N O R T H E R N T R U S T C O R P O R A T I O N Steven L. Fradkin Executive Vice President & Chief Financial Officer © 2007 Northern Trust Corporation northerntrust.com Northern Trust “Managing the Down Cycle” November 8, 2007 Boston, Massachusetts BancAnalysts Association of Boston - 26 th Annual Fall Conference EXHIBIT 99.1 |
2 Giving Our Clients the Freedom to Focus on What Really Matters Forward Looking Statement This presentation may include forward-looking statements such as statements that relate to Northern Trust’s financial goals, dividend policy, expansion and business development plans, anticipated expense levels and projected profit improvements, business prospects and positioning with respect to market, demographic and pricing trends, strategic initiatives, re-engineering and outsourcing activities, new business results and outlook, changes in securities market prices, credit quality including reserve levels, planned capital expenditures and technology spending, anticipated tax benefits and expenses, and the effects of any extraordinary events and various other matters (including developments in litigation, other contingent liabilities, and regulation involving Northern Trust and changes in accounting policies, standards and interpretations) on Northern Trust’s business and results. These statements speak of Northern Trust’s plans, goals, strategies, beliefs, and expectations, and refer to estimates or use similar terms. Actual results could differ materially from those indicated by these statements because the realization of those results is subject to many risks and uncertainties. Our 2006 financial annual report and periodic reports to the SEC contain information about specific factors that could cause actual results to differ, and you are urged to read them. Northern Trust disclaims any continuing accuracy of the information provided in this presentation after today. |
N O R T H E R N T R U S T C O R P O R A T I O N Conference Theme: “Managing the Down Cycle” 3 |
N O R T H E R N T R U S T C O R P O R A T I O N Northern Trust: “Managing the Business Through All Cycles” 4 |
5 Giving Our Clients the Freedom to Focus on What Really Matters 20 Years of History: Economic Shocks & Cycles 1998: LTCM collapse; Russian debt default; Global currency crisis 2000: Y2K financial infrastructure scare; Start of 2-year stock bear market 2001: 9/11 attack; Invasion of Afghanistan 2002: Accounting scandals: Enron, Worldcom, Tyco, & Global Crossing 2003: Second Persian Gulf War (Iraq) 9/30/87 S&P 500: 321.83 10/19/87: Black Monday: S&P 500 declines 20% 1989: Commercial Real Estate Bubble bursting 2004-05: Disastrous hurricane seasons 2004-07: Oil spike from $30 to $90 per barrel 2007: Subprime mortgage market collapse & debt market liquidity crunch 9/30/07 S&P 500: 1526.75 1990-1991: Recession 1991: Persian Gulf War (Kuwait) 1993: Orange County bankruptcy crisis 1994: Fed rate squeeze and bond bear market 1995: Mexican & Latin American debt crises 1991: Soviet Union collapse |
6 Giving Our Clients the Freedom to Focus on What Really Matters 20 Years of History: Successfully Navigated by NTRS 9/30/87 S&P 500: 321.83 1990-1991: Recession 1991: Persian Gulf War (Kuwait) 10/19/87: Black Monday: S&P 500 declines 20% 1989: Commercial Real Estate Bubble bursting 1993: Orange County bankruptcy crisis 1994: Fed rate squeeze and bond bear market 1995: Mexican & Latin American debt crises 1998: LTCM collapse; Russian debt default; Global currency crisis 2000: Y2K financial infrastructure scare; Start of 2-year stock bear market 2001: 9/11 attack; Invasion of Afghanistan 2002: Accounting scandals: Enron, Worldcom, Tyco, & Global Crossing 2003: Second Persian Gulf War (Iraq) 2004-05: Disastrous hurricane seasons 2004-07: Oil spike from $30 to $90 per barrel 2007: Subprime mortgage market collapse & debt market liquidity crunch 1991: Soviet Union collapse 9/30/07 S&P 500: 1526.75 $109 $113 $115 $127 $150 $168 $182 $220 $259 $309 $354 $405 $485 $488 $447 $405 $506 $584 $665 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 NTRS Net Income ($ millions) |
N O R T H E R N T R U S T C O R P O R A T I O N Macroeconomic Environment: A Current Perspective 7 How have financial institutions managed the recent exceptionally challenging macroeconomic environment? |
8 Giving Our Clients the Freedom to Focus on What Really Matters Securities Write-downs $7.9 billion on CDOs and subprime mortgages $2.2 billion in debt and equity trading operations, including mortgage-backed securities and structured products $1.56 billion on loans and subprime mortgages $450 million in CDO and MBS $525 million on mortgage loan and CDO warehouses $1 billion on mortgage-backed securities and non-agency loans $3.6 billion on investments due to subprime crisis |
9 Giving Our Clients the Freedom to Focus on What Really Matters Charge-offs on Illiquid Leveraged Loans $1.5 billion $1.35 billion $869 million $940 million $1.3 billion $463 million $402 million $250 million |
10 Giving Our Clients the Freedom to Focus on What Really Matters Credit costs increased nearly $3 billion due to a $740 million increase in credit losses and a $2.2 billion charge to increase loan loss reserves Credit Quality Challenges Loan loss provision up 50% over last quarter to $90 million Nonperforming assets up 50% over last quarter; $55 million loan loss provision Nonperforming assets up 51% over last quarter to $570 million Net charge-offs increased to 1.01% of loans in the quarter Nonperforming assets doubled to $3.4 billion over last year Nonperforming assets up 23% and provision for credit losses up 17% over last quarter Nonperforming assets jumped 41% over last quarter due to home equity and residential construction loans |
11 Giving Our Clients the Freedom to Focus on What Really Matters Tumultuous Third Quarter: Successfully Navigated by NTRS No securities or leveraged loan write-downs Credit quality improved: nonperforming assets decreased and reserve ratios improved EPS: 11 th consecutive quarter of double-digit, year- over-year growth Common Equity: 78 th consecutive quarter of growth Record quarterly net income, up 27% year-over-year Record assets under custody, up 24% year-over-year Record global custody assets, up 31% year-over-year Strong 14% year-over-year growth in assets under management NTRS’ Third Quarter 2007: |
12 Giving Our Clients the Freedom to Focus on What Really Matters Success Achieved Through Enduring Principles and Strategies Attractive Demographic Markets Focused and Conservative Strategy Client Centricity Excellence in Execution Consistent Leadership and Philosophy |
N O R T H E R N T R U S T C O R P O R A T I O N Northern Trust: “Managing the Business Through All Cycles” 13 |
14 Giving Our Clients the Freedom to Focus on What Really Matters Source: Claritas Attractive Demographic Markets PFS: Extensive Reach in High Growth Affluent Market 85 Offices in 18 States Over 50% of millionaire market resides within a 45-minute drive of Northern Trust offices. Projected Annual Household Growth Rates 2006 - 2011 8.5% 10.4% 15.0% Growth Rate by Household Asset Size New York (1) Arizona (8) Florida (25) Illinois (19) Colorado (1) Nevada (1) Missouri (1) Minnesota (1) Washington (1) Michigan (3) Texas (7) California (11) Georgia (1) Massachusetts (1) Wisconsin (1) Ohio (1) Connecticut (1) Delaware (1) |
15 Giving Our Clients the Freedom to Focus on What Really Matters (1) McKinsey & Company – Mapping the Global Capital Market, Third Annual Report, January 2007 (2) The Greensted Report, Issue 4, Spring 2007 – AUC of Top 10 custodians as of December 31, 2006 Attractive Demographic Markets C&IS: A World of Vast and Growing Opportunities Total World Capital Market: $140 Trillion Total Assets Under Custody Worldwide: $72 Trillion United States Europe Latin America, Mid-East & Other Asia $40 Trillion $28 Trillion $50 Trillion $22 Trillion Japan, China & India (1) (2) |
16 Giving Our Clients the Freedom to Focus on What Really Matters 15 Locations Worldwide Trade Settlement in 90+ Markets Clients in 41 Countries Attractive Demographic Markets C&IS: Positioned Globally for Growth Positioned to serve clients locally and capitalize on global opportunities. Chicago (Corporate Headquarters) Toronto London New York Luxembourg Amsterdam Dublin Guernsey Jersey Singapore Beijing Tokyo Bangalore Hong Kong Melbourne |
17 Giving Our Clients the Freedom to Focus on What Really Matters Focused and Conservative Client-centric and Highly Focused Northern Trust Clients Pension Funds Large Corporations Investment Management Firms Foundations / Endowments / Healthcare Insurance Companies Government Agencies Taft-Hartley Individuals Families Asset Servicing Highly Focused Business Personal Clients Institutional Clients Two Client Channels Integrated Operations & Technology Platform Asset Management One Operating Platform Banking |
18 Giving Our Clients the Freedom to Focus on What Really Matters Focused and Conservative Client-centric and Highly Focused Northern Trust Clients Pension Funds Large Corporations Investment Management Firms Foundations / Endowments / Healthcare Insurance Companies Government Agencies Taft-Hartley Individuals Families Highly Focused Business Personal Clients Institutional Clients Two Client Channels Integrated Operations & Technology Platform One Operating Platform Some of the businesses we are not in: •Sub-Prime Mortgage Underwriting •Credit Cards •Asset Backed Commercial Paper Conduits •Private Equity Bridge Financing •Investment Banking Asset Servicing Asset Management Banking |
19 Giving Our Clients the Freedom to Focus on What Really Matters 35% 28% 17% 13% 11% 11% 11% 8% 5% 5% 45% Private Client Revenues (As a Percentage of Total Company Revenues, 2006) Northern Trust Wachovia Citigroup Wilmington Trust Bank of America Mellon JP Morgan Chase Charles Schwab Merrill Lynch Goldman Sachs Source: Company reports Focused and Conservative PFS: Our Focus on the Affluent Market is Unmatched Bank of New York |
20 Giving Our Clients the Freedom to Focus on What Really Matters Focused and Conservative C&IS: Significant Presence in Our Target Segments Pension Plans Foundations, Endowments & Healthcare Public Funds / Taft-Hartley 100 U.S. Corporate Plans 40% 200 U.S. Funds 37% 200 U.K. Funds 27% Northern Serves Of the Top Northern Serves Of the Top 25 Taft-Hartley Funds 32% 100 U.S. Public Funds 35% U.K. Local Authority 31% 50 U.S. Foundations 30% 50 U.S. Endowments 28% 50 U.S. Healthcare Funds 32% Northern Serves Of the Top Source: Pensions and Investments 22 January 2007 (US Pensions), 25 December 2006 (Foundations & Endowments), 29 May 2006 (Asset Managers); Pension Funds and Their Advisors, 2006 (UK Funds); Money Market Directory, 2006 (Healthcare Funds); Lipper Fitzrovia Dublin Fund Encyclopedia, Administrators, 2006/2007; Lipper Fitzrovia Guernsey Fund Encyclopedia, Administrators, 2006/2007. Fund Administration • Serves 28% of the Top 200 Asset Managers in the world • Is the #1 Provider of Offshore Private Equity Fund Administration service in Europe • Serves as Fund Administrator for more funds in Ireland and Guernsey than any other provider |
21 Giving Our Clients the Freedom to Focus on What Really Matters *As of June 30, 2007; Sources: FR Y-9C reports & SNL Financial. . Securities Portfolio – High Quality and Short Duration 96% of Northern Trust’s total securities portfolio was composed of AAA rated securities as of September 30, 2007. 75% of Earning Assets reprice or mature within one year. Top 20 Bank average equals 50%.* 77% of Interest-Bearing Deposit liabilities reprice or mature within one year. Top 20 Bank average equals 48%.* Focused and Conservative Prudent Balance Sheet Management Loan Portfolio – High Quality Nonperforming assets represent only 0.12% of total outstanding loans as of September 30, 2007. Top 20 Bank average equals 0.68%. Nonperforming loans are covered 6.1x by credit loss reserves as of September 30, 2007. Top 20 Bank average equals 2.0x. Northern Trust does not underwrite mortgage loans to sub-prime borrowers, does not lend directly to hedge funds, does not provide bridge financing to private equity deals, and does not provide an off-balance sheet commercial paper conduit for client liquidity |
22 Giving Our Clients the Freedom to Focus on What Really Matters Client Centricity The Northern Trust Difference Innovative product leadership Unparalleled client service Leading-edge technology Client Solutions Sharp business focus Consistent financial strength and stability Culture and heritage Clients are at the center of everything we do |
23 Giving Our Clients the Freedom to Focus on What Really Matters Client Centricity PFS: Comprehensive Array of Solutions for Clients Retirement Services Qualified Plan Services Defined Benefit Plans Defined Contribution Plans Recordkeeping Investment Management Benefit Payment Services Trust Services Fiduciary Administration and Oversight Family Business Services Philanthropic Services Estate Settlement Services Real Estate and Farm Management Asset Custody Minerals Management Brokerage Full-Service Brokerage Money Market Instruments Safekeeping Online Access Access to Your Banking, Trust, Investment Management, Mutual Funds and Brokerage Information, via Northern Trust Private Passport ® and Wealth Passport ® Financial Planning Retirement Planning Estate Planning Tax Planning Asset Allocation Stock Option Planning Corporate Banking Working Capital and General Corporate Loans Secured and Cash Flow Lending Acquisition Financing Industrial Development Bonds Equipment Finance and Leasing Asset Management Structured Investment Services Asset Allocation Equity Investing Fixed Income Investing Short-Term Asset Management Indexing Alternative Investments Single Stock Strategies Private Banking Personal Credit Lines and Swing Loans Real Estate Development Loans Margin Loans Stock Option Lending Home Mortgages Equity Credit Lines Wealth Management Group Family Office Support Multi-generational Wealth Management Global Asset Servicing for Multi-Manager Investment Programs Data Aggregation and Customized Reporting Tax Lot and Partnership Accounting Investment Consulting and Performance Measurement |
24 Giving Our Clients the Freedom to Focus on What Really Matters Client Centricity C&IS: Extensive Suite of Product Solutions for Clients Fund Services Fund Accounting Investment Operations Outsourcing Active Collateral Management Hedge Fund Administration Private Equity Administration Property Administration Asset Servicing Safekeeping Settlement Income Collection Corporate Actions Information Services Risk Management Services Cash Active Passive Securities Lending Manager of Managers Foreign Exchange Transition Management Commission Management Accounting Reporting Valuation Attribution Analysis Value at Risk Cross-Border Pooling patent pending Rates of Return Multinational HQ Reporting Regulatory Reporting Compliance Monitoring Market Event Analytics Socially Responsible Investing Asset Management Asset Servicing Asset Management |
25 Giving Our Clients the Freedom to Focus on What Really Matters Multi-Advisor Funds Hedge Funds Private Equity Small Cap Growth Mid Cap Growth Large Cap Value Exchange Fund Enhanced Index Funds International Fixed Income High Yield Stable Value Canadian & UK Programs Int’l/US Equity Manager of Managers Minority and Emerging Managers Investment Program Solutions International Equities EAFE Index 130/30 Long-Short Strategies Technology Large Cap Growth Socially Responsible Tax Advantaged Fixed Income and Equity Index Funds Core Fixed Income Municipals Government Short/Intermediate Duration Fixed Income Cash Management Active Investment Management Growth & Value Equity Short & Long Duration Fixed Income Quantitative Management Index & Enhanced Capabilities Manager of Managers Investment Program Solutions Emerging & Minority Programs Alternative Investments PRODUCT BREADTH Methods of Delivery Separate Accounts Collective Funds Common Funds Mutual Funds Methods of Delivery Separate Accounts Collective Funds Common Funds Mutual Funds Client Centricity NTGI: A Continuum of Proprietary & External Solutions Investment Options |
26 Giving Our Clients the Freedom to Focus on What Really Matters Excellence in Execution NTRS: Outstanding Financial Performance in 2007 Trust, Inv. & Other Servicing Fees Other Non-Interest Income Net Interest Income Total Revenues Non-Interest Expenses Net Income Earnings Per Share % Growth 2006 to 2007 $1,530 Million $421 Million $647 Million $2,599 Million $1,648 Million $602 Million $2.69 +15% +16% +10% +14% +14% +22% +21% Assets Under Custody Global Custody Assets Assets Under Management $4.1 Trillion $2.0 Trillion $761 Billion +24% +31% +14% Year-to-Date 9/30/07 |
27 Giving Our Clients the Freedom to Focus on What Really Matters Consistent Leadership and Philosophy Well Positioned for Growth Rich History 118 Year Heritage — Undiluted by Mergers & Acquisitions Focused and Conservative Strategy Exclusively Focused on the Management and Administration of Client Assets Attractive Demographic Markets Serving highly attractive demographic markets in the U.S. and globally Seasoned Management Team Northern Trust Industry Bill Osborn - Chairman & CEO 37 Years 37 Years Rick Waddell - President & COO 32 Years 32 Years Sherry Barrat - President – PFS 17 Years 37 Years Steve Fradkin - EVP & Chief Financial Officer 22 Years 22 Years Tim Moen - EVP – Human Resources & Administration 6 Years 32 Years Bill Morrison - President – PFS 11 Years 34 Years Steve Potter - EVP – International 25 Years 25 Years Joyce St. Clair - EVP – Corporate Risk Management 15 Years 26 Years Jana Schreuder - President – WWOT 27 Years 27 Years Tim Theriault - President – C&IS 25 Years 27 Years Kelly Welsh - EVP & General Counsel 7 Years 29 Years |
N O R T H E R N T R U S T C O R P O R A T I O N Steven L. Fradkin Executive Vice President & Chief Financial Officer © 2007 Northern Trust Corporation northerntrust.com Northern Trust “Managing the Business Through All Cycles” November 8, 2007 Boston, Massachusetts BancAnalysts Association of Boston - 26 th Annual Fall Conference |