Northern Trust Corp (NASDAQ:NTRS)

NetscribeBanking (92.58) Submitted: 1/12/2007 7:49:03 AM : Start Price: $54.93 NTRS Score: -19.49

Northern Trust Corporation is a financial holding company that conducts business through three principal business units: Northern Trust Global Investments, Worldwide Operations, and Technology. It has four national bank and one savings bank subsidiaries, three trust companies and plethora of other U.S. and foreign subsidiaries. With an asset base of $53.4 billion, Corporate and Institutional Services accounts for majority of its revenues.

The focus of the bank has been on the wealth advisory services. The year 2007 would be a huge year for public and pension fund administration with rough estimates of about $500 billion to be managed. However these are tied to the global equity markets and the Barings Bank integration is showing positive results. The bank has consistently evolved over the years and has transformed itself from being a domestic player to a more global and dynamic enterprise. In line with this it has operations in over 40 countries and more than 30% of its income comes from non-U.S. operations. This is further strengthened by the fact that global custody represents 50% of their portfolio which has grown at a compounded annual rate of 31% over the past 15 years compared to Standard and Poors 500’s 8.6%. It is very bullish on the European growth story opening a new branch in London and trying to expand its physical presence into continental Europe and Asia.

The rollout of innovative product - multinational pooling capability - in Personal Financial services (PFS) division is expected to generate good business. Moreover the PFS division has roped in 40 third party managers to offer investment solutions to hedge funds and private equity players who in turn compete directly with the full service brokers.

The unique strategy of the bank of bundling products facilitates cross selling and charging less for incremental product sold seems to payoff well. Interest rate pressure and credit quality is not much of an issue as it derives 75% of its income from the fee and non-interest based sources. It has had its sixth consecutive double-digit net income growth in the recent quarter. With a good management team with diversified experience along with profitable business mix the bank is all set for a bullish trend.