Analyst upgrades Wilmington Trust, cites improving credit, unlikely need to raise capital

Wilmington Trust shares rise on analyst upgrade

BOSTON — Shares of Wilmington Trust Corp. rose Thursday after an upgrade by a SunTrust Robinson Humphrey analyst, who said the regional bank is seeing credit trends improve and is unlikely to make a near-term stock offering to raise capital.

Mac Hodgson raised his rating on the shares to “Buy” from “Neutral.” He also revised his earnings outlook for Wilmington Trust and set an initial $16 price target for the shares.

Shares of Wilmington Trust rose 65 cents, or 5.1 percent, to $13.38 in morning trading.

Hodgson said in a research note that he expects credit trends to improve for Wilmington Trust in the current quarter compared with the second quarter, when the Delaware-based bank saw a nearly 32 percent increase in non-performing assets — loans that are considered past due — compared with this year’s first quarter. Wilmington Trust also recorded securities losses of $23.4 million on pooled trust-preferred investment securities.

But Hodgson, who recently made a field visit to discuss the company’s prospects with management, said he doesn’t expect non-performing assets to jump sharply in the third quarter. He also doesn’t see the company making an “outsized” loan-loss provision, “as management indicated that it is seeing some stability in its markets, and commercial real estate is holding up well.”

The company has likely absorbed the bulk of expenses from credit-related impairment charges, he said.

“Any negative impact on regulatory ratios will not be meaningful,” he said.

The bank’s tangible common equity ratio, a measure of a bank’s financial health, remains low, but “should improve in coming quarters with better earnings, an only 1 cent quarterly dividend and limited, if any, balance sheet growth,” Hodgson said. “As a result, we do not think the company needs to raise capital in the near term.”

Hodgson raised his full-year 2009 earnings estimate to 30 cents per share from his previous forecast of 20 cents per share. For 2010, he reduced his estimate to 94 cents per share from $1.03.

Analysts surveyed by Thomson Reuters expect a 2009 profit of 16 cents per share, on average, and a 2010 profit of 65 cents per share.