Northern Trust released its Q4 2024 Earnings last week (see the Seeking Alpha earnings call transcript here, and the call contained several mentions of money market funds, bank deposits and cash management. CEO Michael O'Grady explains, "NTAM, our asset management business, worked in close partnership with our global family office and asset servicing businesses to develop a money market solution for a client seeking greater tax efficiency for its sizable cash investments. This turned out to be highly-attractive to a number of our clients and we experienced one of the fastest fundraises in NTAM history, raising nearly $3 billion over the course of six months with participation from 18 clients. As we enter 2025, we will further institutionalize these approaches through enterprise-wide initiatives aligning with meeting our clients' greatest needs and key industry trends, such as alternative investment solutions, family office services and liquidity solutions. We will also continue to prioritize growth in wealth and asset management and foster stronger collaboration between both businesses."
He says, "We refreshed our strategy in 2023 following the hiring of Daniel Gomba, our Asset Management President.... We refined our go-to-market partnership with asset servicing, creating more comprehensive solutions for clients and prospects, which resulted in more than 35 new client wins. Leveraging the success, we launched multiple products specifically geared toward the needs of our asset servicing ... and ultra-high net-worth wealth segments. As a result, we realized positive net flows for the year, including 13% growth in liquidity, which surpassed $300 billion in AUM and generated positive long-term flows in the second-half of the year."
O'Grady continues, "We also improved the trajectory of our organic fee growth meaningfully, all while delivering investment performance above our benchmarks. We aim to carry this momentum into 2025 by investing in areas of growth that are both aligned with secular trends in the industry and where we have the right to win. These include expanding our alternatives offerings, capturing growth in custom SMAs and broadening our ETF presence while simultaneously maintaining our focus on core strengths in liquidity solutions, indexing, quant and fixed income."
CFO David Fox comments, "[T]he deposit mix came in modestly better than our expectations. Average deposits were $113 billion, flat with third quarter levels, but non-interest-bearing deposits increased 7% on a linked-quarter basis and increased 100 basis-points as a percentage of the total mix to 15.5%. Second, deposit pricing improved. As part of our focus on client liquidity management, we made certain pricing adjustments to be more aligned with current market conditions. And as expected, we continue to realize a very strong deposit beta on institutional accounts relative to fourth quarter rate cuts."
He states, "Turning to the full year's results ..., trust fees were up 8% in 2024 due to both strong underlying markets and solid new business generation. We generated record NII, up 8% for the year, driven by sharply increasing deposits at the beginning of the year and stability over the remainder of the year.... Turning to NII, for the first-quarter, we expect NII to be approximately $555 million to $575 million. This assumes the current market implied forward curve, a flattish balance sheet on a dollar-adjusted basis with stable deposit levels, a relatively stable deposit mix, stable pricing and modest currency headwinds."
During the Q&A, Fox replies to a question, "I think non-interest-bearing deposits were up over $1 billion. I think that's probably higher than other quarters and my guess would be that there's some seasonality to that number. And certainly, we welcome it, but ultimately, it's not out of step with what we've seen in the past. In terms of the pricing adjustments, and we've talked about this before, we really have put a lot of effort behind our overall liquidity management and balance sheet management as it relates to deposits.... It's really taking a look at all the multiple currencies that we do manage on our deposit base and having a much more fulsome review of everything we're doing and making sure those betas are consistent with what we think they should be."
In response to another question, Fox tells us, "We're still anticipating a certain number of rate cuts at least a couple this year in the U.S. And then globally, there's a lot of other potential rate cuts that are in our numbers as well. `Keep in mind, our deposits aren't all in dollars. So, we obviously did some pricing adjustments, which help on the NII front as well.... We think obviously, if there are less rate cuts, that's better."
In other news, the website Ledgerinsights.com published, "Analysis: BlackRock BUIDL update shows key design options in tokenized money market funds," which says, "Securitize, BlackRock's tokenization partner for its BUIDL tokenized money market fund (MMF), announced some updates to the token behavior.... The changes were pretty simple: the fund can now be redeemed intraday rather than waiting until 3pm. And it pays out interest daily rather than monthly."
They write, "One of the visions is to use tokenized money market funds as collateral. The CFTC market advisory committee aims to get tokenized securities approved to be used as margin for options trading.... German central counterparty Eurex Clearing announced it received the regulator's green light to use digital collateral for margin. The key advantage is the ability to post margin quickly without liquidating assets. In traditional finance (TradFi), Broadridge already tokenizes Treasuries on a permissioned blockchain for intraday repo, transacting $1.5 trillion a month."
Calastone also writes about tokenized money funds in "Navigating rate cuts and the rise of tokenised money market funds in 2025." They state, "[In] 2025, the money market fund (MMF) landscape is set to evolve in response to shifting macroeconomic conditions and advances in digital finance. Central banks around the world are likely to continue adjusting interest rates downward, a trend that could have a significant impact on the MMF sector. At the same time, new technological innovations -- such as tokenisation -- are poised to revolutionise how these funds are used, traded, and managed."
The update says, "While rate cuts and automation will dominate the headlines, another major trend in the MMF space is the rise of tokenisation. Tokenisation refers to the process of converting rights to an asset, such as a money market fund, into a digital token that can be traded on a distributed ledger technology (DLT) network. In the case of MMFs, tokenisation offers significant benefits, particularly in the areas of collateral management and liquidity."
It adds, "The concept of tokenised money market funds is not merely theoretical; real-world use cases are already beginning to emerge. In the UK, the Technology Working Group has endorsed the use of tokenised MMFs as collateral, and several successful pilots have been conducted in other jurisdictions. This growing acceptance of tokenisation points to a future where MMF units are routinely traded on DLT networks, making the investment process more efficient, transparent, and secure.... In 2025, we expect to see tokenisation get much closer to being mainstream feature of the MMF market."
Finally, the WSJ writes, "Coinbase Would Delist Stablecoin Tether if Required by Law, CEO Says," which says, "Coinbase Global would remove stablecoin tether from its U.S. cryptocurrency trading platform if required by new legislation, CEO Brian Armstrong said in an interview at the Journal House in Davos, Switzerland. Tether, which is pegged 1:1 to the dollar, is the world's most traded cryptocurrency, but authorities are scrutinizing its use by a plethora of crime groups, sanctions evaders and terrorist organizations to move money around the globe unhindered."
It comments, "If tether's issuer, also called Tether, couldn't comply with any new U.S. laws, Coinbase would delist it, Armstrong said.... Coinbase delisted tether for its European customers last month in response to new EU regulations for digital currencies that force stablecoin issuers to hold a portion of their reserves in cash at banks. Tether has said it opposes this new requirement because it could create more risk. Tether's smaller rival, U.S.-based Circle, in which Coinbase is a shareholder, says its own USDC stablecoin is already compliant with the EU's Markets in Crypto-Assets Regulation."
