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Northern Trust eyes possible acquisition targets

BOSTON (Reuters) - Financial services company Northern Trust Corp is interested in buying a fund administrator or asset manager, its chief executive said on Thursday, not long after rivals revealed a string of takeovers.

At a time many banks are still eager to sell off some divisions and as several of Northern’s rivals have expanded their footprints abroad, Chairman and Chief Executive Officer Frederick Waddell said the company is keeping its eyes open for suitable targets.

“If we could get a fund administrator or asset manager, that would be of interest to us,” Waddell said at the Citigroup Financial Services Conference in New York.

Unlike many rivals, Chicago-based Northern Trust has made very few acquisitions in the last years, preferring to grow its assets organically. The company has $627 billion in assets under management and $3.7 trillion in assets under custody.

But as the pace of consolidation picks up in the asset management and custody industries, Northern -- known for its generally conservative style -- might have to consider making a move or two, some analysts have said.

On Monday, Bank of New York Mellon Corp, the world’s largest custodian of financial assets, said it would buy Germany’s BHF Asset Servicing GmbH for $343 million. A month ago, the New York-based company purchased PNC Financial Services Group Inc’s fund services unit.

At the end of 2009, Boston-based State Street Corp, one of the world’s biggest money managers for institutions, announced plans to buy the securities services arm of Intesa Sanpaolo, Italy’s biggest retail bank.

Northern’s Personal Financial Services division, which caters to very wealthy families, has offices in 18 states in the United States, with nearly a dozen in California, two dozen in Florida and a handful in the Northeast. Waddell said the company would be especially interested in finding acquisition targets in areas where the company is already strong -- like on the east and west coasts.

Waddell also said that the time is currently not right to raise the dividend. “We would like to raise the dividend at the appropriate time, but now is not that time,” Waddell said.

Unlike some rivals, Northern has kept its dividend steady for some time, paying out 28 cents per share every quarter since raising it to that level in the fourth quarter of 2007.

Northern Trust, like its rivals, earns a chunk of its revenue from lending out stocks to clients, including many hedge funds. After the company saw its securities lending fees drop dramatically to $133 million in 2009 from $434 million in 2008, Waddell said he expects this business to feel pressure for some time. As clients take fewer risks and worry about impending regulation, many have reduced their securities lending exposure. “I don’t expect it to come back to where it was a year or two ago,” Waddell said.

The company’s stock price was nearly flat, off 0.3 percent at $53.87, as both of its biggest rivals were off more.

Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick