UPDATE: Resigning Wilmington Trust boss Cecala says it was his idea to leave. Incoming boss Foley says the bank "is committed to remaining independent." Shares down 10%. Reuters story here.
EARLIER: Wilmington Trust Corp. chief Ted T. Cecala's "unexpected retirement" and replacement by ITT Corp. treasurer Donald E. Foley leaves Delaware's largest bank with "significant credit challenges," writes Janney Capital Markets analyst Stephen Moss in a report to clients this morning. Foley joined the bank board as a director four years ago, and chairs the board audit committee.
"The quality of the company’s balance sheet has come under much stress during the credit cycle": Foreclosed real estate and potential problem loans made up more than one-fifth of the company's lending portfolio at March 31, Moss notes. The bank still hasn't repaid $330 million in federal TARP investments pending a "safety and soundness review and the stabilization or decline of non-performing assets." It was able to raise capital through a stock sale last year, which Moss, among others, recommended over the bank's initial refusal.
A longtime Wilmington Trust-watcher in New York told me this morning the bank has an attractive business mix, but management credibility has been damaged by loan losses and weak earnings. He suggested PNC and US Bancorp as likely acquirers if the board agrees to sell.
Wilmington Trust is the biggest commercial bank still based in the Philadelphia area, with more than $10 billion in loans and bank investments and tens of billions more in client assets. It's the dominant bank in Delaware and a major lender to small businesses and developers in suburban Philadelphia.
Said Cecala in the bank's statement: "Wilmington Trust is fundamentally strong and well positioned to capitalize on the market opportunities that will emerge as the economy improves. I have been discussing my retirement with the Board for some time and we are in agreement that this is the right time for the Company to make this transition."
Added Gailen Krug, the board's nominating and governance chair: "Ted's leadership and foresight as Chairman and CEO... helped the Company avoid the worst perils of the credit crisis," adding that Foley "has the unanimous support of the Board."
Founded by members of the dominant faction of the du Pont family in the early 1900s, and still partly owned by their heirs, the NYSE-listed bank also has national money-management, investment custody and tax shelter businesses. The combination used to make Wilmington Trust a less likely takeover target - few acquirers wanted both groups of businesses - but in the recent crisis the bank's price-to-earnings multiple has at times been lower than smaller hometown rival WSFS Corp., a historic reversal. A depressed share price makes the bank attractive to bargain-hunting larger banks.
In his Rodney Square office, I asked Cecala, back in 1996 soon after he took the job, whether Wilmington Trust was for sale. "Sure," he told me, startling the bank's then-spokesman, the late Charlie King. Cecala walked over to his desk, and pointed to the flashing numbers on his Bloomberg terminal. "We're for sale every day," he told me. "Buy as much as you want." Of course, the share price was higher then.