Ladies and gentlemen, thank you for standing by. Good day, and welcome to the Northern Trust Corporation First Quarter 2014 Earnings conference call. Today’s call is being recorded. At this time, I would like to turn the conference over to the Director of Investor Relations, Bev Fleming, for opening remarks and introductions. Please go ahead.

Thank you, Paula. Good morning everyone and welcome to Northern Trust Corporation’s First Quarter 2014 Earnings conference call. Joining me on our call this morning are Mike O’Grady, Northern Trust’s Chief Financial Officer, Jane Karpinski, our Controller, and Alison Quaintance from our Investor Relations team. For those of you who did not receive our first quarter earnings press release or financial trends reported via email this morning, they are both available on our website at northerntrust.com. In addition and also on our website, you will find our quarterly earnings review presentation, which we will use to guide today's conference call. This April 15 call is being webcast live on northerntrust.com. The only authorized rebroadcast of this call is the replay that will be available through May 14. Northern Trust disclaims any continuing accuracy of the information provided in this call after today. Now for our Safe Harbor statement. What we say during today's conference call may include forward-looking statements, which are Northern Trust's current estimates and expectations of future events or future results. Actual results, of course, could differ materially from those expressed or implied by these statements because the realization of those results is subject to many risks and uncertainties that are difficult to predict. I urge you to read our 2013 annual report and other reports with the Securities and Exchange Commission for detailed information about factors that could affect actual results. During today's question and answer session, please limit your initial query to one question and one related follow-up. This will allow us to move through the queue and allow as many people as possible the opportunity to ask questions as time permits. Thank you again for joining us today. Let me turn the call over to Mike O'Grady. Michael O’Grady: Thank you, Bev. Good morning everyone…

(Operator instructions) We’ll take our first question from Ken Usdin with Jefferies. Ken Usdin – Jefferies: Hi Mike and Bev, how are you? Good morning. Mike, can you give us a little more color on the custody business? Obviously there’s great growth on a year-over-year basis and there’s really good AUC growth sequentially, but the revenues were only up just slightly and I was wondering if you could detail whether some part of it might have been transaction activity or any other pushes and pulls that there might have been that would have withheld it from a better growth rate. Michael O’Grady: So the custody business continues to grow well, and as you saw from the custody and fund administration fees is actually a nice quarter as far as growth, and that just reflects the continued strong new business that we talk about as it works its way through the fee line. I would say that as far as factors within the quarter, keep in mind that as strong as the equity markets may be, only about half of the assets under custody relate to equity so they don’t—they won’t fully reflect that. So having a growth rate in fees that is similar to assets under custody is actually the positive impact of net new business. Ken Usdin – Jefferies: Okay, but was there something that either was strong in the fourth or that didn’t come through in the first, because all that, given the growth that you’re mentioning and the onboarding of new clients, the revenues were only up less than $1 million sequentially. So I’m just thinking about from a prospective, is there something that either wasn’t in there that might be going forward, or just something that maybe is lagging in terms of its revenue recognition? You…

Moving on, we’ll go to Brennan Hawken with UBS. Brennan Hawken – UBS: Good morning. So question on the AUM- it sounds like ex-noise in your C&IS and wealth management, I get to maybe roughly a 2% C&IS sequential growth rate and then just slightly positive in wealth management. Is that right? I was trying to note down all the noise you were walking through there, Mike. Michael O’Grady: Yes, sequential, I think if you take into account the transfer that we talked about, on C&IS you would be closer to 4% and on wealth management you’d be closer to 1%. Brennan Hawken – UBS: Okay, and it also looked like the asset management fee rate in C&IS took a bit of a hit, so can we talk about whether or not this noise, was it the timing of some of these re-classes that might have had an impact there, or did these changes happen in the beginning of the quarter and therefore is this the new run rate that we should think about for the asset management business in C&IS? Michael O’Grady: So as you point out, the fee rate is still shy of that, and there are a number of factors that contributed to it. One is just slightly higher money market fee waivers. Two is that at the beginning of the quarter, we did re-price some of our mutual funds in the multi-manager space. That was as of January 1, so that’s in the run rate, if you will, now. Then also, the day count in the first quarter does impact the fees that are generated from the mutual funds, and then there’s a slight mix change which we’ve been talking about over time, which is even as clients take on more equity exposure, they’re doing it…

Moving on, we’ll go to Marty Mosby with Guggenheim. Marty Mosby – Guggenheim: Good morning, Mike. I was going to ask a technical question about the share repurchase. The $163 million was about over 2.5 million shares, but when you look at the outstanding shares in the report, they’re only down about 800,000, so I was curious what the difference was between that. Michael O’Grady: Yeah, the difference is just that in any time period, there are exercises of employee-related shares and options, and so that can offset some of the shares that we repurchase; and that’s the case in the fourth quarter as well. Marty Mosby – Guggenheim: But that was stronger than what you would typically have probably seen—we’ve seen in past quarters. Michael O’Grady: Yes, and part of that, Marty, is it is going to be related to the level of the stock price, so options that were granted a number of years ago were out of the money for some time period. In the fourth quarter with the stock price being higher, that provides a greater incentive for employees to exercise the options. It also just depends on the remaining time that’s in the options as well, and certainly as options get closer to expiration, which will happen towards the end of the year, then the employees tend to exercise those options before they expire. Marty Mosby – Guggenheim: And then lastly, the shift from the shorter term money with banks and the Fed into the treasury portfolio, what kind of duration are you buying into? What’s your thought process there at this point? Michael O’Grady: So our duration on the securities portfolio was very stable with where we were in the fourth quarter, so right now, as I’ve mentioned previously in the fourth quarter, we were at about 14 months as far as the duration for that portfolio and we’re still in that range. We did increase the size of the securities portfolio during the quarter just because we’ve seen increased custody deposits and stability in those deposits, and I would say at this point that obviously like everyone else, we’re looking at interest rates and what the expectations might be, but our position is relatively stable as opposed to one where we’re necessarily looking to either increase or decrease the duration on that portfolio. Marty Mosby – Guggenheim: Got you, so just a shift between the shorter term and then the securities, given what you’re looking at as more long-term funding out of the deposit base? Michael O’Grady: Exactly. Marty Mosby – Guggenheim: Thanks. All right, thank you.

We’ll go to our next questioner, and that will be Ashley Serrao with Credit Suisse. Ashley Serrao – Credit Suisse: Good morning, Mike. First, a question on regulation. As we come towards the end of the SLR rule-making process, do you believe that the rule as it stands today will impact business decisions in any meaningful way? And then an update on how you’re thinking about other regulation, especially in Europe – I know you addressed the expense angle with AIFMD, but maybe some thoughts on revenue opportunities as well. Michael O’Grady: Sure. So with regard to the supplementary leverage ratio, I do believe that that will have an impact on business decisions, not necessarily because it has such a great impact on Northern Trust but I think that it will impact the market. And the areas where I would expect to see impact would be certainly just with the size of the balance sheet being very relevant and having higher levels for the largest banks, just being able to take on deposits, for example, as a different capital implication than it previously did. So I think that will affect the market overall and certainly will affect the way we think about client deposits and what the appropriate pricing is for that deposit. At this point, the supplementary leverage ratio does not present limitations to us, so it hasn’t caused us to do anything that we wouldn’t have previously done; but I think that that will evolve, as I mentioned, with the market over time. And then a second area that I think it could potentially have an impact is on what I’ll consider off-balance sheet commitments, whether that’s line of credit or just credit facilities to corporations; and again, given the fact that those are included in the denominator…

Moving on, we’ll go to Luke Montgomery with Sanford Bernstein. Luke Montgomery – Sanford Bernstein: Morning guys. Just a quick one on CCAR. Now that you’ve been through the process, just any lessons you’ve learned, things that maybe you would do differently or could have done differently for next time. And then also along with that, perhaps you could comment on whether the uncertainty going into this time, maybe more conservative on your capital return request than you might have otherwise been. Michael O’Grady: Sure. So CCAR, as we talked about a lot last year, we needed to make a number of changes and enhancements to our process relative to the CapPR process and feel that we were successful in implementing those and we’re certainly pleased with the outcome. Having said that, we still have more work to do on that front. As has been much talked about, there’s the quantitative aspect of it, which we think that we perform well, but then there’s also the qualitative aspect, and in those areas we continue to improve the modeling that we do. We continue to improve the way in which we communicate our plan to the regulators. We definitely involve a broader group of people within the company, whether that’s different parts of business management as we develop stress scenarios but also the engagement of our board, so it’s a very comprehensive, as it’s titled, process and I think that we learn the importance of making those investments to be able to meet with the regulatory expectations, but we also understand that those expectations continue to move up. So we have plans in place, even though we have not received specific feedback with regard to our plan at this point, and we’ll get that later in the month. That hasn’t held…

We’ll move to our next caller, and that will be Cynthia Mayer with Bank of America Merrill Lynch. Cynthia Mayer – Bank of America Merrill Lynch: Hi, thanks a lot. Maybe just circling back to the fee reductions on multi-manager mutual funds, can you give us a sense of how many assets and funds that involves and some of the thinking behind that? Also, I think you had mentioned—previously mentioned maybe last quarter that you were reversing discounted fees in wealth management, so wouldn’t that offset some of that? Michael O’Grady: So the first part, Cynthia, this related to three multi-manager funds which had AUM of approximately $4 billion related to that, and the rationale for the change in pricing was to just ensure that those products continued to be priced competitively within the marketplace. As you would expect, we constantly are monitoring pricing and the costs of our funds, and from time to time feel it’s appropriate to look at reducing the fees on the fund. So that’s what it related to. As far as the discounts, the discount is what I would consider kind of an ongoing initiative. We did not necessarily reduce discounts, for example, across the board in the first quarter. It’s something where right now, it’s happening more on what I would consider kind of an account-by-account basis where if we determine that the level of work and value that’s being delivered is not aligned with the discount, then that’s an opportunity. But we didn’t really see any benefit, significant benefit from that in the first quarter that would offset the change in pricing. Cynthia Mayer – Bank of America Merrill Lynch: Okay, great. I apologize if you mentioned this, but how is your pipeline looking for C&IS? Michael O’Grady: Pipeline continues to look very…

Moving on, we’ll go to Glenn Schorr with ISI. Glenn Schorr – ISI: Thanks very much. I guess I’m trying to tie together all of the pieces of the puzzle for investment management because we heard about a transfer, some price cuts, and then some internal transfer stuff. If I look at assets versus fee growth over, let’s say, the last five years instead of worrying about the last quarter or year, fees grow less than assets, but that’s a function of active to passive which you should be capturing. So I guess I’m looking for any kind of summary comment of how the asset management business is doing in your mind, the passive as it should be well positioned, especially with your client base, but it’s hard to see with a lot of the different moving parts – sorry. Michael O’Grady: Sure, I think it’s certainly a fair question, and over time—over a longer time period, as you suggested, assets under management have certainly grown at a nice growth rate for us, which is a result of, as we’ve talked about, a strong equity market environment but also new business. On the fee side of the equation, we’ve had the negative impact of the fee waivers which right now, we’re at basically the highest run rate level that we’ve seen. It did go down if you went back a year ago, obviously, and some quarters before that, but it’s gone back up to a higher level now just because the very shortest end of the curve is very low, and that’s where a lot of the funds within those funds are invested. So that’s been a drag on the growth rate, and I would agree that we certainly have benefited because of the move from active to passive, so…

Moving on, we’ll go to Mike Mayo with CLSA. Mike Mayo – CLSA: Hi. Could you just elaborate more on the sub-custodian fees fourth quarter to first quarter, maybe a dollar amount or who are you dealing with, if you can disclose that, and how are those relationships? Michael O’Grady: Yes, so we deal with sub-custodians all over the globe, and it’s particularly in areas where we are not inclined to actually be a primary custodian, so that’s the nature of it. We’re the global custodian, and then we have the sub-custodian networks. With regard to the costs, there are certain of those costs which are absorbed but there are certain which per agreements with our clients get passed on. With that network, the timing in which we receive the cost is not always as smooth and predictable as we would like, so I can’t obviously comment on specific names of the sub-custodians that result in the higher levels, but I can tell you, for example, that there are certain just geographies that in the quarter ended up being higher than what we expected, so as a result we had less that we recovered in the fourth quarter. But I would say, Mike, that’s a line that just over time, quarter to quarter, moves up and moves down, but the longer term trend I would say is one where if anything, we’re picking up efficiencies in the cost of our sub-custodian network. Mike Mayo – CLSA: Okay. Separately, your earning assets grew 12% this quarter, 11% last quarter, but before that it was kind of flat or down the prior few quarters. So is anything changing with the balance sheet? Michael O’Grady: Yeah, there is no question that some of our larger custodian clients are placing more deposits with us,…

Our next question will come from Robert Lee with KBW. Robert Lee – KBW: Thanks, good morning. I’d like to go back to the SLR for just a quick question. You mentioned you’re 5% of the holding company. Can you just conceptually—you know, if you guys have gotten this far, how should we be thinking about where you’d like to run your SLR? What kind of cushion you’re thinking that would be appropriate for Northern? Would it be running it at 5, 5.25, 5.5, and then maybe if you could kind of update us where you are kind of the bank level? Michael O’Grady: Sure. So as far as—let me take the second part first, which is with regard to the bank level. The bank level is approximately in the same neighborhood that the holding company is as well. As you know, you can affect the level of capitalization at the bank differently than the holdco to the extent that you downstream from the holdco into the bank. But at this point, we’re comfortable with the level of capitalization at both the bank level and the holding company level, and I would say as far as where we’re targeting the SLR, I would say similar to our other ratios. We look at all of them collectively and just over time determine what is the level that we feel we need, first from an internal perspective, second from a regulatory perspective, and that’s an area that particularly with the SLR right now, I would say we have a fair amount of room given that the requirement for Northern Trust is at 3%, and as we pointed out we’re above 5% there. So there is room there on the regulatory front, but then the third category we talked about or consideration is…

Next we’ll go to Gerard Cassidy with RBC. Gerard Cassidy – RBC: Thank you, good morning. Mike, you guys have the ROE target of 10 to 15% for Northern Trust, and as you pointed out earlier, you’ve had some very strong growth in assets under custody as well as the global custody assets, and this quarter as well assets under management were quite strong. Is it—and your ROE, unfortunately when you back the last five years with the exception, I think, of ’09 has been consistently under 10%, below your range. Is it simply a matter of interest rates, because I know you have the fee market waivers as a drag on earnings, so it is really we’re waiting for interest rates to rise for you to get into that 12, 13% ROE consistently? Michael O’Grady: Yeah, I would say that we are not waiting on interest rates to rise. They may rise, they may not rise, and at this point as to when they’ll rise, we wouldn’t know even if you told me it was certain that they’re going to rise. So our focus has been on improving the profitability absent that. Certainly, the low interest rates have presented the drag they have, but part of the reason why we have the slide there that points out the expenses to trust fees ratio is because although, again, that’s not completely immune from external factors so the money market fee waivers does impact that ratio, because it lowers the fees. But it is a way that we think we can control the profitability more, and that’s why we are focused on trying to bring that ratio down to make the core fee business more profitable for us. Over the last nine quarters, we’ve been successful looking year-over-year in bringing that…

Our final question will come from Geoffrey Elliott with Autonomous Research. Geoffrey Elliott – Autonomous Research: Hello. In terms of the shift from assets from active to passive business, particularly on the wealth management side, what can you do to ensure that as clients’ risk appetite returns, that still (audio interference). Michael O’Grady: Geoffrey, I think I missed the last part of the question. Geoffrey?

Just one moment. I’m sorry, please continue, Mr. Elliott. Geoffrey Elliott – Autonomous Research: Hello. So the share of equities in wealth management AUM has been increasing pretty significantly, but I guess because of the shift from active to passive products, that hasn’t really been benefiting the fee rate, so what can you do to ensure that you benefit as clients’ risk appetite returns? Michael O’Grady: So we clearly benefit to the extent that our clients benefit, and so our objective is to provide the best wealth management services and expertise to them, and we feel that as it has been true historically, we’ll benefit along with them to the extent that they do well. As far as the trends, though, we also try to position ourselves well for the trends, and with the shift from active to passive, we actually think we’re well positioned in the sense that we capture a large portion of the assets as they shift them around, given that we’re well positioned in passive, but then further, very specifically the ETFs were directed at ensuring that we have products that meet those needs as well. So we will continue to do things like the ETFs where it’s in product development in our asset management group. They’re very focused on what are products that our clients will find useful as we go forward so that we can not only make sure that they are successful but that, as I mentioned, we can financially share in that success.

Was there anything further, Mr. Elliott? Geoffrey Elliott – Autonomous Research: Hello, can you hear me? Michael O’Grady: Yes. Geoffrey Elliott – Autonomous Research: On the last call, you mentioned that you expected to get back into the 10 to 15% ROE target range this year. Do you still expect to do that after reporting the 9.3% for the first quarter? Michael O’Grady: The 10 to 15% range is our target range, and clearly the objective for not only me but for the company and management and all the employees is to be in our target range, so that is definitely what we continue to endeavor to do. Geoffrey Elliott – Autonomous Research: Okay, thank you very much.

I’ll turn it back to our presenters for any closing remarks.

Thank you all for joining us today. We look forward to updating you on our second quarter performance in July. Have a good day.

That does conclude today’s conference. We’d like to thank everyone for their participation.