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An overlooked global wealth management giant with a focus on clients with more than $200 million of assets achieves new heights
12/03/2018 , Ian Orton

Founded in 1889 specifically to provide trust, or private banking facilities, along with conventional banking services for Chicago’s wealthy citizens, Northern Trust, “the Gray Lady of LaSalle Street” has since expanded its focus on the US generally as well as other international markets, including the UK and Guernsey.

But both its size and presence within the global wealth management sector routinely gets overlooked despite the fact that wealth management, along with asset servicing or “corporate and institutional services” (C&IS), accounts for Northern Trust’s two core businesses or reporting segments.

In 2017 Northern Trust’s wealth management operations generated total revenues and pre-tax profits of $2,292.9 million and $929 million respectively. 

Wealth management assets under custody and administration, assets under custody and assets under management amounted to $655.8 billion, $645.5 billion and $289.8 billion respectively.

In addition wealth management accounted for $26.3 billion of “earning assets”, most of which consisted of loans.

The segmented management reporting data contained within Northern Trust’s 2017 annual report and accounts doesn’t break out the deposit volumes for either wealth management or C&IS. Assuming a loan to deposit ratio of 29 percent*, however, this would imply that wealth management customer deposits could have amounted to $73.26 billion.

All this means that total client assets amounted to more than $1 trillion at the end of 2017, a volume sufficient to place Northern Trust in the top echelon of global wealth management firms.

Its ranking may be even higher when it comes to dealing with very rich customers with more than $200 million of assets. For Northern Trust has a specific unit to deal with this customer segment.

This is its Global Family Office which provides trust, investment management, custody, and philanthropic services; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking for individuals and family offices in the United States and throughout the world.

Northern Trust’s Global Family Office had $422.9 billion of assets under custody at the end of 2017, or 65.5 percent of wealth management’s $645.5 billion of assets under custody. It also had $87.1 billion of assets under management, or 30.1 percent of wealth management’s $289.8 million of total assets under management.

In total the Global Family office contributed $226.3 million of the $1,449.7 billion of wealth management’s trust, investment and other servicing fees generated during 2017, or 15.6 percent of the total.

Moreover the Global Family Office appears to be growing much faster than the rest of wealth management’s operations.

The Global Family Office increased trust, investment and servicing fees by 17 percent and 14 percent respectively during 2017 and 2016 compared to wealth management’s 10 percent and three percent.

Assets under custody grew by 22 percent and eight percent during each of the two years compared to the 19 percent and seven percent recorded by wealth management.

Assets under management increased at the Global Family Office by 26 percent and 12 percent during 2017 and 2016 compared to the 17 percent and nine percent registered by wealth management. 

Overall, Northern Trust’s wealth management operations have grown at a healthy rate over the past two years.

Pre-tax profits grew at 15 percent and 13 percent respectively during 2017 and 2016 to $919.0 million and $798.6 million.

As already noted above trust, investment and other servicing fees, the main component of wealth management’s earnings grew by 10 percent during 2017 and three percent during 2016 to $1,449.7 million and $1,320.3 million respectively.

But interest income, which accounted for $736.2 million in 2017 and $651.4 percent in 2016, also experienced good growth during the two years despite low interest rates, growing at another 13 percent during 2017 on top of the 15 percent recorded in 2016.

In total Northern Trust has a network of wealth management offices in 18 US states and Washington D.C. as well as in London, Guernsey and Abu Dhabi.

*based on total deposits of $112,390.8 billion and total loans and leases of $32,592.2 billion (Source: Northern Trust, Annual Report and Accounts, 2017)     
 

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