ANNUAL REPORT 2020
In times of uncertainty, our clients have always looked to us—as a guide, as an ally, as the right path forward. And 2020 has been no exception. Even more trusted, even more committed, even more clear: the arrow points to True North.
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Message to Shareholders
Michael O’Grady — Chairman, President and Chief Executive Officer

In times of uncertainty, our clients have always looked to us – as a guide, as an ally, as an advisor to help guide them to the right path forward. And 2020 was no exception. Even more trusted, more committed, more clear: the arrow points True North.

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Performance
Financial Highlights
Jason Tyler — Chief Financial Officer

In a year unlike any other, we maintained strong organic growth, driven by our multi-year strategic initiatives. While interest rate headwinds drove net income lower, return on common equity remained within target. Our commitment to delivering long-term value continues unabated, supported by the strength of our capital position, the quality of our balance sheet, and the continued trust placed in us by an exceptional portfolio of clients.

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Expertise

The expertise we have developed over more than 130 years is the bedrock upon which we have built each client success. It is a standard of excellence that permeates every service and offering—from wealth management to asset management to asset servicing. As a guiding force for our clients, it is never static, continuously evolving as we address the requirements and opportunities of shifting markets and a changing world.

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Service

From new investment imperatives to financial planning advice to process re-engineering: the needs of our clients are always evolving. In any given year, responding to those needs requires foresight, a sharp focus on each client’s unique financial profile, and a flexibility born of our long-term perspective. In 2020, the COVID-19 pandemic demanded even more. Our ability to respond was never more evident, and never more important, to the fundamental health of our clients’ portfolios, businesses, and operations, demonstrating true service.

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Relationships

Our clients’ horizons and needs are multifaceted, but our long-term commitment to their financial well-being and growth is singular. It underlies the quality of service we deliver. It inspires the expertise we deploy. It informs the investments we prioritize. It is precisely why Northern Trust’s expansive portfolio of clients persists—and continues to grow—no matter the economic climate.

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Innovation

At Northern Trust, we innovate at critical junctures, shaping the curve as technological, market and workplace trends mature, and sustained value can be realized–within our own operations and for our clients. 2020 was a year in which such innovations were both well-prepared responses to unforeseen events and well-paved realizations of profound opportunities.

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Inclusion

We believe that the broadest cross-section of voices strengthens our foundation for growth and contributes immeasurably to our integral relationship with society. We also believe that the pursuit of diversity, equity and inclusion is no small task. It must be practiced within our walls, amplified by our leaders, and reflected in the composition of our clientele. In 2020, we reaffirmed our commitment to it, accelerated our efforts, and scaled our programs for even greater impact.

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Community

While we are a global company highly attuned to the macroeconomic forces that impact our clients’ financial strategies, we are also sharply focused on the needs of the communities in which we operate. In 2020, the need was immediate: capital infusion, including funds from the Paycheck Protection Program, for local businesses and organizations. But it was also systemic, meriting an even more purposeful commitment to long-term local impact at a global scale.

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Dear Shareholders,
Annually, I discuss the company’s performance for the past year and our expectations for the next. Needless to say, 2020 was not what we expected, nor was it a year like any other. The pandemic continues to impact everyone’s daily life. While it has highlighted our resourcefulness and resiliency as a society, it has also accentuated inequalities and, at times, pushed us further apart. Living and operating in this environment has been disorientating and difficult for all of us.

For more than 130 years, we have seen our clients through times of relative prosperity and times of great upheaval. It is in times like these—times when our clients need us the most—that we are clearest about who we are, what we stand for and how we must evolve. And it is in times like these that we hold strongest to our unwavering principles of service, expertise and integrity. They guide how we take care of our employees, our clients and our communities. They focus us on the needs of today, while ensuring a brighter tomorrow. Our principles endure—they are our True North.

At Northern Trust, we have not been immune to the pandemic’s effects. We have adapted nearly everything we do to operate the company effectively and create value for our stakeholders. We have consistently aimed to serve as our clients' most trusted financial partner, guarding and growing their assets as though they were our own. Every day, we work to earn this trust.

Throughout the pandemic, with the vast majority of our employees working remotely, Northern Trust’s three businesses – wealth management, asset management and asset servicing – have remained dedicated to the clients who depend upon us. We have transformed in-person engagement into vibrant, interactive digital experiences. We have utilized our balance sheet to meet client needs for credit and liquidity.

We also introduced The Northern Trust Institute, which innovatively leverages our deep expertise and research to help wealth management clients achieve optimal outcomes. Through Integrated Trading Solutions , our asset servicing business gave clients access to global markets, multiple trading locations, high-quality liquidity and an integrated front-, middle- and back-office service. And our asset management business developed a new proprietary environmental, social and governance scoring methodology that enables investors to integrate sustainability into their investment portfolios.

Seeing the dramatic needs in our communities, we contributed $3 million to support the COVID-19 response efforts of nonprofit organizations around the world to provide healthcare, food and other humanitarian relief. And we launched the Northern Trust Foundation with a $20 million commitment. The Foundation aims to create more equitable opportunities for long-term financial success for those who too often face unfair hurdles because of their race, ethnicity, gender, geography or socio-economic conditions.

Contribution to Covid-19 Efforts
$3M
$3 million
Commitment to Northern Trust Foundation
$20M
$20 million

Despite the record low interest rates and fluctuating markets of 2020, we continued to grow our business and deliver solid financial performance. Assets under custody or administration ended the year at $14.5 trillion, up 21 percent from 2019, and assets under management were $1.4 trillion at the end of the year, up 14 percent. Revenue was consistent, as the increase in trust fees and other noninterest income was mostly offset by a reduction in net interest income.

Assets under custody or administration at year end
$14.5T
$14.5 trillion
Assets under Management
$1.4T
$1.4 trillion

Return on average common equity declined to 11.2 percent and diluted earnings per share declined 18 percent, reflecting lower interest rates, increased operating expenses and a higher provision for credit losses. Our capital levels remained strong and we maintained our quarterly dividend at 70 cents per share throughout the year.

Revenue (in millions)
$6,135.2
$6,135,200,000
Revenue is presented on a fully taxable equivalent basis, a non-generally accepted accounting principle (GAAP) financial measure. A reconciliation of revenue prepared in accordance with GAAP to revenue on a fully taxable equivalent basis is available here.
Maintained Quarterly Dividends
$.70Per
Share
$.70

As we look to 2021 and beyond, we remain focused on our key priorities:

  • Syncing high-touch service with digital, data-driven delivery tailored to our clients' needs.
  • Generating organic growth by delivering innovative solutions to new and existing clients.
  • Leveraging our diverse workforce by equipping employees with skills for the future.
  • Driving continual productivity through a sustainable, scalable operating model.
  • Building upon our foundational strength with a strong, conservative balance sheet and a globally respected brand.

I will close by extending my heartfelt gratitude to our clients and shareholders for your patience and understanding through these volatile and uncertain times. I am also deeply grateful for the dedication, perseverance and courage of our employees through this past year’s demanding moments. They make it possible for us to continue offering our clients the service, expertise and integrity that define us as a company.

I hope you'll enjoy reviewing our 2020 performance in a more interactive way through this site. No matter what the future brings, we look forward to remaining your True North as we continue to create value for all of our stakeholders in the years ahead. I wish you and your families a safe and rewarding 2021.

Thank you.

Sincerely,

Michael O’Grady
Chairman, President and Chief Executive Officer

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