Magazine article American Banker

Wilmington Trust Tops Price Target, Is Downgraded

Magazine article American Banker

Wilmington Trust Tops Price Target, Is Downgraded

Article excerpt

Salomon Brothers analyst Diane Glossman Tuesday downgraded Wilmington Trust Co. to "hold" from "buy," after the company's stock surpassed her price target.

Shares in the Wilmington, Del.-based banking company fell 50 cents to close at $33.50. Ms. Glossman had a target price of $32.

The bank market suffered another day of declines, with the Standard & Poor's Bank Index dropping 0.27%.

In her report to investors, Ms. Glossman said Wilmington's stock is not likely to sustain the blistering pace it set in recent months. Wilmington's stock is up 10.5% this year, while its peers in Salomon's regional bank composite have fallen 2.7%.

The $5.4 billion-asset trust bank's shares are trading at 12 and 11 times 1996 and 1997 earnings estimates, respectively. Its peers trade at 11.6 and 10.4 times earnings, Ms. Glossman said.

Legg Mason Wood Walker analyst Janet McCabe, who rates Wilmington Trust "underperform," said that the bank has "more or less exhausted its ability to expand within the state of Delaware."

The bank has a market share in excess of 40% in Delaware, Ms. McCabe said. "They can only grow as fast as the state, and the state hasn't been growing as fast as the nation over the past several years.

"When you have to make margin expansion mergers, you have to incur dilution, which delays the benefits of expansion.'

Ms. McCabe estimates Wilmington's annual earnings growth at 7% to 8%, and projects earnings per share of $2.75 for 1996 and $2.95 for 1997.

The Legg Mason analyst said that while Wilmington has sometimes been rumored to be a takeover candidate, it already trades at a premium above its book value. …

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