lehman september 2005 for pdf - northern trust · northern trust page lehman brothers –6 2005...

Copyright © 2005 by Northern Trust CorporationCopyright © 2005 by Northern Trust Corporation

Strategic Differentiation

The Hilton New YorkThe Hilton New YorkSeptember 14, 2005September 14, 2005

Lehman Brothers2005 Financial Services Conference

PAGE PAGE 22 2Northern Trust Lehman Brothers – 2005 Financial Services Conference

Forward Looking Statement

This presentation may include forwardThis presentation may include forward--looking statements such as statements that looking statements such as statements that relate to Northern Trust’s financial goals, dividend policy, exprelate to Northern Trust’s financial goals, dividend policy, expansion and business ansion and business development plans, anticipated expense levels and projected profdevelopment plans, anticipated expense levels and projected profit improvements, it improvements, business prospects and positioning with respect to market and prbusiness prospects and positioning with respect to market and pricing trends, icing trends, strategic initiatives, restrategic initiatives, re--engineering and outsourcing activities, new business results engineering and outsourcing activities, new business results and outlook, changes in securities market prices, credit qualityand outlook, changes in securities market prices, credit quality including reserve including reserve levels, planned capital expenditures and technology spending, anlevels, planned capital expenditures and technology spending, and the effects of any d the effects of any extraordinary events and various other matters (including develoextraordinary events and various other matters (including developments in litigation pments in litigation and regulation involving Northern Trust and changes in accountinand regulation involving Northern Trust and changes in accounting policies, g policies, standards and interpretations) on Northern Trust’s business and standards and interpretations) on Northern Trust’s business and results. These results. These statements speak of Northern Trust’s plans, goals, strategies, bstatements speak of Northern Trust’s plans, goals, strategies, beliefs, and eliefs, and expectations, and refer to estimates or use similar terms. Actuexpectations, and refer to estimates or use similar terms. Actual results could differ al results could differ materially from those indicated by these statements because the materially from those indicated by these statements because the realization of those realization of those results is subject to many risks and uncertainties. Our 2004 anresults is subject to many risks and uncertainties. Our 2004 annual report and nual report and periodic reports to the SEC contain information about specific periodic reports to the SEC contain information about specific factors that could factors that could cause actual results to differ, and you are urged to read them. cause actual results to differ, and you are urged to read them.


Strategic DifferentiationA Consistent, Focused Strategy

Two Client DistributionTwo Client DistributionChannelsChannels

One Core BusinessOne Core Business

Single Global SecuritiesSingle Global SecuritiesProcessing and Processing and

Information PlatformInformation Platform

Asset Asset ServicingServicing

Asset Asset ManagementManagement

Information Information ServicesServices

Asset AdministrationAsset Administration

Worldwide Operations and Technology

Personal Financial Services

Corporate & Institutional Services


Financial Highlights Reflect Excellent Performance

Assets Under CustodyAssets Under Custody $2.7 Trillion$2.7 Trillion +22%+22% +22%+22%Global Custody AssetsGlobal Custody Assets $1.1 Trillion$1.1 Trillion +35%+35% +35%+35%Assets Under ManagementAssets Under Management $590 Billion$590 Billion +12%+12% +12%+12%

Trust, Inv. & Other Servicing FeesTrust, Inv. & Other Servicing Fees $402 Million$402 Million +20%+20% +10%+10%Net Interest IncomeNet Interest Income $180 Million$180 Million +23%+23% +23%+23%

Total RevenuesTotal Revenues $687 Million$687 Million +17%+17% +11%+11%Noninterest ExpensesNoninterest Expenses $442 Million$442 Million +17%+17% +8%+8%

Net IncomeNet Income $150 Million$150 Million +15%+15% +15%+15%Earnings Per ShareEarnings Per Share $0.68$0.68 +15%+15% +15%+15%

Second Quarter Second Quarter 20052005

% Change vs. Prior Year% Change vs. Prior YearReportedReported excl. FSG*excl. FSG*

* Excludes impact of the Financial Services Group acquisition


Client Assets at Record Levels

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2000 2001 2002 2003 2004 2Q05

Assets Under Assets Under CustodyCustody

$2.7 Trillion$2.7 Trillion

R E

C O

R D

R E

C O

R D

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

2000 2001 2002 2003 2004 2Q05

Global Custody Global Custody AssetsAssets

$1.1 Trillion$1.1 Trillion

$0

$100

$200

$300

$400

$500

$600

$700

2000 2001 2002 2003 2004 2Q05

Assets Under Assets Under ManagementManagement

$590 Billion$590 Billion

R E

C O

R D

R E

C O

R D

R E

C O

R D

R E

C O

R D

…in stark contrast to equity markets

5 Year CAGR5 Year CAGR(6/30/00 (6/30/00 –– 6/30/05)6/30/05)

+11%+11%


+25%+25%


+13%+13%

5 Year5 YearCAGR:CAGR:

Dow JonesDow Jones S&P 500S&P 500 NASDAQNASDAQ EAFEEAFE0%0% --4%4% --12%12% --3%3%


The recognized leader in providing sophisticated The recognized leader in providing sophisticated financial solutions to high net worth families.financial solutions to high net worth families.Target market: Individuals or families with Target market: Individuals or families with $75+ million in investable assets$75+ million in investable assets

$1 Million $25 Million $75 Million

Delivering highDelivering high--touch trust, investment management and banking solutions touch trust, investment management and banking solutions to individuals through 84 offices in 18 states.to individuals through 84 offices in 18 states.Target market: Affluent individuals with at least $1 million in Target market: Affluent individuals with at least $1 million in investable assetsinvestable assets

Delivering comprehensive, investment solutions through Delivering comprehensive, investment solutions through a multia multi--manager investment program.manager investment program.Target market: Individuals or families with Target market: Individuals or families with $25 to $75 million in investable assets$25 to $75 million in investable assets

Wealth Wealth ManagementManagement

Wealth Wealth AdvisoryAdvisory

PrivatePrivateClientClient

C L I E N T I N V E S T A B L E A S S C L I E N T I N V E S T A B L E A S S E T SE T S

Personal Financial ServicesIndustry Leader in Serving the Affluent Market

Largest Personal Largest Personal Trust Bank in U.S. Trust Bank in U.S.

SOURCE: SNL Financial


Source: Claritas

1.1

1.6

2004 2009

Projected MillionaireHousehold Growth(Within PFS Footprint, Millions)

52%52%IncreaseIncrease

84 Offices in 18 States

40% of millionaire market resides within a 45 minutedrive of Northern Trust offices.

Massachusetts (1)Massachusetts (1)

IllinoisIllinois(18)(18)ColoradoColorado

(1)(1)

GeorgiaGeorgia(1)(1)

NevadaNevada(1)(1)

MissouriMissouri(1)(1)

WisconsinWisconsin(1)(1)

MinnesotaMinnesota(1)(1)

WashingtonWashington(1)(1)

MichiganMichigan(3)(3)

FloridaFlorida(25)(25)

TexasTexas(7)(7)

ArizonaArizona(8)(8)

CaliforniaCalifornia(11)(11)

New York (1)New York (1)Connecticut (1)Connecticut (1)

Delaware (1)Delaware (1)OhioOhio(1)(1)

Personal Financial ServicesStrong Demographic Tailwinds


…to achieve growth objectives

Event Marketing & Strategic PhilanthropyEvent Marketing & Strategic Philanthropy

Sophisticated SolutionsSophisticated Solutions

Integrated Local Delivery ModelIntegrated Local Delivery Model

Personal Financial Services Strategically Differentiated…


Personal Financial ServicesEvent Marketing & Strategic Philanthropy

Philanthropic Educational Entertainment


Retirement ServicesQualified Plan ServicesDefined Benefit PlansDefined Contribution PlansIRA RolloversInvestment ManagementIndividual 401(k) Plans

Private PassportOnline access to banking, trust, investment management, mutual funds, and brokerage information

Corporate BankingWorking Capital and General Corporate LoansSecured and Cash Flow LendingAcquisition FinancingIndustrial Development BondsEquipment Finance and Leasing

Checking & Deposit ServicesPersonal LoansReal Estate Development LoansMargin Loans

Stock Option LendingHome MortgagesEquity Credit Lines

Private BankingStructured InvestmentServicesAsset AllocationEquity InvestingFixed-Income Investing

Short-Term Asset ManagementIndexingAlternative InvestmentsSingle Stock Strategies

Investment Management

Comprehensive Trust ServicesFamily Business ServicesReal Estate and Farm ManagementMinerals ManagementCharitable ServicesTrust and Estate Settlement ServicesGuardianship Services

BrokerageFull Service BrokerageManaged Account10b5-1 PlansMoney Market InstrumentsSafekeeping

Financial ConsultingRetirement PlanningEstate PlanningTax PlanningAsset AllocationStock Option Planning

Client

Personal Financial ServicesSophisticated Solutions – Breadth of Services


Portfolio Portfolio ManagerManager

TrustTrustAdministratorAdministrator

PrivatePrivateBankerBanker

Northern Trust:Northern Trust:Integrated Local DeliveryIntegrated Local Delivery

FiduciaryFiduciarySpecialistSpecialist

Regional HQRegional HQ

Broker/Broker/FinancialFinancialAdvisorAdvisor

PrivatePrivateBankerBanker

PortfolioPortfolioManagerManager

Local OfficeLocal Office Local OfficeLocal Office National HQNational HQ

CompetitorsCompetitorsVirtual IntegrationVirtual Integration

ClientClientClientClient

WealthWealthStrategistStrategist

BrokerBroker

Personal Financial ServicesIntegrated Service Delivery Model


Personal Financial ServicesSpotlight: Wealth Management Group

$65 $65

$82

$101$106

2001 2002 2003 2004 2Q05

Assets Under Custody($Billions)

1Penetration equals Northern Trust AUC divided by total investable assets, U.S. ultra high net worth households2Source: The VIP Forum

Total Investable Assets2

U.S. Households $75 MM+$700 BN $581 BN $715 BN $792 BN

Northern Trust Penetration1 9% 11% 11% 13%

Northern Trust Serves

24% of the Forbes 400

3 Year CAGR: 16%


Asset ServicingAsset Servicing

Information ServicesInformation Services

Risk ManagementRisk Management

AssetAssetManagementManagement

Corporate & Institutional ServicesPositioned for Success and Profitability

CashCashActiveActivePassivePassiveSecurities LendingSecurities Lending

Manager of ManagersManager of ManagersForeign ExchangeForeign ExchangeTransition ManagementTransition ManagementCommission RecaptureCommission Recapture

SafekeepingSafekeepingSettlementSettlementInvestment Operations Investment Operations OutsourcingOutsourcing

AccountingAccountingReportingReportingValuationValuation

Attribution AnalysisAttribution AnalysisValue at RiskValue at RiskCrossCross--Border Pension Border Pension PoolingPooling

Rates of ReturnRates of ReturnFund ServicesFund ServicesMultinational HQ ReportingMultinational HQ Reporting

Income CollectionIncome CollectionCorporate ActionsCorporate Actions

Compliance MonitoringCompliance MonitoringMarket Event AnalyticsMarket Event Analytics


Clients in Clients in 39 Countries39 Countries

Trade Settlement Trade Settlement ~90 Markets~90 Markets

16 Locations16 LocationsWorldwideWorldwide

Staff Outside U.S.: Staff Outside U.S.: 1,750+ FTE1,750+ FTE

Toronto

London

Hong Kong

Singapore

DublinTokyoChicago

New York

LuxembourgBeijing

Isle of Man

GuernseyJersey

San Francisco

DetroitLos Angeles

Corporate & Institutional ServicesPositioned to Attract Global Opportunities


25% 25% -- 38% 38% Across Target SegmentsAcross Target Segments

Sources: Pensions & Investments, Investment & Pensions Europe, Pension Funds & Their Advisors, S&P Money MarketDirectory, Nelson Marketplace, and WM Company Local Authority Pension Fund Universe

34%34%

Top 200 U.S. Top 200 U.S. Pension FundsPension Funds

38%38%

Top 100 U.S. Top 100 U.S. Corporate PlansCorporate Plans

28%28%

U.K. Local U.K. Local Authority MarketAuthority Market

25%25%

31%31%

Top 100 U.S. Top 100 U.S. Public FundsPublic Funds

32%32%

Top 25 TaftTop 25 Taft--Hartley PlansHartley Plans

32%32%

Top 50 U.S. Top 50 U.S. FoundationsFoundations

28%28%

Top 50 U.S. Top 50 U.S. EndowmentsEndowments

Top 200 U.K. Top 200 U.K. Pension FundsPension Funds

Corporate & Institutional ServicesCompelling Performance in Target Segments


…to achieve growth objectives

Client Service HeritageClient Service Heritage

Innovative SolutionsInnovative Solutions

Organic Growth…Organic Growth…Complemented by Strategic AcquisitionsComplemented by Strategic Acquisitions

Corporate & Institutional ServicesStrategically Differentiated…


Product

Capabilities

Relationship

Focus

Client

Northern Trust’s ApproachCompetition

ClientProduct

Product

Product

Product

Product

ProductProduct

Corporate & Institutional ServicesServicing Philosophy Centers on Clients


Corporate & Institutional ServicesClient Service is the Heritage of Northern Trust

50% 60% 70% 80% 90% 100%

Client Satisfaction SurveyMelior Group Assessment(Reported January, 2005)

93%

96%

95%

Overall ClientSatisfaction

Expectations AreMet / Exceeded

95% Would HireNorthern Trust Again


Custodian

In the Past: Northern Trust Solution:

Pension Funds

Pension Funds Mutual Funds

SvenskaHandelsbanken

Northern Trustas Custodian

SwedishCustodian

Mutual Funds

Corporate & Institutional ServicesInnovative Solution in the Nordic Region


$0

$20

$40

$60

$80

$100

1991 2001 2004 2Q05

Nordic Region Client Assets($Billions)

$0.02

$21

$86

$67

$19

Corporate & Institutional ServicesInnovation Fuels Growth in the Nordic Region

$97


ANB IMC 1997 $ 53.0

Trustbank Financial Corp. 1998 15.0

Carl Domino Associates, LP 2000 21.3

Ulster Bank Investment Services 2000 14.3

Deutsche Bank Index Business 2003 121.6

Legacy South 2003 13.2

Financial Services Group (FSG) 2005 475.0

Acquisition strategy continues to focus on enhancement of capabilities and access to new geographies, as exemplified by most recent transactions:

PriceAcquisition Year ($ mil) Capability Geography

Corporate & Institutional ServicesOrganic Growth Complemented by Strategic Acquisitions


Expanding RelationshipsExpanding Relationships

Traditional Asset Servicing Products Traditional Asset Servicing Products

Hedge Fund AdministrationHedge Fund Administration

Property Fund AdministrationProperty Fund Administration

Private TrusteePrivate Trustee

Offshore Private BankingOffshore Private Banking

Private Equity AdministrationPrivate Equity Administration

New RelationshipsNew Relationships

New WinsNew Wins

New GeographiesNew Geographies

FSG ClientsFSG Clients

Northern TrustNorthern TrustClientsClients

Corporate & Institutional ServicesFSG Acquisition Fuels Growth Opportunities


OtherOther$5 Billion (1%)$5 Billion (1%)

(Alternative Asset Classes)(Alternative Asset Classes)

$231 Billion$231 Billion(39%)(39%)

$101 Billion$101 Billion(17%)(17%)$253 Billion$253 Billion

(43%)(43%)


ActiveActive


QuantitativeQuantitative


Manager of ManagersManager of Managers

A Diversified Asset ManagerA Diversified Asset Manager

Across Asset ClassesAcross Asset Classes Across StylesAcross Styles

$590 Billion$590 BillionAssets Under Management as of June 30, 2005Assets Under Management as of June 30, 2005

EquitiesEquities

FixedFixedIncomeIncome

ShortShortDurationDuration

Northern Trust Global InvestmentsWorld Class Investment Manager


1Global Investor GI 1002Pension & Investments3FRC Monitor; based on long-term funds

99thth largest worldwide asset managerlargest worldwide asset manager1,21,2

44thth largest U.S. taxlargest U.S. tax--exempt asset managerexempt asset manager22

33rdrd largest institutional index managerlargest institutional index manager22

66thth largest banklargest bank--managed mutual fund familymanaged mutual fund family33


Northern Trust Global InvestmentsEstablished Industry Leader




EquitiesEquities 37%37%Fixed IncomeFixed Income 13%13%Short DurationShort Duration 50%50%

EquitiesEquities 50%50%Fixed IncomeFixed Income 35%35%Short DurationShort Duration 12%12%OtherOther 3%3%

Total AUMTotal AUM

PersonalPersonal

InstitutionalInstitutional

EquitiesEquities 39%39%Fixed IncomeFixed Income 17%17%Short DurationShort Durationand Otherand Other 44%44%

Northern Trust Global InvestmentsBroad Client Base



$590

$292

$572

$326 $320 $303

$479

$233

$0

$100

$200

$300

$400

$500

$600

1998 1999 2000 2001 2002 2003 2004 2Q05

($ Billions)

$404

Acquired Index

Assets

12/31/98 to 6/30/05% Change CAGR

Assets Under Management +153% +15%Excluding Index Acquisition +121% +13%S&P 500 -3% -0.5%

Northern Trust Global InvestmentsExcellent Growth in Assets Under Management


$12.4

$17.7

$26.8

$30.7

$0

$5

$10

$15

$20

$25

$30

2002 2003 2004 2Q05

Northern Trust Global AdvisorsNorthern Trust Global AdvisorsAssets Under ManagementAssets Under Management

$30.7 Billion$30.7 Billion$ Billions$ Billions

NTGA Highlights:NTGA Highlights:AUM have more than doubled in AUM have more than doubled in last two yearslast two years

Capabilities include:Capabilities include:

Emerging and Minority ManagersEmerging and Minority Managers

Hedge FundsHedge Funds

Private EquityPrivate Equity

Investment Program OutsourcingInvestment Program Outsourcing

Strategic SubStrategic Sub--AdvisoryAdvisory

Specialized U.S. and international Specialized U.S. and international equity programsequity programs

Northern Trust Global InvestmentsSpotlight: Manager of Managers Program


Northern Trust:A Compelling Investment Proposition

Rich HistoryRich History116 Year Heritage116 Year HeritageUndiluted by Mergers & AcquisitionsUndiluted by Mergers & Acquisitions

Focused StrategyFocused StrategyExclusively Focused on the Management and Administration of ClieExclusively Focused on the Management and Administration of Client Assetsnt Assets

Conservative CultureConservative CultureOne of only 5 independent U.S. Bank Holding Companies Rated AAOne of only 5 independent U.S. Bank Holding Companies Rated AA-- by S&Pby S&P

Seasoned Management TeamSeasoned Management Team Northern TrustNorthern Trust IndustryIndustry

Bill Osborn Bill Osborn -- Chairman, President & CEO Chairman, President & CEO 35 Years35 Years 35 Years35 YearsSteve Fradkin Steve Fradkin -- Executive Vice President & CFOExecutive Vice President & CFO 20 Years20 Years 20 Years20 YearsBill Morrison Bill Morrison -- President President -- PFSPFS 9 Years9 Years 32 Years32 Years

Tim Tim TheriaultTheriault -- President President -- WWOTWWOT 22 Years22 Years 26 Years26 YearsTerry Terry TothToth -- President President -- NTGINTGI 16 Years16 Years 23 Years23 YearsRick Waddell Rick Waddell -- President President -- C&ISC&IS 30 Years30 Years 30 Years30 Years

lehman september 2005 for pdf - northern trust · northern trust page lehman brothers –6 2005...

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