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City National Bank seeking to repay TARP money

In a stock sale, the Beverly Hills company raises about $100 million that it intends to put toward repayment of $400 million it received from the U.S. government.

May 06, 2009|Tom Petruno

The parent of City National Bank on Tuesday added its name to the list of financial companies that want to exit the industry's strained partnership with Uncle Sam.

Beverly Hills-based City National Corp. said it raised about $100 million by selling new shares to investors, and intended to put the money toward repayment of $400 million in government capital it received in November.

"We'd like to repay the whole thing," said Russell Goldsmith, the company's chief executive.

But he said the bank hadn't yet applied to the Treasury to return the money and couldn't give a timetable.

Many banks, and their shareholders, have been chafing under the rules of the government's Troubled Asset Relief Program, which has injected $198 billion in capital into 557 banks to strengthen their balance sheets and encourage lending.

Some smaller banks already have repaid the TARP money, saying the restrictions the government imposed on employee pay and on dividend payments to shareholders put them at a competitive disadvantage.

City National, with $17 billion in assets, is the biggest bank based in Los Angeles County and received the most TARP funds of any bank based in California other than Wells Fargo & Co. in San Francisco.

Goldsmith said the bank was buoyed by the reception for its stock offering Tuesday. The company issued 2.8 million shares at $39 each, a 2.7% discount to the closing price on Monday. The stock's market price rose after the deal was announced, rising $1.28, or 3.2%, to $41.38, its highest close since Jan. 7.

"We think it's a signal of the confidence investors have" in City National, Goldsmith said of the stock sale.

Despite rising loan losses, City National has remained profitable, and its ratio of tangible capital to assets was 7.1% as of March 31, well above the levels of many of its larger rivals.

Goldsmith, whose family holds 17% of the company's stock, said the bank didn't need to raise more capital but believed that this was a good time to test the market with the stock sale, after the recent surge in bank share prices.

In a report Monday, investment research firm Keefe Bruyette & Woods listed City National as one of just seven banks that Keefe believes could repay the government without raising additional funds.

Goldsmith said the government's restrictions on bank employees' pay under TARP had "not yet" had any effect on City National. "But it is a concern."


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