Wilmington Trust: Not All Banks Increased Loan Write-Offs in Q1

Apr.26.09 | About: Wilmington Trust (WL)

In the past two weeks, the majority of large and small banks have now reported earnings sharply higher than most analysts had expected.

The surprises had experts questioning how banks could have cooked the books to pump up earnings. Many pointed to 'mark to market' valuation rule changes. Others observed increases in allocations to cover bad debts.

But on Friday, one bank demonstrated an ability to overcome all objections to positive earnings. Not only did Wilmington Trust Corporation (NYSE:WL) handily beat all earnings estimates, but it sharply reduced the amount of money set aside to cover bad loans, and in Q1 2009 wrote off many fewer loans as unpaid. (Call Transcript)

Not only that, the latest quarter's results were further boosted by a net gain of $7.6 million in Wilmington Trust's investment portfolio. Not counting that gain and write-downs, Wilmington Trust's first-quarter profit was $17.4 million, or 19 cents per common share.

Including the write downs and one-time gain the bank was able to pay up handsome preferred dividends in addition to posting profit. Wilmington Trust's stock surged 32% on Friday.

These strong results are just additional evidence that early season investor jitters about banks' ability to perform well in Q1 were unfounded.

Disclosure: No position