Northern Trust 2020 Annual Report

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.

Back to Grid

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North

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.

SHAREHOLDER MESSAGE

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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.

Financial Highlights

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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.

In August 2020, Northern Trust and BondEvalue, a Singapore-based fintech company, collaborated to achieve a major milestone – completing the world’s first bond trade backed by distributed ledger technology.

BondEvalue has launched the world’s first fractional bond exchange, BondbloX, which makes bonds more accessible to investors by reducing the minimum denomination, reducing costs, increasing transparency and expediting settlement. The exchange operates as a Regulated Market Operator (RMO) under the Monetary Authority of Singapore. This innovation demonstrates our industry leadership in delivering digital solutions to our clients and the global markets.

Our ESG Scoring methodology first in industry

Our asset management business developed a new proprietary environmental, social and governance (ESG) scoring methodology that enables the integration of sustainability into investment portfolios in a more transparent and focused manner. It is built on a robust evaluation of financially material sustainability issues relevant to each industry, focusing on the specific risks likely to impact a company’s financial performance. Our scoring methodology is the first in the industry to integrate standards from the Sustainability Accounting Standards Board with aspects of the forward-looking recommendations proposed by TCFD (Taskforce for Climate-Related Financial Disclosures).

Our ESG Scoring methodology first in industry

The rate of change—in financial markets, in the workplace, in our daily lives—was accelerating even prior to 2020. Now, the promise of innovation is amplified by the potent sense of a transformed world and a “new normal.” Still, our approach remains steady: observe, assess and act—precisely when sustained value can be realized.

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Relationships

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Inclusion