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City National profit rises 8% but misses Wall Street expectations

January 24, 2013|By E. Scott Reckard
  • City National Corp. Chairman Bram Goldsmith, left, and Chief Executive Russell Goldsmith.
City National Corp. Chairman Bram Goldsmith, left, and Chief Executive… (Mel Melcon / Los Angeles…)

City National Corp.'s fourth-quarter earnings rose 8% on strong growth in lending, but the profit was squeezed by low interest rates, leaving lower results than Wall Street expected. 

The Los Angeles-based parent of City National Bank earned $47.2 million, 87 cents a share, compared with $43.9 million, 82 cents a share, in the fourth quarter of 2011. Analysts had expected $1 a share, according to Thompson Financial.

Quarterly revenue rose 5% year-over-year to $303.6 million, slightly higher than the analyst consensus.

City National Corp. is the largest bank based in Southern California as measured by assets, which reached $28.6 billion at the end of 2012 -- up 21% from the fourth quarter of 2011.

"2012 was a very strong year of growth in earnings, assets, clients and capabilities," said City National's president and chief executive, Russell Goldsmith. "Net income and revenue were up significantly, loan production set new records, deposits grew at double-digit rates, credit quality remained strong, and assets reached a new record."

The bank released its earnings Thursday afternoon after the financial markets closed. The stock had closed the day down 29 cents at $52.56.

Like many banks, City National has seen its lending profits pinched as old loans are repaid and replaced with new ones at lower interest rates.

Its net interest margin, measuring lending profitability, averaged 3.27% in the fourth quarter, down from 3.58% in the third quarter and 3.7% a year earlier. That left interest earnings at $209.1 million, up 1% from a year earlier but down 3% from the third quarter.

The bank's provision for losses on loans rose from $2 million in the third quarter to $7 million in the fourth quarter. 

The higher loan volume was a bright spot, providing an offset to the declining profit margin.

Not counting loans acquired from failed banks on which the Federal Deposit Insurance Corp. shares losses, fourth-quarter loan balances averaged $14 billion. That was 14% higher than a year earlier and up 3% from the third quarter -- growth that RBC Capital Markets analyst Joe Morford said "should be well received."

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