Northern Trust soars above financial turmoil

Over the past 18 months, several banks around the country have posted huge losses, largely related to the collapse of the subprime housing market, the near complete slowdown in residential and commercial real estate and a subsequent credit crunch.

Many local banks have felt the pain as well. In the second quarter of 2008 alone, Milwaukee-based Marshall & Ilsley Corp. posted a $483 million loss, while Green Bay-based Associated Banc-Corp had $59 million in loan losses during the same time frame.

However, some banks and financial institutions have steered clear of the housing-related woes by catering to high net-worth individuals, focusing on asset management and trusts.

Chicago-based Northern Trust Co. is one example of a bank that has escaped the carnage thus far.

The company posted second quarter net income of $215.6 million in mid-July, compared with $206.9 million in income the year before. Its quarterly net revenues were $1.09 billion, a 24-percent increase from the second quarter in 2007.

“Northern Trust has been well insulated from the fallout amongst financial institutions,” said James Kuehn, president and chief executive officer of Northern Trust-Wisconsin. “We’re not immune to everything – if (the fallout) continues to ripple through to investment-grade securities and other vehicles, we will be impacted. But that’s not our current way of thinking.”

Northern Trust also has benefited because it did not invest heavily in securities related to the housing market, Kuehn said.

“We don’t have any products to sell to our clients,” he said. “We have no inventory. And from a personal investment management standpoint, we’re always looking for the best securities.”

The company’s local office at 526 E. Wisconsin Ave. in downtown Milwaukee has also posted significant gains, Kuehn said. The Milwaukee-based Wisconsin operations are experiencing record levels of new business fees, a reflection of its record number of new clients.

“That’s a function of a few things – a reflection of our quality personnel, Northern Trust’s reputation and a function of what’s going on in the national marketplace with other financial institutions,” he said. “We’ve been a direct beneficiary in numerous locations of clients leaving other providers because of their concerns with the current (economic) environment.”

The Milwaukee office of Northern Trust has seen a significant number of new trust and investment management accounts and deposits transferred to it that are well in excess of the $100,000 that the Federal Deposit Insurance Corp. (FDIC) covers.

“That’s in recognition of our financial strength,” Kuehn said.

While the local branch of Northern Trust is seeing record growth, it has so far only added one new employee this year, a portfolio manager. However, the company will convert meeting space on its second floor later this month into more office space, as it expects to add employees in early 2009.

The converted meeting area on the bank’s second floor is the last expansion room in Northern Trust’s downtown facility. The space should be sufficient through 2009, Kuehn said, but beyond that, the bank may consider additional locations.

The bank now has 21 employees in the Milwaukee marketplace, and it will add personnel in both banking and trust and investment management early next year. Kuehn declined to give the number of new employees the Milwaukee office will hire.

“Based on Northern Trust’s commitment to the highest level of service, we will hire the necessary personnel to meet that,” he said. “Our clients have been good ambassadors – we’re seeing a higher and higher percentage of new business coming from word or mouth referrals,” Kuehn said. “Coupled with the larger stuff that is out there, the financial turmoil, it’s all playing into our hands.”

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