Despite a string of successful quarters at Wilmington Trust Corp., including the second-quarter results announced Friday, analysts say they expect market conditions could make it difficult for the Delaware company to keep growing strongly.
Wilmington's net income grew 22% in the quarter as revenue climbed at a "double-digit pace" in each of its businesses, chairman and chief executive officer Ted T. Cecala said in a conference call.
Earnings per share rose 20% and, at 67 cents, beat the 66-cent average of estimates from analysts sampled by Thomson First Call. Net income was $46.9 million, up 17% from the fourth quarter.
A strong economy fed the good results at Wilmington, Mr. Cecala said. "We have leveraged the investments we have made to expand the business, hire the best people, and add capabilities to enter markets where we see potential for growth," he said.
But analysts said certain indicators in the past 30 to 45 days in U.S. capital markets could signal bumps in the road ahead. Wilmington's assets under management rose 6%, to $39.1 billion, from the year earlier, for example, but were down 3% from March 31.
Gerard Cassidy, an analyst at RBC Capital Markets, said loan demand is likely to decline as the U.S. economy slows.
"The stars, the moon, and the sun have really aligned for this company over the past couple of years, but I think the alignment will dissipate in the next three to six month, so growth will slow," he said. "Growth will slow due to the fact that a lot of the driving forces that helped Wilmington grow are running out of steam."
The company has taken advantage of favorable conditions to expand each of its businesses in the past year, Mr. Cassidy said. Its wealth advisory services and corporate client services units each reported year-over-year revenue increases of 11%, and the revenue generated from Wilmington's affiliated money managers was up 38%.
Advisory revenue grew 13% from the year earlier, to $73.6 million, and loan balances were up 11%, to $7.68 billion.
Wilmington was an active acquirer in 1998, when in January it bought a stake in Cramer, Rosenthal, McGlynn, a White Plains, N.Y., value manager with $3.2 billion of assets under management. In July that year, it bought a stake in Roxbury Capital Management, a Los Angeles growth manager, which also managed $3.2 billion.
Assets under management at Cramer Rosenthal rose 20% in the quarter, to $9.4 billion, but were down 4% from March 31. At Roxbury Capital assets under management rose 10%, to $3.25 billion, from the year earlier but fell 7% from the first quarter.
Mr. Cassidy said Wilmington's strong returns have enabled it to reinvest in its business but that slower revenue growth would force a slowing of the acquisition pace.
Mr. Cecala said in the conference call that Wilmington plans to continue investing in its businesses.
"There was strong momentum in each of our businesses during the second quarter," he said, "and we remain focused on building and strengthening client relationships. Also, we continued to invest in opportunities to enhance our competitive distinctions and generate future growth."
