Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=101629
Story Retrieval Date: 5/26/2013 4:41:54 AM CST
Wintrust Financial Corp.’s stock tumbled 16 percent after the banking company swung to a substantial loss, widely missing analysts’ expectations. The drop largely resulted from an increase in its provision for credit losses.
The Lake Forest-based company lost $2.4 million, or 12 cents per diluted share, in the third quarter ended Sept. 30, compared with a profit of $9.9 million, or 40 cents per diluted share, in the year-earlier period. The company said the net loss during the quarter was a direct result of a $24.1 million provision for credit losses, almost six times the $4.4 million allocation a year ago. Analysts expected earnings of 30 cents per diluted share, Bloomberg reported.
Revenues rose 6 percent to $82.6 million from $77.7 million a year earlier.
Net interest income fell 8 percent to $60.7 million from $66.2 million, and the net interest margin was 2.74 percent, down from 3.14 percent. The decline is attributable to the drop in the federal funds rate, which led to unfavorable yields on loans, said the company. Noninterest income increased 90 percent to $21.9 million from $11.5 million, mainly due to a boost in mortgage banking revenue and fees on covered call options.
The company, which operates 14 chartered banks in the Chicago area and one near Milwaukee, made $18.5 million, or 75 cents per diluted share, in the nine months ended Sept. 30, compared with $40 million, or $1.59 per diluted share, in the year-earlier period. Revenues rose 5 percent to $261.3 million from $248.2 million.
“We intend to be profitable in 2008 and this is something that is manageable and we will work through,” said Edward J. Wehmer, president and CEO of Wintrust in a conference call. He expressed confidence that repricing existing loans as they come into maturity and having loan yields rise will contribute to a full-year profit. He said the company’s board will meet this week to determine whether or not to apply to the federal Troubled Asset Relief Program for up to several hundred million dollars as a relatively cheap extra boost in capital.
Analyst John Pancari of JPMorgan Chase & Co. expects the stock to remain pressured in the near term as credit visibility remains unpredictable. He noted that while Wintrust’s management confirmed that regulatory capital levels are above well-capitalized minimums, “we expect likely additional loan loss reserve measures to weigh heavily on capital in coming quarters.”
Analysts estimate earnings of 31 cents per diluted share for fourth quarter and $1.48 for the year. Last year, the company earned 65 cents in the fourth quarter and $2.24 for the year.
The stock closed at $24.07, down $4.65, while the NASDAQ was down 4.77 percent.