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Tracking the performance of 24 of the largest financial services companies against analysts' estimates, with links to relevant coverage, filings, releases, and bank benchmark profile data.
July 24
Wilmington Trust Corp. may have to make some tough choices soon, but its chairman and chief executive Ted T. Cecala is doing all he can to deflect speculation that it has reached a crossroads.
The Delaware company reported a second-quarter loss and more bad news on loan losses. Analysts say it may be forced to raise additional capital by selling key units.
Cecala paints a very different picture. He said Wilmington Trust is still interested in "cautiously" looking for ways to expand its corporate client services and wealth management businesses.
"We have no reason to change our strategy, and we look at these businesses as great opportunities that require little capital to grow," the CEP said in an interview Friday. "We continue to see opportunities. We just have to make sure that they are the right opportunities for us."
Still, the pressures are mounting.
Wilmington Trust's stock has dropped 80% in the past 10 months, and analysts said it may need to shelve any expansion plans or perhaps consider selling one of the two businesses Cecala seeks to grow to focus capital on its struggling loan portfolio.
The company was forced to reduce cash dividends, and analysts expect "further action" to generate capital. That talk has prompted a debate on how the company might proceed.
Geoffrey Bobroff of Bobroff Consulting of East Greenwich, R.I., said Wilmington Trust's results indicate it is not in a position to add to either its corporate client services or wealth management businesses, and it may be forced to consider selling them.
"Organizationally, they have to put a good face on things and tell people that they are trying to expand and grow the business, but businesswise, they need to be focused on getting out of the position they are in from a financial standpoint," he said.
Others aren't so sure.
Andy Stapp of B. Riley & Co. Inc. of Los Angeles said Wilmington Trust's loans struggled during the quarter because of its high exposure to construction development loans.
He said raising additional capital is "a possibility" but the company certainly won't sell either the corporate client services or the wealth advisory business.
Stapp said Wilmington Trust will "proceed cautiously" with the two businesses, but "both are very core businesses for them. They account for half of the company's revenues and won't be abandoned or sold just to raise capital."
Cecala said during the quarterly earnings call Friday that the company remained well capitalized "including and excluding" the $330 million it received through the Treasury's capital purchase program in November, but it had no plans to repay the government. Its tangible common equity ratio was 5.4% at the end of the second quarter, down from 5.51% in the previous quarter.
Any thought that the company would consider selling either business "is more speculation than reality," Cecala said.
"We consider these core businesses," he said.
Wilmington Trust, which announced its second-quarter results Friday, said it lost $9 million, or 20 cents a share, meeting the average estimate of analysts polled by Thomson Reuters.
For the year-earlier period it posted a loss of $20 million, or 29 cents a share.
The company suffered securities losses of $23.4 million on pooled trust-preferred investment securities. On an after-tax basis, this reduced earnings by approximately 26 cents a share.
The company's loan-loss provisions tripled to $54 million from a year earlier and rose 83% from the first quarter.
Net chargeoffs increased to 0.39% of average loans, from 0.13% a year earlier and 0.22%, a quarter earlier.
Nonperforming loans rose to 3.59%, from 0.95% a year earlier.
Wealth advisory services' revenue fell 5% from a year earlier, and corporate client services revenue rose 5% as the unit had its third consecutive quarter of record sales activity.
William Farrell, the executive vice president of corporate client services at Wilmington Trust, said in an interview that the unit continues "to look for opportunities to pick up a book of business or individuals for growth."
Bobroff said Wilmington Trust's second-quarter woes are not uncommon for regional banking companies. He said most were not stress-tested and are struggling with bad loans.
He said some of these banking companies will have to consider getting out of asset management to raise additional capital.
"Wilmington Trust has always been viewed as a good private wealth management bank, but private wealth is at best a rounding adjustment in good days," Bobroff said.
"This is not a portion of the bank that will restore the losses in market value that this company's shareholders have suffered through."
