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ntrs_investor_day_ceo

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  • 1. NORTHERN TRUST Service Expertise Integrity CORPORATION Frederick H. Waddell President & Chief Executive Officer Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation
  • 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 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. Service Expertise Integrity 2
  • 3. Today’s Agenda Corporate Overview Frederick H. Waddell President & Chief Executive Officer Steven L. Fradkin Financial Overview Executive Vice President and Chief Financial Officer Personal Financial Services Sherry S. Barrat Co-President, PFS Corporate & Timothy J. Theriault President, C&IS Institutional Services Northern Trust Stephen N. Potter President, NTGI Global Investments Wrap-Up and Q&A Frederick H. Waddell President & Chief Executive Officer Service Expertise Integrity 3
  • 4. Northern Trust: Client-Centric and Service Expertise Integrity Highly Focused Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation
  • 5. Relationship Driven, Client-Centric Business Model Our Clients Pension Funds Government Families Individuals Agencies Large Corporations Family Privately Taft-Hartley Foundations Held Investment Businesses Management Firms Foundations / Family Offices Endowments / Insurance Companies Healthcare Personal Corporate & Financial Institutional Services Services Northern Trust Global Investments Worldwide Operations & Technology Service Expertise Integrity 5
  • 6. Enduring Principles and Strategies for Success Attractive Client Markets Client- Focused Brand Capabilities Centric Excellence in Execution Key Principles for Long-Term Growth: Organic Growth Acquisition Strategy Focused on Expanding Geography or Capability Operating with a Single Global Platform Service Expertise Integrity 6
  • 7. Personal Financial Service Expertise Integrity Services Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation
  • 8. Personal Financial Services Extensive Reach in High Growth Target Market Attractive Client Markets 85 PFS Offices in 18 States Projected Annual Over 50% of the U.S. millionaire market resides Household Growth Rates within a 45-minute drive of Northern Trust offices. 2007 - 2012 by Household Asset Size Washington (1) 15.5% Minnesota Minnesota Michigan (1) (1) (3) Massachusetts (1) 11.3% Wisconsin Wisconsin (1) (1) Connecticut (1) New York (1) Nevada Ohio Ohio Illinois (1) Illinois Delaware (1) (1) (1) (19) (19) 7.1% Colorado Colorado (1) (1) Missouri Missouri (1) (1) California (11) Georgia Georgia (1) (1) Arizona (8) $1 - 5 $5 - 200 $200+ Texas Florida MM MM MM (7) (25) Source: Claritas Service Expertise Integrity 8
  • 9. Personal Financial Services Addressing Clients’ Complex Financial Goals Focused Capabilities Our integrated approach and comprehensive capabilities allow us to address all of our clients’ needs. Building and Protecting and Creating a Legacy Managing Wealth Transferring Wealth Grow Assets Protect and Preserve Wealth Reinforce Family Values Proprietary and Third-party Wealth Transfer Planning Family Education Investment Managers Customized Trust Solutions Family Mission Statement Active Index Strategies Advanced Wealth Transfer Transition Wealth Alternative Investments Strategies Estate Settlement Services Manage Risk Establish a Charitable Guardianship Services Asset Diversification Giving Tradition Single-stock Concentration Plan for Special Assets Implement a Tailored Hedging Strategies Philanthropic Strategy Family Business Stock Option Planning Balance Charitable Giving with Manage Non-Financial Assets the Financial Needs of the Family Tax Liability Management Ensure Tax-Efficiency of Tax Sensitive Investing Philanthropic Vehicles Tax Loss Harvesting Investment Vehicle Selection Liquidity Management Deposit Services Custom Lending Short Term Cash Management Vehicles Service Expertise Integrity 9
  • 10. Personal Financial Services Our Focus on the Affluent Market is Unmatched Excellence in Execution Private Client Revenues As a Percentage of Total Company Revenues, Full Year 2007 42% 35% 30% 16% 12% 10% 10% 9% 5% Merrill Bank of Bank of Goldman JP Morgan Northern Wilmington Citigroup Wachovia Lynch* America NY Sachs Chase Trust Trust Mellon Source: Company Fourth Quarter 2007 Earnings Release reports; *Merrill Lynch percentage based on 2006 data Service Expertise Integrity 10
  • 11. Personal Financial Services Largest Personal Trust Provider in the U.S. Excellence in Execution The Largest Personal Trust Bank in the U.S. Personal Trust Assets ($ Billions) 1. Northern Trust $205.3 2. Bank of America 127.5 3. JPMorgan Chase 84.5 4. Citigroup 69.9 5. Wachovia 61.9 6. Bank of NY Mellon 50.7 7. U.S. Bancorp 42.9 8. Wells Fargo 42.2 9. PNC Financial 35.3 10. SunTrust 27.3 Source: SNL Financial; As of December 31, 2007 Service Expertise Integrity 11
  • 12. Personal Financial Services What Really Matters to Our Clients Client- Centric Northern Trust’s holistic approach to wealth management addresses the full spectrum of our clients’ unique needs. Private Banking Asset Management Trust Services Financial Planning CLIENT Philanthropic Services Retirement Planning Business Banking Brokerage Service Expertise Integrity 12
  • 13. Personal Financial Services Attractive Client Markets Client- Focused Brand Capabilities Centric Key Strategies and Opportunities for Long-term Growth Excellence in Execution Attractive growth rates in target markets Expand share of wallet Enhance referral flow Sustain and leverage flight to quality Selective geographic expansion Service Expertise Integrity 13
  • 14. Corporate & Service Expertise Integrity Institutional Services Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation
  • 15. Corporate & Institutional Services Market Opportunities Continue to Grow Attractive Client Markets Total Market: $161 Trillion(1) Total Assets Under Custody Worldwide: $90 Trillion(2) Europe, Middle East & Africa Asia Pacific North America $41 Trillion $60 Trillion $60 Trillion U.K. Canada $10 Trillion $4 Trillion Japan Western $19 Trillion Europe U.S. $43 Trillion $56 Trillion Emerging Asia $14 Trillion Other Other $7 Trillion $8 Trillion (1) McKinsey & Company – Mapping the Global Capital Market, Fourth Annual Report, January 2008; Excludes $6 trillion of South American assets (2) YE 2007 competitor earnings releases & The Greensted Report, Fall 2007 – Top 10 custodians Service Expertise Integrity 15
  • 16. Corporate & Institutional Services Continuum of Solutions for Complex Needs Focused Capabilities Asset Management Asset Enhancement Asset Reporting Asset Administration Asset Processing Service Expertise Integrity 16
  • 17. Corporate & Institutional Services Continuum of Solutions for Complex Needs Focused Capabilities Asset Businesses we are NOT in: Management Investment Banking Asset Sub-Prime Mortgage Underwriting Enhancement Asset Backed Commercial Paper Conduits Asset Reporting Private Equity Bridge Financing American Depository Receipts Asset Venture Capital Administration Stock Transfer DC Record Keeping Asset Processing Service Expertise Integrity 17
  • 18. Corporate & Institutional Services Strong Presence in Target Institutional Segments Excellence in Execution Pension Plans Public Funds / Taft-Hartley Northern Northern Of the Top Serves Of the Top Serves 25 Taft-Hartley Funds 40% 100 U.S. Corporate Plans 40% 100 U.S. Public Funds 37% 200 U.S. Funds 40% U.K. Local Authority 30% 200 U.K. Funds 29% Foundations, Endowments, Fund Administration and Healthcare Serves 27% of the Top 200 Asset Northern Managers in the world Of the Top Serves #1 Provider of Offshore Private 50 U.S. Foundations 30% Equity Fund Administration services in Europe 50 U.S. Endowments 26% Fund Administrator for more funds 50 U.S. Healthcare Funds 36% in Ireland and Guernsey than any other provider 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. Service Expertise Integrity 18
  • 19. Corporate & Institutional Services Clients Drive Our Solutions and Product Offerings Client- Centric Pension Public Asset Foundations Plans Funds Managers & Endowments Client Needs / Industry Trends Corporate & Institutional Services Products and Solutions: Asset Management Asset Administration Asset Enhancement Asset Processing Asset Reporting Service Expertise Integrity 19
  • 20. Corporate & Institutional Services Attractive Client Markets Client- Focused Brand Capabilities Centric Key Strategies and Opportunities for Long-term Growth Excellence in Execution Competing and winning around the world Complexity drives innovation Broad array of solutions Unique global operating model Extending industry leading technology platform Service Expertise Integrity 20
  • 21. Northern Trust Service Expertise Integrity Global Investments Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation
  • 22. Northern Trust Global Investments An Attractive Growth Opportunity Attractive Client Markets “In some respects, the asset management business is the envy of the financial services sector in view of its high margins, healthy returns, limited credit risk, generally low capital requirements, and solid cash flow. “Because of the industry’s margin and ROE premiums to most other financial service businesses, as well as its limited capital and credit risk, the group trades at a premium valuation, which we expect to continue.” – UBS Investment Research, December 2005 Service Expertise Integrity 22
  • 23. Northern Trust Global Investments Providing Investment Solutions to Target Clients Focused Capabilities By Asset Class as of March 31, 2008 Personal Financial Services Corporate & Institutional Services $146.0 Billion $632.6 Billion Equities Short Equities Duration $221 BN $62 BN (35%) (43%) $40 BN (27%) $267 BN (42%) $62 BN (10%) Fixed Income $36 BN Securities $80 BN (24%) Lending (13%) Other Other $3 BN $8 BN (<1%) (6%) Short Fixed Duration Income Service Expertise Integrity 23
  • 24. Northern Trust Global Investments Top Tier Investment Manager Excellence in Execution Rankings Markets 8th Largest Manager Worldwide Institutional Assets Served 5th Largest Manager U.S. Institutional Tax-Exempt Assets 4th Largest Manager Defined Benefit Assets 3rd Largest Manager Multi-Manager - U.S. Institutional Assets Investment 3rd Largest Manager Passive Domestic Indexed Equity Strategy 3rd Largest Manager Passive Domestic Indexed Bonds 3rd Largest Manager Passive International Indexed Securities Source: Pensions & Investments 2007 Special Report on Asset Managers, data as of December 31, 2006. Multi-manager Ranking Source: Cerulli Associates, 2005 Service Expertise Integrity 24
  • 25. Northern Trust Global Investments Significant Success in Growing Client Assets Excellence in Execution PFS C&IS Assets Under Management Assets Under Management $609 ($ Billions) ($ Billions) $563 $148 $501 RECORD $135 $462 $117 $110 $374 $104 Acquired $75 BN $98 Index Assets $94 $92 $88 $228 $226 $73 $215 $201 S&P500 S&P500 $160 $59 $138 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 AUM 10-Year CAGR: 10% AUM 10-Year CAGR: 16% S&P500 10-Year CAGR: 4% S&P500 10-Year CAGR: 4% Service Expertise Integrity 25
  • 26. Northern Trust Global Investments Clients Drive Our Solutions and Product Offerings Client- Centric Institutional Clients Personal Clients Client Needs / Industry Trends Northern Trust Global Investments Products and Solutions: Active Quantitative Manager of Managers Service Expertise Integrity 26
  • 27. Northern Trust Global Investments Attractive Client Markets Client- Focused Brand Capabilities Centric Key Strategies and Opportunities for Long-term Growth Excellence in Execution Aligned and focused on serving personal and institutional clients Leveraging strengths in quantitative, manager of managers and fixed income investments Building through global growth Delivering investment excellence Service Expertise Integrity 27
  • 28. One Voice, One Message via Multiple Channels Brand Client Communications Sponsorships & Events Client Segmentation Alternative Communications Advertising Worldwide Crises Funding Products Philanthropy Regional Messages Service Expertise Integrity 28
  • 29. NORTHERN TRUST Service Expertise Integrity CORPORATION Frederick H. Waddell President & Chief Executive Officer Principles That Endure INVESTOR DAY 2008 © 2008 Northern Trust Corporation