Northern Trust Corp.'s nationwide expansion is running ahead of schedule, according to chairman and chief executive officer William A. Osborn.

The plan was to double its branches to 100 by 2005, Mr. Osborn said in an interview last week, but the company is likely to reach that goal much sooner.

The branch expansion is part of a push to build the company's personal trust business.

While Northern Trust has profited from both its personal and institutional trust operations, it has shown faster growth in the past year in personal trusts.

Its niche is serving not just the wealthy but the wealthiest. Part of the banking company's strategy is to target states where many millionaires live.

The company has opened offices this year in Denver and in the suburbs of Detroit, Chicago, and Los Angeles. The $26.6 billion-asset company has 67 offices, mostly in Illinois and Florida.

Another 10 Florida offices are to be opened in a few years, Mr. Osborn said. Northern has also explored opening branches in states where it has none.

In the Midwest, he said, the company is considering Milwaukee, Cleveland, and St. Louis as prospective sites. An office in Milwaukee is likely to be opened next year.

Northern also is looking at Atlanta, Boston, Las Vegas, Seattle, and Washington, he said. The company wants to enter these markets and will eventually have a presence in each, Mr. Osborn said.

"The challenge you have strategically is, you're working within the financials of the company," he said. "We've been able to do this at a measured pace."

The company has chartered a savings bank in Michigan, which it says it may use to expand into other states that now restrict out-of-state bank operations.

Denver was the only market Northern entered through acquisition this year, in a $15 million deal last May for Trustbank Financial Corp. Mr. Osborn said the bank would continue to enter markets through start-up offices and acquisitions. He said deals would likely be small but did not rule out a larger transaction.

In the past, Northern Trust has bought small, privately held banks for cash. Buying a single-branch bank can provide quick entry into a market, and Northern does not need a large branch network because it is focused on wealthy clients.

In some cases, mergers among competitors have benefited the company. For example, Northern is picking up customers from the former Barnett Banks Inc. of Jacksonville, Fla., which was acquired this year by NationsBank Corp.

While all bankers say they pick up competitors' customers disgruntled by mergers, Northern's strong customer focus probably would appeal to some, said James M. Schutz, an analyst at ABN Amro Inc., Chicago.

"The client Northern is looking for will not suffer foolishness for very long" from his or her existing bank, Mr. Schutz said. "These are people with money. They don't put up with a lot of crap."

Mr. Osborn said he hopes for a similar type of disruption in Chicago from two big mergers: Banc One Corp.'s pending acquisition of First Chicago NBD Corp. and NationsBank's merger with BankAmerica Corp.

Both First Chicago and BankAmerica have large private banking departments.

"It all creates noise," Mr. Osborn said, "and the reality is, we're the last independent bank in Chicago."

However, Northern's expansion plans could be hampered by a sustained downturn in the stock market.

The company has weathered short-term downturns well because its core institutional and personal trust businesses offer healthy diversification, an analyst said.

Income from fee-based businesses grew 19% from a year ago, to $266 million in the second quarter. Personal trust fees grew 25%, to $97 million. Though such growth rates may not be sustainable if the market continues to deteriorate, Northern could still report double-digit fee income growth, said Bradley Ball, an analyst at Credit Suisse First Boston.

Mr. Osborn said his company's spending on branch expansion has eaten into profits. Northern Trust's Florida operation has 25 offices. Nine are so new that they have not yet turned a profit, yet the Florida operation earns more than 30% on equity and more than 2% on assets.

But Mr. Osborn acknowledged that expansion comes at a price. The only "way for us to get extremely profitable is to stop growing," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.