Editorial: A sale of Northern Trust would be a major blow to Chicago

Chicago Tribune

23-06-2025

Founded in 1889, Northern Trust is one of Chicago's most storied companies. Its colorful back story includes building a makeshift branch that handled the banking needs of vendors and attendees at the Columbian Exposition after the bank hired to do the job failed a week after the 1893 World's Fair opened.
How many ordinary Chicagoans know that? Precious few, surely. Northern Trust is low profile by design.
Chicago's largest locally headquartered bank, Northern Trust caters to wealthy households and families across the country, and thus is discrete about its business and clients as one might expect.
Northern Trust also is one of Chicago's relatively few truly global companies, positioned as one of the world's handful of financial institutions that hold trillions of dollars in assets on behalf of large institutional investors and process their transactions. This quiet giant employs thousands in Chicago and has been a dedicated civic donor for generations.
We provide this thumbnail description because a company that likes to be under the radar suddenly is in an unwelcome spotlight. The Wall Street Journal reported Sunday that Northern Trust CEO Michael O'Grady met last week with his counterpart at Bank of New York Mellon about a potential combination of the two entities.
The news comes less than four months after the Deerfield-based parent of Walgreens agreed to be purchased by a New York private-equity firm Sycamore Partners. Like Northern Trust, Walgreens has a Chicago history that goes back well over 100 years.
The notion that Walgreens, a Chicago mainstay, could be swallowed by a New York investment firm with a name few in these parts recognized, would have seemed ludicrous even a few short years ago. But in these times of economic volatility — first, a pandemic, then rampant inflation and now the uncertainty tied to trade policy in Washington, D.C. — there are few certainties in the business world.
Even so, Northern Trust's status as a pillar of Chicago's business community seemed a pretty safe bet until the weekend bombshell.
How safe is that bet now? There's reason to worry.
BNY Mellon's market value is more than two times Northern Trust's, making it possible for the larger New York-based firm to offer a premium for the Chicago bank's shares. According to the report, the discussions are so early that there's been no talk of how much BNY Mellon might bid.
Northern Trust was quick to dampen speculation, with a spokesman asserting the bank 'is fully committed to remaining independent and continuing to deliver long-term value to our stakeholders, as we have for 135 years.'
The statement didn't stop investors from doing just that — speculating. They bid Northern Trust shares up by 8% Monday to their highest level in more than three years.
For Chicago's sake, let's hope Northern Trust's statement truly reflects the sentiments of O'Grady and the board. A relentless series of sales of locally-based banks to out-of-town buyers over the past two decades has dramatically weakened the city's once-powerful banking sector. New York's JPMorgan Chase in 2004 acquired Bank One, the city's largest bank at the time. Charlotte, N.C.-based Bank of America followed suit in 2007, swallowing LaSalle Bank, the city's second largest lender.
Several smaller local banks bulked up in the wake of those splashy deals, snatching commercial clients who wanted more personalized service than the giants could or would provide. Most of them subsequently sold to out-of-town buyers such as Cincinnati-based Fifth Third, Canadian lender CIBC and even a bank based in Evansville, Indiana, called Old National.
The most recent hit came just last month: Virginia-based Capital One completed its long-planned buyout of credit card lender Discover Financial Services, based in north suburban Riverwoods. We'll see what the future local job losses are from that deal, but surely they will be significant. Discover employs thousands in the Chicago area.
Even without the negative effect of mergers, Chicago is losing good-paying, white-collar jobs provided by the likes of Discover and Northern Trust. Illinois has seen a steady decline in financial services employment since 2019, and most of those jobs are in the Chicago area. That trend means fewer residents making upper-middle-class salaries (or higher), which reduce overall consumer purchasing power and hold back the local economy. In short, our economy (and tax base) badly needs those sorts of workers.
A buyout of Northern Trust also would damage Chicago's already tarnished image as a place to do business. We've seen powerhouse hedge fund and financial services company Citadel decamp for Florida. Manufacturing giant Caterpillar, with long ties to Illinois, hightailed it to Texas. Only a few decades after moving its base to Chicago, Boeing relocated its headquarters to the Virginia suburbs of Washington, D.C.
Still, don't lose hope just yet. In addition to Northern Trust's stated desire to keep its independence, the good news for Chicago is that a tie-up with BNY Mellon would create substantial anti-trust concerns, even for an administration likely to be friendlier to such deal-making than the Biden administration. Northern Trust also has a particularly strong culture — Midwestern in sensibility, shunning the ostentation often associated with East Coast banking and investment firms — that would be difficult to absorb without risking the loss of key people in a high-touch business where relationships are critical.
The axiom in the banking industry long has been that banks are sold, not bought. The sector is highly resistant to hostile takeovers, or even 'bear hugs,' where word of an acquirer's interest is leaked in hopes of stoking pressure from a target's shareholders to sell.
Indeed, this leak features all the hallmarks of that latter approach.
Still, any time Wall Street perceives a company such as Northern Trust as being 'in play,' all bets are off. A publicly traded company answers ultimately to its shareholders. Even if BNY Mellon's overture doesn't bear fruit in the short run, Northern Trust will have to perform well to remain a stand-alone for the long haul.
Avoidable stumbles at Discover — running afoul of regulators in 2023 by failing to invest enough in compliance-related technology and personnel — opened the door for Capital One to make an offer Discover's board decided it couldn't refuse. Northern Trust can afford no such errors now that BNY Mellon's interest is publicly known.