say that's a typical fee arrangement, meaning the GP pays you guys for placing the product on the platform? How does the commercial model work?
It depends on the specific circumstances on it, but generally speaking, for us, there is just a fee that we charge as a part of a client utilizing the alternatives platform, if you will.
Got it. Got it. Okay.
But there are different models, you know, on how the economics could work.
Right. Okay. Fair enough. All right. Why don't we shift gears a little bit, Dave, bring you into the conversation? Let's talk about the financials. Q4 is almost at its tail end, so, you know, good time of the year to give us a bit of an update on how
Things are tracking towards your expectations. And just to kinda remind everybody, you talked about NII finishing the year up mid to high single digits year over year, implying Q4 flat to maybe marginally up versus Q3 levels. And you obviously talked about expenses being within the 5% range for the year. So let's start there. And any other updates you wanna share with us?
Yeah. So, you know, NII is cyclical, right, and so when you think about what I talked about last time, the deposit levels drive most of that, most of the NII results, and so last quarter is typically a seasonally low quarter for us, and when I gave the guide, I was basically saying that I felt as if we were gonna have a recovery going into Q4, so what I would tell you is that, if anything, I have stronger conviction around the guide that I gave you before, and they have responded well. Deposit levels have responded well. In addition to that, we've taken other measures in the quarter, whether it's backbook repricing, securities portfolio, and other issues that we've tried to address on our deposit pricing to protect that going into it.
So I would just say I would reaffirm strongly the guidance that I gave you before going into the fourth quarter for NII. On expenses, you know, listen, you know, the 5% or below has been with me the entire year. I'll be very happy when it's over. But I think we've totally changed the way we do our expense planning. It's very dynamic. And so I continue to be committed to that below 5% for this year. And there's nothing I see on the horizon that would cause me to change that. If anything, the dollar strengthened a bit this quarter, so that headwind went away. So strong on both, okay, going forward.
Got it.
On both those guides.
Okay. Anything notable on the fee side for Q4? Again, the quarter's kind of.
Yeah. I mean, on the fee side, you know about our lagged fee structure that we've got in asset servicing. We have a month lag in wealth management. You did see a pretty big sequential increase in the markets from June 30 to September 30, right? So that's gonna be very positive, right, for us.
Yep.
Pipelines are strong. The fee reset, the restructuring we talked about in the last quarter or within the institutional side, will have no impact in the fourth quarter on fees themselves, right? So I think, you know, the fourth quarter should see some reasonably strong fee progression.
Got it. Got it. Okay. And then when we think about the drivers of NII, to your point, you know, you feel really good about, I guess you said, you know, Q4 will be flat to marginally up quarter over quarter. So it's probably fair to assume it's more up than flat, just given the sort of confidence you just, you know, alluded to.
Yeah. You can, you can do the math. We were up 9%, I think, year to date as of September 30th. And so you can do the math from there in terms of.
Yeah. How much of the improvement in deposit base in Q4 you think is truly seasonal versus something that you've seen kind of on the core organic growth side of the business that might sustain a more elevated deposit level as we look out into 2026 as a jumping-off point for '26 NII?
Yeah. You know, like I said, the pipeline's strong, and it tends to grow with the underlying business, so part of the deposit growth will definitely be a function of some of the new business that we brought in the quarter.
Yeah.
I also just think it's a function of, if you look at the entire return we get in NII, deposit growth isn't the entire, the entire story, right? So it's, it's the biggest component of it. But there's a lot we've been doing around sweating the assets that we get. I mean, you think about the cash we generate in the asset servicing business. We have really put a concerted effort around making sure that we price our deposits appropriately and that we invest the money wisely, and we take advantage of opportunities in the marketplace.
Mm-hmm.
To really do more there. And so I think folks have been surprised at our NIM levels and how we've been able to manage that. That's been intentional, right?
Mm-hmm.
So it isn't just deposits. It's also a whole bunch of other measures that we're taking, including currencies and other things to try to maximize that balance sheet potential.
I gotcha.
Yeah.
So I guess when you think about 2026, just to build on that a bit, on the last quarter's call, I think you talked about NII will be flat up marginally 1%-2% year- over- year in 2026 to 2025. A lot of reasons behind it is things you just sort of talked about around the proactive actions you've taken around the balance sheet.
Yeah.
I think within that, you also talked about two rate cuts. We'll see what happens today. We'll see what the forward curve has done. How do you feel about that original guidance if you were to get more than, you know, two rate cuts from there?
So actually, it was three rate cuts if you think about it.
Three rate cuts.
I mean, 'cause December is a rate cut potentially today.
Yeah.
Okay. So there's December, and that'll have an impact through the entire year, right?
Yeah.
Then we're anticipating March and September, right?
Yep.
Two more rate cuts. So actually, it's three when I talked to.
Yeah.
Originally about it. We think we've got mitigating stuff that we can do. And that's why I gave you sort of the flat to make sure that we don't have a dip, right?
Sure.
And going forward. Now, you've gotta make a lot of assumptions if you're talking about a full-year projection. You've gotta make assumptions around the yield curve and everything else and deposit levels. We also think we're gonna have some growth in our business, in our pipeline, right? That'll drive higher deposits. And we're also not seeing a full year's effect of some of the deposit pricing stuff that we took. That's continuing. That, that isn't over, right? So we're.
Yeah.
We're kind of reaching the end of it. But at the end of the day, we haven't lapped it yet, right?
Sure.
So you've got that coming into it. We've got all the backbook repricing that we're gonna do, which, you know, we can reinvest that at a higher yield going forward, so all these other mitigating factors, right? We sort of think there's upside there. But at the end of the day, I know I can reach that sort of flat if everything's normalized going forward with some upside potential.
Got it. Okay. Let's hit on expenses as well. I know you lived with sub-5% all year. There's gonna be another number you're gonna have to live with in 2026. So if you'd like to share that with us, that would be helpful, but you know, bigger picture, I know everything we talked about today obviously continues to focus on driving margins, driving efficiency throughout the ecosystem. What's the plan on that, again, near term into 2026? What kind of a growth expectation do you think about?
So we did a little bit different. We haven't locked our plan in yet for 2026, but we did a little bit of a different planning process this time in the sense that we, Mike talked about it. We started with productivity first, right?
Mm-hmm.
And then we looked at our investments. We wanna make in-year investments expenses. And then basically that spits out an expense growth, right? And then we went back and looked at it again and prioritized the investments. And then we tried to drive higher productivity going into 2026, right? So they're all interlinked, if you will. What I will say is that we are still planning on a muted environment going into 2026. We're not expecting or anticipating or relying upon the markets to basically bolster our results, right? So we still have to operate within a pretty tight band on expenses, right?
Mm-hmm.
Now, if the markets are on our back and we see great growth opportunities and things like that, we can always reassess. But we've put this dynamic planning process together for a reason. We can look at it every quarter, right? And we can basically say, "What's going on in the marketplace? How's the business going?" and adjust. We have a very detailed list of our capital expenses and our investments we can make during the course of the year. And we can toggle and be flexible in that, right? But we've built the discipline on the expense side to know how to flex up or down, right?
Mm-hmm.
So to give you an exact number, it's really a positive operating leverage mentality that we've got right now, right?
Yeah.
Mike talked about it. We've had consistent positive operating leverage. That's gonna be our north star at the end of the day. We don't want to starve our growth businesses.
Mm-hmm.
From key investments going forward. But we also wanna have that discipline to say, "If the markets are muted," we had Liberation Day earlier this year, which was, you know, S&P got down to almost 5,000.
Sure.
We have to be in a position to be able to maintain the rigor around expenses, right?
Got it.
So we're gonna maintain that rigor, and we know what the levers are.
Mm-hmm.
We know how to pull them.
Got it.
Yeah.
So I think you put it well, like North Star being positive operating leverage. And not to paraphrase, but it sounds like you guys feel you could still get there even when NII is flat in 2026 versus 2025.
Yeah.
Maybe a little bit of wiggle room, you know, around, like, the market activity.
Absolutely.
Yeah.
Yeah.
Okay. Great. We got about a minute left on the clock, so maybe just real quick on capital return priorities as well. I know it's also important you guys.
Yeah.
Accelerated that, opportunistically, when you can. As you think about 2026, any thoughts on the buybacks?
Yeah. And so 2025, just to finish off on 2025, I think what I said before was we had to grow to 110% as of the third quarter, and we're driving towards at least 100% for the year, right?
Yep.
Now, capital, you know, I always get this question, and, and Mike and I talk about it all the time. There's probably about seven or eight different inputs into capital, right? So when you think about your loan activity, you think about your ROE, you think about potential M&A opportunities, you think about your buffer you wanna have over the G-SIBs, all those, all that stuff kinda factors into it. But at the end of the day, we'd hope to be able to, to kinda keep the same clip we had in 2025 to the extent that that makes sense relative to everything else we're looking at. We like the buffer that we've got, right? Now.
Mm-hmm.
It's 11 to 12. We've been more in the 12s than the 11s. If it leaks into the 11s, that's not a problem for us, right?
Yeah.
So again, hard to land on the head of a pin because $700 million of RWA is equal to 0.1.
Mm-hmm.
That can happen really quickly in our business given the size of our client base.
Sure.
Right?
Sure. Great. Okay. Well, great note to leave it on. Thank you both very much.
Okay.
Appreciate you guys participating again in this year .
Thank you.
Thank you.