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July 20, 2009
Share ThisOn July 17, 2009, Wilmington Trust Corp. (WL), a mid-cap financial services holding company, cautioned that its second-quarter earnings may fall short of market expectations, primarily driven by increased provision, other-than-temporary impairments, and a special consideration of Federal Deposit Insurance Corporation (FDIC).
Ahead of second quarter results, the consensus estimate was $0.09 per diluted share and we had estimated the earnings to be $0.02 per diluted share. However, given the company’s anticipated provision for loan losses of $54 million for the second quarter, which is higher than our estimate, we expect the earnings to slightly miss. But it is expected to fall far short of consensus.
The company expects nonperforming loans to increase 32.2% sequentially to approximately $332 million, net charge-offs to increase 69.8% sequentially to approximately $36 million. All these as well as downgrades in internal credit risk ratings are the reasons for anticipating an 83.1% higher provision for loan losses compared to the first quarter of 2009.
The other reasons for the expected decline in the bottom-line are an expected pre-tax charge of approximately $23 million for other-than-temporary impairments on pooled trust-preferred investment securities and a special assessment by the FDIC of approximately $5 million.
Credit quality remained mixed during the last quarter, with non-performing assets increasing to 2.67% of related assets (up 48 bps sequentially) and year-to-date net charge-offs at 0.22% of average loans (down 35 bps sequentially). However, management is confident of reporting a sound position during second quarter earnings release. The company has received $330 million in Capital Purchase Program funds in exchange for Wilmington Trust Series A preferred stock issued to the U.S. Department of the Treasury.
Though loan growth has been impressive relative to many of its peers -- Webster Financial (WBS), Valley National (VLY) and Fulton Financial (FULT) -- so far, mainly due to strong economic growth in the Delaware region, the pace of growth has started to moderate in the last few quarters.
We expect the pace to slow down further in the near- to medium-term, based on the ongoing weakness in economy. Thus, we are maintaining our Sell recommendation on the shares of WL.
Read the full analyst report on "WL"
Read the full analyst report on "WBS"
Read the full analyst report on "VLY"
Read the full analyst report on "FULT"
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