© 2008 Northern Trust Corporation Service Expertise Integrity NORTHERN TRUST CORPORATION September 9, 2008 Lehman Brothers Global Financial Services Conference Frederick H. Waddell President & Chief Executive Officer EXHIBIT 99.1 |
Integrity Expertise Service 2 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 with respect to litigation, other contingent liabilities and obligations, 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, targets, 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 2007 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. |
Integrity Expertise Service 3 Today’s Agenda Financial Overview Current Topics of Interest Strategic Overview: Personal Financial Services Corporate & Institutional Services Northern Trust Global Investments |
© 2008 Northern Trust Corporation Service Expertise Integrity Financial Overview |
Integrity Expertise Service 5 Challenging Market Environment COMPLEXITY UNCERTAINTY S&P 500: 37 notable daily moves from August 1, 2007 through August 31, 2008 Global banks and brokerage firms continue writedowns of securities, raising capital and evaluating business models “Now that U.S. imports are contracting in real terms…the developed economies are, at the very least, teetering on recession … [and] growth in developing economies is being adversely affected.” ”When the U.S. ‘Catches a Cold,’ So Does the Rest of the World.” Northern Trust Global Economic Research, August 15, 2008 “The European Central Bank remains concerned that high inflation rates will become entrenched and US inflation data this week showed consumer prices rising at the fastest rate since January 1991.” “Surge for the Dollar as Global Fears Rise.” Financial Times. August 15, 2008 The environment beginning in the summer of 2007 and continuing today has been characterized by uncertainty, complexity and volatility. VOLATILITY |
Integrity Expertise Service 6 Challenging Market Environment Continued in 2Q 2008 Second Quarter 2008 YTD June 2008 S&P 500 EAFE* KBW50 -3.2% -2.1% -24.9% -12.8% -17.3% -32.4% June 30 Year-over- Year -14.9% -22.4% -46.9% *In terms of Local Currency, not US$. **Source: Haver Analytics Operating Earnings Per Share of S&P 500 Companies declined 29% in Second Quarter 2008 vs Second Quarter 2007.** |
7 Integrity Expertise Service NTRS: Strong Performance in Second Quarter 2008 Northern Trust: *Excludes the impact of leveraged lease items recorded in Second Quarter 2008. Please refer to the 2Q08 10Q for details. Record revenues*, up 27% vs Second Quarter 2007 Record net income*, up 46% vs Second Quarter 2007 Completed 14 th consecutive quarter of double-digit, year-over-year growth in earnings per share* Completed 81 st consecutive quarter of growth in common equity Exceptional credit quality: nonperforming assets and reserve ratios improved versus Second Quarter 2007 Exceptional securities quality: 92% of securities portfolio rated triple-A No securities or leveraged loan write-downs Assets under custody declined 1% versus Second Quarter 2007, as compared with a 14.9% decline in the S&P 500 Assets under management declined 2% versus Second Quarter 2007 |
8 Integrity Expertise Service Revenue Growth 8% - 10% Positive Operating Leverage EPS Growth 10% - 12% Return on Equity 16% - 18% Annual Target Met All Long-Term, Strategic Financial Targets in 2Q08 2 nd Qtr 2008** 27.3% +11.5 46.7% 24.8% 2 nd Qtr 2007 11.4% -1.4 21.1% 20.2% 3 rd Qtr 2007 19.1% +0.3 25.7% 19.5% 4 th Qtr 2007* 25.4% +2.5 26.0% 19.9% *Excludes all VISA related items. Please refer to the 2007 Annual Report and 10K and 1Q08 10Q for details. **Excludes leasing charges. Please refer to the 2Q08 Form 10Q for details. 1 st Qtr 2008* 18.7% +2.5 22.6% 19.9% |
9 Integrity Expertise Service Growth in Client Assets Consistently Outperforms the Market Assets Under Custody $4.0 Trillion -0.5% -0.7% +16.7% Global Custody Assets $2.0 Trillion +0.2% +4.6% +28.9% Assets Under Management $751 Billion -3.5% -2.0% +12.1% Assets at 5 Year June 30, 2008 Last Qtr Last Yr CAGR % Change Vs. Equity Market Indices: S&P 500 -3.2% -14.9% +5.6% EAFE (local currency) -2.1% -22.4% +8.6% Whether considered on a quarterly, annual or 5-year basis, our asset accumulation rates consistently outperform the market. |
10 Integrity Expertise Service NTRS: 10 th Largest Bank in the U.S. as of August 31, 2008 Ranked by Market Capitalization 253.7 217.0 165.5 118.1 98.1 57.3 31.4 30.6 24.7 23.0 14.1 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 15. Citigroup Bank of America JPMorgan Chase Wells Fargo Wachovia US Bancorp Bank of New York SunTrust PNC Bank State Street Northern Trust ($ Bn) As of June 30, 2007 177.9 104.1 79.3 49.6 47.2 42.6 40.6 33.8 25.5 17.7 7.7 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 19. Citigroup Bank of America Wells Fargo Wachovia JPMorgan Chase Bank One US Bancorp Fifth Third FleetBoston BB&T Northern Trust ($ Bn) As of Dec 31, 2002 138.7 134.0 103.4 100.0 55.5 39.6 33.5 29.3 24.9 17.7 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Bank of America JPMorgan Chase Citigroup Wells Fargo US Bancorp Bank of NY Mellon Wachovia State Street PNC Bank Northern Trust ($ Bn) As of August 31, 2008 |
© 2008 Northern Trust Corporation Service Expertise Integrity Current Topics of Interest |
12 Integrity Expertise Service Top 20 Bank Source: FR Y-9C reports and SNL Financial Revenue Stream Revenue Stream – Dominated by Fee Income 74% of Total Revenues derived from Non-Interest Income in 2007. Top 20 Bank average equaled 48%. Differentiated, Conservative Business Model Securities Portfolio Securities Portfolio – High Quality and Short Duration 92% of Northern Trust’s total securities portfolio was composed of triple-A rated securities as of June 30, 2008. 91% of Asset-Backed Securities rated triple-A Exposure to subprime Asset Backed Securities relative to the overall portfolio was minimal at ~2% Total gross unrealized losses on the securities portfolio were $176 million 79% of Earning Assets and 75% of Interest-Bearing Deposit Liabilities re-price or mature within one year as of June 30, 2008. Top 20 Bank average equals 52% and 45%, respectively. Equity Market Impact Equity Market Impact A 10% rise or fall in overall equity markets causes an approximate, corresponding 4% increase or decrease in Trust, Investment & Other Servicing Fees, and an approximate, corresponding 2% increase or decrease in Total Revenues |
13 Integrity Expertise Service Outstanding, Consistent Credit Quality Top-tier credit quality. Notably better than peer averages in each category. *Peer group consists of the 20 largest U.S. Bank Holding Companies in terms of total balance sheet assets. Source: SNL Financial Peer* Average NTRS 0.12% 501% 0.07% 1.47% 168% 1.43% Non-Performing Assets as a % of Loans Loan Loss Reserve as a % of Non-Performing Assets Net Charge-Offs to Average Loans As of June 30, 2008 |
14 Integrity Expertise Service Strong Capital Ratios Consistently Exceed… 9.7% 9.8% 9.7% 9.8% 11.0% 2004 2005 2006 2007 2Q08 …Regulatory “Well Capitalized” Guidelines. 13.3% 12.3% 11.9% 11.9% 11.7% 2004 2005 2006 2007 2Q08 6.9% 6.8% 6.7% 7.1% 7.6% 2004 2005 2006 2007 2Q08 Tier 1 Capital Ratio Well Capitalized Guideline = 6% Leverage Ratio Well Capitalized Guideline = 5% Total Risk Based Ratio Well Capitalized Guideline = 10% |
15 Integrity Expertise Service Strong, Consistent Capital is a Differentiator *Reflects legacy Bank of New York through Second Quarter 2007 Source: Based on Total Common Equity as reported by SNL Financial Second Quarter 2008 was the 81 st consecutive quarter – or 20+ years – of increasing common equity dating back to 1988 Quarterly Change in Common Equity Quarterly Increase Quarterly Decline Northern Trust 2008 2008 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 1988 1988 Bank of NY Mellon* Bank of America Citigroup Fifth Third JPMorgan Chase Mellon (legacy) State Street Wells Fargo 2007 2007 |
16 Integrity Expertise Service Stable Credit Rating History “A bank for all business cycles” AA AA- A Standard & Poor’s Senior Debt Rating S&P 500 Avg Fed Funds Northern Trust Corporation: AA- Rating for 20+ Years The Northern Trust Company: Upgraded to AA on May 30, 2008 |
© 2008 Northern Trust Corporation Service Expertise Integrity Strategic Overview |
18 Integrity Expertise Service Client-centric and Highly Focused Business Model Our Clients Worldwide Operations & Technology Government Agencies Taft-Hartley Foundations / Endowments / Healthcare Individuals Privately Held Businesses Pension Funds Large Corporations Investment Management Firms Insurance Companies Families Family Foundations Family Offices Personal Financial Services Corporate & Institutional Services Northern Trust Global Investments |
19 Integrity Expertise Service Resisting the Temptation to Change Our Business Model Credit Cards Retail Banking Consumer Finance Venture Capital Stock Transfer DC Record Keeping Investment Banking Sub-Prime Mortgage Underwriting Asset Backed Commercial Paper Conduits Private Equity Bridge Financing Discount Brokerage American Depositary Receipts While we do adjust our actions to align with prevailing conditions, Northern Trust has resisted the temptation to change our business model or risk profile to capitalize on temporarily shifting cycles. Businesses Northern Trust is NOT in: |
© 2008 Northern Trust Corporation Service Expertise Integrity Personal Financial Services |
21 Integrity Expertise Service Personal Financial Services Extensive Reach in High Growth Affluent Market 85 PFS Offices in 18 States Over 50% of the U.S. millionaire market resides within a 45-minute drive of Northern Trust offices. Arizona (8) Florida (25) Illinois (19) Illinois (19) Colorado (1) Colorado (1) Nevada (1) Nevada (1) Missouri (1) Missouri (1) Washington (1) Michigan (3) Texas (7) California (11) New York (1) Connecticut (1) Delaware (1) Georgia (1) Georgia (1) Wisconsin (1) Wisconsin (1) Ohio (1) Ohio (1) Minnesota (1) Minnesota (1) Projected Annual Household Growth Rates 2007 - 2012 by Household Asset Size 7.1% 11.3% 15.5% $1 - 5 MM $5 - 200 MM $200+ MM Source: Claritas Massachusetts (1) |
22 Integrity Expertise Service Personal Financial Services Addressing Clients’ Complex Financial Goals Integrated approach and comprehensive capabilities. Grow Assets Proprietary and Third-party Investment Managers Active Index Strategies Alternative Investments Manage Risk Asset Diversification Single-stock Concentration Hedging Strategies Stock Option Planning Tax Liability Management Tax Sensitive Investing Tax Loss Harvesting Investment Vehicle Selection Liquidity Management Deposit Services Custom Lending Short Term Cash Management Vehicles Building and Managing Wealth Protecting and Transferring Wealth Protect and Preserve Wealth Wealth Transfer Planning Customized Trust Solutions Transition Wealth Estate Settlement Services Guardianship Services Plan for Special Assets Family Business Manage Non-Financial Assets Creating a Legacy Reinforce Family Values Family Education Family Mission Statement Advanced Wealth Transfer Strategies Establish a Charitable Giving Tradition Implement a Tailored Philanthropic Strategy Balance Charitable Giving with the Financial Needs of the Family Ensure Tax-Efficiency of Philanthropic Vehicles |
23 Integrity Expertise Service Private Client Revenues As a Percentage of Total Company Revenues, Full Year 2007 Source: Company Fourth Quarter 2007 Earnings Release reports; *Merrill Lynch percentage based on 2006 data 35% 30% 16% 12% 10% 10% 9% 5% 42% Northern Trust Wachovia Citigroup Wilmington Trust Bank of America JP Morgan Chase Merrill Lynch* Goldman Sachs Bank of NY Mellon Personal Financial Services Our Focus on the Affluent Market is Unmatched |
24 Integrity Expertise Service Personal Financial Services Significant Success in Growing Client Assets $59 $73 $92 $98 $94 $88 $104 $110 $117 $135 $143 $148 $96 $121 $148 $163 $160 $151 $185 $209 $226 $282 $326 $332 PFS Assets Under Management ($ Billions) PFS Assets Under Custody ($ Billions) AUM CAGR: 9% S&P 500 CAGR: 3% AUC CAGR: 12% S&P 500: 3% |
© 2008 Northern Trust Corporation Service Expertise Integrity Corporate & Institutional Services |
26 Integrity Expertise Service Corporate & Institutional Services Asset Servicing Solutions Full array of capabilities to meet the needs of sophisticated institutional investors. Fund accounting Transfer agency Corporate secretarial Trustee Investment operations outsourcing Safekeeping Settlement Derivatives processing Income collection Corporate actions Tax reclamation Active Quantitative Investment outsourcing Liability driven investing Manager of managers Hedge funds Private equity Transition management Investment accounting Reporting and valuation Performance analytics Risk monitoring and reporting Trade execution analysis Data warehouse Cross-border pooling Trade execution Cash management Securities lending Foreign exchange Commission management Asset Administration Asset Processing Asset Reporting Asset Enhancement Asset Management |
27 Integrity Expertise Service Corporate & Institutional Services Strategically Positioned to Succeed in Three Dynamic Regions North America Europe, Middle East & Africa Asia Pacific Abu Dhabi Dublin Toronto London Limerick Amsterdam Luxembourg Guernsey Melbourne Singapore Hong Kong Bangalore Beijing Tokyo Jersey Chicago |
28 Integrity Expertise Service Corporate & Institutional Services Strong Presence in Target Institutional Segments Source: Pensions and Investments 21 January 2008 (US Pensions), 24 December 2007 (Foundations & Endowments), 28 May 2007 (Asset Managers); Pension Funds and Their Advisors, 2007 (UK Funds); Money Market Directory, 2007 (Healthcare Funds); Lipper Fitzrovia Dublin Fund Encyclopaedia, Administrators, 2006/2007; Lipper Fitzrovia Guernsey Fund Encyclopaedia, Administrators, 2006/2007. Fund Administration Serves 27% of the Top 200 Asset Managers in the world #1 Provider of Offshore Private Equity Fund Administration services in Europe Fund Administrator for more funds in Ireland and Guernsey than any other provider Pension Plans 100 U.S. Corporate Plans 40% 200 U.S. Funds 40% 200 U.K. Funds 29% Northern Serves Of the Top Public Funds / Taft-Hartley Northern Serves Of the Top 25 Taft-Hartley Funds 40% 100 U.S. Public Funds 37% U.K. Local Authority 30% Foundations, Endowments, and Healthcare 50 U.S. Foundations 30% 50 U.S. Endowments 26% 50 U.S. Healthcare Funds 36% Northern Serves Of the Top |
29 Integrity Expertise Service Corporate & Institutional Services Significant Success in Growing Client Assets C&IS Assets Under Custody ($ Trillions) C&IS Global Custody Assets ($ Trillions) AUC CAGR: 13% S&P 500: 3% GCA CAGR: 28% EAFE CAGR: 5% $1.0 $1.1 $1.4 $1.5 $1.5 $1.3 $1.9 $2.3 $2.7 $3.3 $3.8 $3.6 $0.1 $0.2 $0.3 $0.4 $0.5 $0.5 $0.7 $1.0 $1.2 $1.7 $2.1 $2.0 |
© 2008 Northern Trust Corporation Service Expertise Integrity Northern Trust Global Investments |
31 Integrity Expertise Service Northern Trust Global Investments Top Tier Investment Manager Source: Pensions & Investments 2008 Special Report on Asset Managers, data as of December 31, 2007. *Multi-manager Ranking Source: Cerulli Associates, 2005 10 th Largest Manager Worldwide Institutional Assets 5 th Largest Manager U.S. Institutional Tax-Exempt Assets 3 rd Largest Manager Defined Benefit Assets 3 rd Largest Manager Multi-Manager - U.S. Institutional Assets* Markets Served Rankings 4 th Largest Manager Passive Domestic Indexed Equity 3 rd Largest Manager Passive Domestic Indexed Bonds 3 rd Largest Manager Passive International Indexed Securities Investment Strategy |
32 Integrity Expertise Service Northern Trust Global Investments A World Class Investment Manager $751.4 Billion Assets Under Management as of June 30, 2008 A Diversified Asset Manager $434 Billion (58%) Active $276 Billion (37%) Quantitative $41 Billion (5%) Manager of Managers Across Asset Classes Across Client Segments $609 Billion Institutional $143 Billion Personal Across Styles Equities $294 Billion (39%) Fixed Income $96 Billion (13%) Short Duration $350 Billion (47%) Other $11 Billion (1%) |
33 Integrity Expertise Service Northern Trust Global Investments Positioned for Global Growth Netherlands United Kingdom United States (85 PFS Offices) Japan RBS/ Mitsubishi/ Resona Trust Ireland Pensco Hong Kong Nordics Nordea Singapore China France Groupama Northern Trust Offices Institutional Distribution Agreements Thailand Bangkok Bank Canada Scotia McLeod United States Investment Only (10 Distributors) Extensive presence through worldwide client base and distribution relationships. Taiwan New York Melbourne Abu Dhabi |
34 Integrity Expertise Service Northern Trust Global Investments Significant Success in Growing Client Assets $197 $233 $292 $326 $320 $303 $479 $572 $618 $697 $757 $751 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 6/30/08 Assets Under Management ($ Billions) 12/31/97 to 6/30/08 CAGR Northern Trust 14% S&P 500 3% Acquired $75 of Index Assets |
35 Integrity Expertise Service Northern Trust: Well Positioned for Success Attractive Demographic Markets Focused and Conservative Strategy Client Centricity Consistent Leadership and Philosophy Excellence in Execution Success Due to Enduring Principles and Strategies: |
© 2008 Northern Trust Corporation Service Expertise Integrity NORTHERN TRUST CORPORATION September 9, 2008 Lehman Brothers Global Financial Services Conference Frederick H. Waddell President & Chief Executive Officer |