The Prudent Investor

A Decision
February 6, 2008, 7:26 am
Filed under: Financial

Looking at the three final companies in contention – Associated Banc-Corp (Nasdaq: ASBC), Wilmington Trust Corporation (NYSE: WL), and BB&T Corp. (NYSE: BBT) – shows a number of similarities.

  PE P/S Yield Market Cap
BBT 12.93 3.76 4.33 3.66B
ASBC 13.32 3.19 3.85 2.37B
WL 11.60 3.20 4.97 20.02B

The only thing that sticks out here is that Wilmington Trust has a much larger market capitalization than the other two. However, a closer look shows that they also have the lowest P/E, almost the lowest P/S (statistically insignificant), and the highest yield. Unless I can find something damning about this company, it could be the best of the three. However, before I get too far ahead of myself, let’s look at a description of the company.

Wilmington Trust Corporation operates as the holding company for Wilmington Trust Company that provides fiduciary, wealth management, investment advisory, financial planning, insurance, broker-dealer, lending, and deposit-taking services in the United States and internationally.

The Regional Banking segment offers various commercial banking services, including commercial loans, construction loans, and commercial mortgages; and retail banking services comprising consumer lending, residential mortgage lending, and deposit products, such as demand checking, certificates of deposit, NOW accounts, and savings and money market accounts in Delaware.

The Corporate Client Services segment offers various capital markets services, including owner trustee, indenture trustee, and other specialized services for capital markets transactions; entity management services consisting of independent directors, office space, administrative services, and corporate governance services to special purpose entities and captive insurance companies; retirement services that include trustee and administrative services for 401(k) and other types of retirement plans; and investment and cash management services.

The Wealth Advisory Services segment provides asset management services; family office services comprising family governance planning, investment consulting, real estate acquisition and disposition, cash flow management and budgeting, tax planning and compliance, risk assessment, insurance oversight, family security, bill payment, and payroll management services; and fiduciary services, which include trust, administrative, tax, philanthropic, and estate settlement services.

Now that we know what they do, we can look at the 2007 Q4 conference call. I do like the way Ted Cecala, the company’s CEO, began his portion of the call.

“If we had lending relationships with national builders for loans financing residential construction in Florida, Arizona, Nevada or the Midwest, I would discuss that; but we have none.

“If we have exposure to structured investment vehicles, I would begin my discussion by describing how we are valuing those assets; but we have none.

“If we had assets backed by sub-prime mortgages, I would also discuss them; but we have none.”

You can find this at and read how a couple of analysts raked them a bit over the coals, and this is reflected in the fact that they generally have a “Hold” on the stock. However, they do not appear to have exposure in the areas that have given the economy a hard time recently, so this gives me hope that this company has been unfairly knocked down.

Analysts have not recently given WL a favorable rating because the diluted earnings of 67 cents was five cents short of their estimate. I believe that we are back to realistic expectations and as the industry begins its recovery, Wilmington Trust will do just fine.

I believe that Wilmington Trust Corporation will be the next addition to the Prudent Investor portfolio.

In the past I have started each position with a $500 purchase, but since the trades are without commission, I am going to make a $125 purchase each Thursday of this month. That will help mitigate some of the risk due to the potentially volatile nature of the industry at the moment.  I will not be surprised to see financials continue to have a hard time, but do think that it is proper to start the position at this point.


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