EUR 850.00 For Business Accounts Only

Morningstar | Northern Trust's wealth management and custody businesses are the foundations of its wide moat.

Northern Trust is the combination of two moaty businesses: a private bank that serves wealthy investors, primarily in the United States, and a custodian bank that serves institutional customers around the world. Both businesses are supported by the bank’s own internal asset management capabilities as well. Northern Trust, while not the largest of the custodian banks, is arguably the most conservative and stable--and it’s often had more room for growth since it started out so much smaller in the first place.Northern Trust's corporate and institutional services segment, which provides asset custody and back-office administration services to institutional clients. While Northern Trust does not have the scale of the largest players in this segment, it still earns respectable returns and can hold its own against these firms, particularly on higher-touch clients, who demand more custom solutions and customer service. This segment also provides services for Northern Trust's Global Family Office segment, which provides services and products for its ultra-high-net-worth clients and where the bank truly distinguishes itself.The Global Family Office is part of the other half of Northern Trust, its private bank operations, which serves more than 20% of the Forbes 400 richest families and boasts client relationships that can span generations. While many financial-services companies have recently intensified their push into wealth management, we think Northern Trust's deeply entrenched position with high-net-worth and ultra-high-net-worth investors, who often have complex needs that require expert attention, has helped protect the bank from the competition. The bank's long history and sterling reputation make it very difficult for competitors to lure clients away.Overall, we like the latest cost-control initiatives and believe that steady results from both business segments, along with rising interest rates, should allow the firm to improve returns on equity over the next couple of years toward the high end of its 10%-15% target, thus consistently outearning the bank's cost of equity of 9%.