Northern Trust beats profit estimates on higher fees, market rally

July 23 (Reuters) - Northern Trust NTRS.O beat Wall Street estimates for second-quarter profit on Wednesday as a rally in the equity market and higher fees boosted the asset and wealth manager's results.

Major U.S. indexes received a boost from a late-quarter rebound, fueled by optimism around potential interest-rate cuts and progress on trade negotiations.

Markets had been rattled earlier in the quarter by changing U.S. tariff strategies and rising geopolitical strain.

Assets under custody and administration climbed 9% to $18.1 trillion in the quarter ended June 30. Assets under management rose 11% during the same period.

Net interest income - the spread between earnings from assets and costs from liabilities - rose 16% in the reported quarter. Trust, investment and other servicing fees increased 6%.

"Northern Trust reported another quarter of strengthening results, featuring mid-single digit trust fee growth, record net interest income, and meaningful expansion in our pretax margin," CEO Mike O'Grady said.

Earnings across the custody and asset management sector are getting a lift from recovering markets, resilient client flows and favorable currency movements.

Northern Trust reported profit of $2.13 in the second quarter. Analysts on average had expected $2.05 per share, according to estimates compiled by LSEG.

Earlier this month, BNY BK.N also beat Wall Street's profit estimates as the world's largest custodian bank benefited from higher interest income and fee revenue.

The Wall Street Journal reported last month that BNY had approached smaller peer Northern Trust about a potential merger. Northern Trust, which is based in Chicago, later said it was fully committed to remaining independent.

Deal activity in the sector is expected to accelerate in the second half of the year.

Still, analysts view a merger between BNY and Northern Trust as unlikely, pointing to regulatory challenges and skepticism about Northern Trust's willingness to sell. They also said BNY may turn its attention to other potential targets.