We have downgrading our long-term recommendation on Wilmington Trust (WL) to Underperform based on deteriorating credit quality and its exposure to risky construction loans. Wilmington’s second quarter 2010 loss was substantially higher than the Zacks Consensus Estimate.
Results were hurt primarily by higher loan loss provisions, increased non-interest expense and weakness in the commercial construction portfolio. However, strong growth in Corporate Client Services segment, improvement in core deposits and growing assets under management were among the positives.
That said, Wilmington has been severely marred by the ongoing volatility in the economy, which has reduced client activity and increased the credit and other cost of operations.