Wilmington Trust shares fall sharply on analyst downgrade citing negative credit trends

Wilmington Trust shares sink on analyst downgrade

NEW YORK — Shares of Wilmington Trust Corp. fell sharply Wednesday after an analyst downgraded the stock on concerns about the bank’s credit trends.

THE SPARK: SunTrust Robinson Humphrey analyst Mac Hodgsson said Wilmington Trust recently hired a third-party firm to do a detailed review of the bank’s loans — particularly its construction portfolio — in preparation for an upcoming regulatory exam. That review is due next week, and the analyst said it appears the bank will have to write off more loans as uncollectable than previously expected.

THE BIG PICTURE: The Wilmington, Del.-based bank has reported steady increases non-performing loans — those with payments past due — and charge-offs nearly every quarter in the last two years. Meanwhile, many banks have reported that problem loans are stabilizing.

THE ANALYSIS: Hodgsson said Wilmington Trust will likely see a material increase in charge-offs in the near term, and noted that management indicates the number of past-due loans will continue to increase. Hodgsson wrote in a note to clients that the results revealed during a meeting with management contrasted positive comments during a conference call June 4 regarding the company’s CEO change.

“In our meeting yesterday, we sensed management was considerably more negative on credit than on the conference call,” Hodgsson wrote.

SHARE ACTION: The stock fell $1.44, or 11.1 percent, to $11.55 in midday trading. The stock has traded as low as $9.75 in the past 52 weeks.