Northern Trust shares jump on report of BNY merger interest

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Shares of Northern Trust rose by more than 6% as of midday Monday after a news report that Bank of New York Mellon reached out to the asset servicing and investment management firm last week to discuss a potential acquisition.

The CEOs of BNY and Northern Trust have had at least one discussion, but there have been no formal offers made, according to the article published in the Wall Street Journal on Sunday. BNY is thinking about its next steps, which may include returning to the Chicago-based Northern Trust with a formal bid, the article said.

A BNY spokesperson declined to comment Monday about the details in the Journal's article.

A spokesperson for Northern Trust, whose policy is to not comment on market rumors, said in an email: "I can tell you that Northern Trust is fully committed to remaining independent and continuing to deliver long-term value to our stakeholders, as we have for the past 135 years."

A deal between BNY, the world's largest custody bank, and its smaller rival would create a firm with more than $70 trillion of assets under custody and "likely solidify" BNY's dominance in the asset-servicing market, analyst Gerard Cassidy at RBC Capital Markets wrote Monday in a note.

As of March 31, BNY managed about $53.1 trillion of assets under custody and administration, reflecting a year-over-year increase of 9%. Meanwhile, Northern Trust managed $16.9 trillion of assets under custody and administration, up about 3% compared with the prior-year period.

Combined, assets under management would be about $3 trillion.

"We believe a potential merger would combine two firms with complementary strengths in serving institutional clients, including pension funds, endowments, and sovereign wealth funds," Cassidy wrote. In addition, Northern Trust's "expertise in wealth management for ultra high-net-worth individuals and its strategic alliance with BlackRock's Aladdin platform could enhance [BNY's] offerings, creating a more comprehensive service suite," Cassidy noted.

Northern Trust partnered with BlackRock in 2020, allowing clients of both firms to access certain Northern Trust capabilities, including data and servicing, on BlackRock's Aladdin platform.

The potential scale of a combined entity that would oversee more than $3 trillion in assets under management could "improve pricing power, attract larger mandates and enhance competitiveness against global assets managers like BlackRock and Vanguard," Cassidy wrote.

The report about a potential acquisition comes at a time when the regulatory landscape is shifting under the Trump administration and potentially making bank M&A a lot easier.

M&A

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Some banks hope to use M&A as a way to play defense, either because they need to shore up their deposits or because they have aging CEOs and are looking for an exit. But investors aren't wild about the deal math.

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Still, market volatility from tariff policies and interest rate pressure is tamping down transactions.

BNY CEO Robin Vince, who was recently appointed board chair in addition to his chief executive duties, has been at the helm of the New York-based firm since the fall of 2022. The company reported a strong first quarter, with revenues totaling $4.8 billion, up 6% year over year.

At an industry conference in late May, Vince was asked about BNY's thoughts on using some of its capital to do M&A deals.

"In 2022, I was pretty categorical, which is like we're not doing any M&A. We've got to get our house in order," Vince said. "But now we're in a mode where it's still a very high bar, but we will be thoughtful if we see ways to make our business get faster and better and leverage this great chassis that we think we've built."