A trader works on the floor at the New York Stock Exchange in New York City, U.S., October 20, 2025. REUTERS/Kevin Coombs

(Reuters) -Northern Trust beat Wall Street expectations for third-quarter profit on Wednesday as it earned higher fees after rallying markets boosted the value of its underlying assets.

Markets rallied through multiple record highs in the third quarter as AI stocks continued their surge, which along with lower interest rates and regulation eased concerns about stagflation and U.S. trade policy.

Northern's assets under custody and administration climbed 5% to $18.25 trillion in the quarter ended September 30. The corresponding trust, investment and other servicing fees increased 6%.

Assets under management rose 9% to $1.77 trillion during the same period.

Net interest income - the difference between what is paid out on liabilities and earned on assets - rose 5% to $596.3 million. Last week, peer State Street's shares tanked after missing Wall Street estimates for NII.

Ebullient markets, robust client flows and favorable currency movements have boosted earnings for the sector.

Last week, BNY also reported higher quarterly profit as the world's largest custodian bank benefited from higher interest income and fee revenue.

Northern Trust reported profit of $457.6 million, or $2.29 per share, in the third quarter. Analysts, on average, expected profit of $2.25 per share, according to data compiled by LSEG.

(Reporting by Ateev Bhandari in Bengaluru; Editing by Leroy Leo)