Despite missing analysts' average estimate by a nickel during the third quarter, Wilmington Trust Corp.'s chief executive officer says that the company will continue looking for ways to further develop its U.S. wealth advisory services business.
Ted T. Cecala, the Wilmington, Del., company's chairman and chief executive officer, said the wealth advisory business continues to be a cornerstone for his company, which will look to do more deals as a means of expanding its footprint.
"When we look at the demographics for this company and look at our position in that segment, we are very positive," Mr. Cecala said during the company's quarterly earnings call on Friday. "Our family-office capabilities have been well received, and we are developing a lot of traction in that area."
Wilmington Trust closed the second quarter by completing its acquisition of Bingham Legg Advisers LLC, a Boston wealth management firm for both individuals and families.
The wealth manager, which now operates under the Wilmington Trust brand, was established in 1999 in a joint venture between what is now Bingham McCutchen LLP, an international law firm, and the Baltimore wealth manager Legg Mason Inc.
Bingham Legg had $1.3 billion of assets under management and $874 million of assets under administration when the deal closed June 29.
This gave Wilmington Trust a presence in five of the top seven high-net-worth markets nationally. In addition to Boston, it has offices in New York, Philadelphia, South Florida, and Southern California, but it lacks wealth management sites in Chicago and San Francisco.
"We are looking for opportunities to expand our footprint, but it is a lot easier said than done," Mr. Cecala said. "We have to make sure when we do an acquisition we have the right match of people and culture. We had to make many trips to Boston before we were successful with the Bingham Legg firm. We are always looking to expand."
Mr. Cecala said, however, that it will not look to expand its investment management business, given its experiences with Roxbury Capital Management and Cramer Rosenthal McGlynn. In last year's third quarter, Wilmington Trust absorbed a $72.3 million noncash impairment writedown after the Los Angeles wealth manager Roxbury, an affiliate of Wilmington Trust, discontinued its microcap fund and announced plans to quit the fixed-income business.
This quarter, Wilmington Trust's earnings were negatively affected by lower revenue from Cramer Rosenthal, its affiliated New York asset manager, where equity market volatility reduced hedge fund performance fees, he said.
"With Roxbury, we tried to add product when we didn't have as good of an investment platform as we have today," Mr. Cecala said. "We have stated in the past that, prospectively, we will not invest in pure investment management firms."
As of Sept. 30 Roxbury's assets under management had declined 8.5%, to $2.86 billion, and Cramer Rosenthal's managed assets grew 20.4%, to $11.8 billion, from a year earlier. Overall, revenue from the two affiliates remained flat from a year earlier, at $4.6 million, but fell 29.2% from the end of the second quarter.
Overall, Wilmington Trust earned $46.2 million, or 67 cents a share, during the third quarter. The average of analyst profit estimates compiled by Thomson Financial Inc. was 72 cents per share.
A year earlier, Wilmington Trust reported net income of $5.2 million, or 7 cents a share, including the $72.3 million charge related to Roxbury. Excluding the charge, the company earned $46.9 million, or 67 cents a share, a year ago.
Mr. Cecala said earnings were flat in the third quarter because of lower revenue from Cramer Rosenthal and an increase in loan-loss provisioning.
These negatives were offset by strong performance in the wealth advisory and corporate-client services businesses, which each achieved double-digit revenue increases.
"Our net interest margin remained stable at 3.73%, and we continued to grow loan balances, although the pace of loan growth slowed," he said.
Wilmington Trust increased its provision for bad loans to $8.9 million, 35% more than the $6.6 million reserved a year earlier.
Analysts said the company has continued to expand its wealth advisory services platform. Last year, it added family wealth advisory offices on the East Coast and opened advisory offices in Connecticut, New Jersey, and Pennsylvania.
Mr. Cecala said the industry is going though a difficult economic cycle. His company's family-office services business is seeing good momentum from its expansion into Boston, he said, and he expects that this is going to continue.
"We have developed the most comprehensive family-office services business in the industry," he said. "Our family offices' fees are based on the services we are providing rather than the assets held in custody, and clients really value this because it gives them a better understanding of what they are paying for."
Wilmington Trust's stock price declined 4.56% in midafternoon trading Friday, to $36.04.
