Magazine article American Banker

Charge to Unwind Unit's Fund Hurts Wilmington Trust

Magazine article American Banker

Charge to Unwind Unit's Fund Hurts Wilmington Trust

Article excerpt

Wilmington Trust Corp. says it remains committed to its growth-style investment management unit, even though an accounting writedown related to the unit delivered a significant blow to third-quarter profits.

Earnings declined 88% from a year earlier, to $5.2 million, or 7 cents a share, as the Delaware company absorbed a $72.3 million impairment charge against its valuation of Roxbury Capital Management after the Los Angeles unit discontinued its microcap fund and announced plans to exit the fixed-income business this year.

Ted T. Cecala, Wilmington Trust's chairman and chief executive officer, said during its earnings call Friday that his company remains "positive" about Roxbury's long-term outlook.

"We expect Roxbury will be a profitable company," he said. "This quarter's charge reflects the cost of unwinding the microcap product, but we do think that this will be a profitable company."

Wilmington acquired Roxbury in July 1998 six months after buying Cramer, Rosenthal, McGlynn LLC, a White Plains, N.Y., value manager.

"Roxbury is a profitable firm and a valuable investment," Mr. Cecala said. "Their core, small-, and midcap products are doing extremely well. They have been incubating new products and acquiring other investment managers. ... Although our investments in money manager firms added volatility to earnings because investing in the asset management business is extremely volatile, they support our long-term strategies."

Some analysts said that despite Mr. Cecala's rhetoric, the charge might temper Wilmington's interest in acquiring asset managers.

Jacqueline Reeves, an analyst at BankAtlantic Bancorp Inc.'s Ryan Beck & Co. Inc., said that Wilmington may stop acquiring investment management companies, but that such a decision would have little to do with the Roxbury charge.

"Since Wilmington moved to an open architecture platform two or three years ago, I'd be surprised if they bought another asset management company," she said. …

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