Wilmington Trust Corp. plans to expand its corporate client services globally despite a tough year that has forced it to consolidate some domestic operations.
After spending the past seven years developing business in Europe, Bill Farrell, the company wants to make its move into South America and other regions, said Bill Farrell, an executive vice president for Wilmington Trust and head of the corporate client business,. "We want to take a more worldwide approach," he said in an interview. "In the long run, we want to look to Asia, but not right now."
Analysts said it is a wise strategy to expand in South America before heading to Asia. Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I., said corporate banking is not as developed in South America and competition includes "a lot of U.S. banks that have curtailed expansion because of their own financial challenges."
"South America is a region that is perhaps more accessible for Wilmington Trust," he said. "Asia is dominated by banks that didn't go through the same crisis as we did in the United States. There are strong Australian banks and strong regional Asian banks there. Asia is going to be much more challenging place for them."
He said Wilmington Trust will need a joint venture or an acquisition to establish itself in Asia.
Farrell said, to enter Asia, Wilmington Trust will either acquire or start its own agency, "and we know de novo is a much slower process." It would like to be in a position to enter Asia in the next few years. "There is no magic formula that works in Europe and doesn't work in Asia," Farrell said. "If we had started in Asia rather than Europe, we would be having a very different conversation right now."
Wilmington Trust's strategy for developing the corporate client services business is "to have the core competencies in one area, develop that area and then move on to the next region," he said.
The corporate client services business, which provides institutional trustee, agency, and administrative services, entered Europe in 2002 when it bought SPV Management Ltd. of London, a supplier of management services that support structured finance and asset securitization transactions. SPV also had offices in Dublin and Milan, and provided services to companies in Luxembourg and the Netherlands.
Since then, Wilmington Trust has opened corporate client services offices in Frankfurt, Luxembourg, the Channel Islands, the Cayman Islands and Amsterdam. (Domestically, the corporate client services business serves customers in Delaware, Michigan, Minnesota, Nevada, New York, South Carolina and Vermont.)
The company is also doing business with companies in France, Italy and Greece, Farrell said. "Most of our transactional work is supported out of London," he said. "Over the last few years, we have been building out our team."
Last week Wilmington Trust announced it had hired Douglas Lavelle and Thomas Mackay to support the global expansion.
Both executives are based in New York and were hired from HSBC Bank USA, where Lavelle was a senior vice president and head of business development in its corporate trust and loan agency group and Mackay was a senior vice president and unit manager on its global debt, agency and bankruptcy team.
Wilmington Trust wants to expand the business despite a difficult third quarter overall. It posted a third-quarter loss as it wrote down the value of some investment portfolio holdings.
Bobroff said Wilmington Trust is treading on some difficult terrain as it cuts expenses in some of businesses while building up corporate client services. "They are going to have to deal with some serious morale issues when they are laying off people in one area of the bank and expanding in another area," he said.
Farrell said corporate client services has continued to deliver solid growth. The unit's revenue rose 28% year over year in the third quarter and 6% from the second quarter, to $43.9 million. It was the unit's fourth consecutive quarter of record sales.
Wilmington Trust plans to continue expanding the business in Europe, Farrell said, though he would not specify which country it would enter next. "Europe is probably more of a natural progression for us at this point," he said. "We want to continue to grow our physical presence to support transactions in Europe."
Farrell said the European corporate client services market has good potential. He said Wilmington Trust has developed strong relationships with the law firms, investment banking groups and accounting firms in the region.
These relationships have presented Wilmington Trust with "some high-profile opportunities," he said, including the Lehman Brothers bankruptcy. "This gives us confidence that there remains plenty of opportunities for organic growth," he said.
