Fitch Places Northern Trust Corp. 'AA-/F1+' IDRs on Watch Negative

Fitch's ratings actions follow NTRS' disclosure that it will incur a $275 million after-tax charge to support cash investment and commingled securities lending collateral funds. In addition, NTRS will incur a $53 million after-tax charge to repurchase illiquid auction rate securities previously sold to Personal Financial Services clients.

Fitch believes that these charges are likely to result in a significant reduction in the cash position of parent Northern Trust Corporation. The Negative Watch reflects potential difficulties in restoring parent cash to levels consistent with an 'F1+' short-term rating. While the parent has had ready access to capital markets in the past, Fitch believes market access for all issuers in today's current unsettled credit markets cannot be assured. Dividends from lead bank TNT may be constrained, which could reduce the amount of dividends it can upstream to the parent.

Positive resolution of the Negative Rating Watch may take place in the near-term, whether through capital markets issuance or through freeing up dividend capability at the bank. Fitch expects to revisit this issue by the end of 2008. If NTRS is unable to raise sufficient levels of parent cash, Fitch would most likely lower the short-term and long-term ratings by one notch to F1 and A+ respectively.

The Individual rating downgrades reflect longer-term pressures on the company's business model. The previous Individual Rating of A/B implies that a given institution has elements of both an A-rated 'very strong bank' and a B-rated 'strong bank'. Pressures include the contingency that cash investment funds may need additional support, in which case NTRS and TNT will either need to provide such support or face business and reputational issues involved in declining to provide support. As a result, Fitch believes that the strength of both institutions corresponds more closely to the `B' rating definition at this point. The Negative Outlook at TNT also reflects the headwinds the bank faces in the current credit environment, such as the support issues referred to above, fluctuations in securities lending revenues, and declines in the market values of assets under management and custody. Fitch expects to assess the impact of these longer-term pressures over the next twelve to twenty-four months.

Fitch has placed the following ratings on Rating Watch Negative:

Northern Trust Corporation

--Long-term IDR 'AA-';

--Long-term senior unsecured 'AA-';

--Short-term IDR 'F1+';

--Short-term senior debt 'F1+'.

NTC Capital I

NTC Capital II

--Trust preferred securities `A+'.

Fitch has also downgraded the following ratings:

Northern Trust Corporation

--Individual to `B' from 'A/B'.

The Northern Trust Company

--Individual to `B' from 'A/B'.

Additionally, Fitch has affirmed the following ratings with a Negative Outlook:

The Northern Trust Company

--Long-term deposits 'AA';

--Long-term IDR 'AA-';

--Long-term senior 'AA-';

--Long-term subordinated 'A+'.

Fitch has also affirmed the following ratings:

The Northern Trust Company

--Short-term deposits at 'F1+';

--Short-term IDR at 'F1+';

--Support at '3';

--Support Floor at `BB+'.

Northern Trust Corporation

--Support at '5';

--Support Floor at `NF'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

SOURCE: Fitch Ratings

Fitch Ratings, Chicago David Spring, 312-368-3194 Julie Solar, 312-368-5472 Doris Hoffmann, 312-368-2057 or Media Relations: Sandro Scenga, 212-908-0278, New York