* Stock drops 10 percent
* Foley says no other candidates considered for CEO
* Investors worried about credit weakness
(Adds analyst comment)
By Joseph A. Giannone
NEW YORK, June 4 Wilmington Trust Corp WL.N saw
its stock sink more than 10 percent on Friday after the regional
bank abruptly handed the chief executive job to a director with no
bank or CEO experience.
Moreover the bank failed to allay lingering worries about
credit woes that prompted stricter regulatory oversight and a $274
million stock offering in February.
Longtime Wilmington boss Ted Cecala, 61, surprised investors
on Thursday when he announced he would retire next month after 31
years at the company. The past two years have been especially
trying, analysts said, as credit quality in Wilmington's
commercial bank arm suffered.
Replacing him immediately as CEO is Donald Foley, a Wilmington
Trust director who was a former treasurer of ITT Corp (ITT.N).
Cecala will serve as chairman until July 19, after which the board
will choose a successor.
The surprise move, which took place without a search, and the
lack of new information on Wilmington's soundness, sent investors
"The timing of the departure was definitely a surprise to many
people," said Stephen Moss, a bank analyst at Janney Montgomery
Scott in Philadelphia. "It does seem abrupt to a number of people.
That leads to worries that there is more to come on the credit
After Wilmington officials conducted a conference call to
introduce Foley on Friday morning, shares of the bank quickly fell
as much as 12 percent. They closed down 9.8 percent or $1.47 at
$13.52 on the New York Stock Exchange on Friday.
Under Cecala, CEO since 1996, Wilmington nearly tripled assets
under management to $42.3 billion. The company operates a regional
Mid-Atlantic commercial bank and offers wealth management for the
rich in 36 countries.
Cecala, who said he has been considering retirement "for some
time," told analysts his decision to step aside was not driven by
the board or by any strategic disagreement. He said there would
not be any severance charges.
A Wilmington spokesman declined to comment on the specific
dates when Cecala decided to retire, when he informed the board or
how quickly the board offered the top job to Foley.
Foley, who served on the audit committee of Wilmington's board
for three years, said there was no external search for a successor
and that no other candidates were considered when Cecala revealed
his plan to retire.
"The board very quickly turned to me and said 'You are our
best candidate. What do you want to do?,'" Foley recalled,
Several investors on the call questioned the sudden change and
Foley's qualifications to run a bank holding company. Foley never
managed a bank before, nor was he a CEO at any company.
Before joining the board in July 2006, Foley managed ITT's
capital and financing activities, as well as its pension and
defined-contribution investments. He was a member of its executive
council and chairman of ITT Industries of Canada.
The awkward hand-off came at a time when investors are worried
about Wilmington's progress in reducing a pile of problem loans
and bolstering capital.
Wilmington in February sold $250 million of new stock so that
it could repay a $330 million investment made in December 2008
under the U.S. Treasury's Troubled Asset Relief Program, or TARP.
Many of the strongest large-cap banks have repaid their
investment to Treasury, though hundreds of smaller regional banks
have not. Foley noted regulators will be conducting a "soundness
review" during the third quarter, after which Wilmington will
learn if it is sufficiently strong to return the funds.
The bank, which filed its quarterly filing a few weeks ago,
did not offer the latest balance sheet data during the call.
Cecala said Wilmington has strong capital ratios and sufficient
cash to repay TARP "when we have the ability to do that."
Some investors have argued the bank needs to raise more
capital, and one during the conference call asked if Wilmington
had been approached by buyers. Cecala said there had been no
disagreements about the direction of the company.
Foley told investors and analysts the proud 107-year-old bank
was "committed to remaining independent."
(Reporting by Joe Giannone; Editing by Gerald E. McCormick,
Dave Zimmerman, Phil Berlowitz)