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City National profit up 17% as deposit inflows continue

April 20, 2012|By E. Scott Reckard
  • City National Bank headquarters in Beverly Hills, 1955. The bank, now based in Los Angeles, reported 17% higher first quarter earnings.
City National Bank headquarters in Beverly Hills, 1955. The bank, now based… (City National Corp. )

City National Corp. shares were trading higher following the L.A. bank’s earnings reportsaying  profit rose 17% during the first quarter, with deposits and assets each up 11%.

The bank, which mainly serves businesses and wealthy individuals, earned $46.3 million, 86 cents a share, compared with $39.7 million, 74 cents a share, in the first quarter of 2011. Revenue was $276 million compared with $275 million a year earlier, but down 4% from the fourth quarter.

Credit quality improved. The percentage of nonperforming assets declined from 1.89% to 1.11%, and City National did not make a provision for losses on loans.  

The earnings, announced after the markets closed Thursday, came in just ahead of Wall Street’s consensus estimate. City National stock was up 35 cents a share at $52.01 in afternoon trading Friday in New York, a rise of 14% since a recent low of $45.51 in early March.

 “Assuming that the U.S. economy along with Europe stay on the levels that they’re at, we expect City National to deliver another solid performance in 2012,” Chief Executive Russell Goldsmith told analysts during a conference call. “Certainly we’re off to a very good start here in the first quarter.”

Goldsmith said the bank made more than $700 million in new loans during the quarter. Commercial and industrial loans grew the most, with more modest increases in commercial mortgages and jumbo home loans for the bank’s wealthy clients.

Still, Goldsmith said, with the California economy improving slowly, many businesses continue to hang onto cash rather than expand, causing deposits to flow in faster than City National can lend them out.

It invested the excess in securities, with those holdings up 39% during the quarter and a partial shift to longer-term bonds to increase returns.

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