Earnings

Return to Article

City Nat'l 1Q Profit Drops 96 Percent; Shares Fall

The Associated Press

LOS ANGELES (AP) — City National Corp. shares fell Friday after it said first-quarter profit dropped 96 percent and that it planned to cut its dividend, but results were better than Wall Street expected.

After the close of trading on Thursday, the regional bank also said it expects to remain profitable throughout 2009, and at levels above the first quarter.

For the January-March period, City National earned $2 million, or 4 cents per share, after paying preferred dividends. This compares with earnings of $44 million, or 91 cents per share, a year earlier.

The 2009 results included a charge of $11.2 million, or 23 cents per share, for securities losses.

Excluding the charge, net income was $13.2 million, or 27 cents per share.

Analysts polled by Thomson Reuters, on average, expected earnings of 22 cents per share for the first quarter. Analysts typically exclude one-time charges from their estimates.

City National also said it was cutting its dividend by 60 percent to 10 cents per share from 25 cents.

Shares fell $1.80, or 5 percent, to $33.01 in morning trading.

While the results beat the average analyst estimate, BMO Capital Markets analyst Lana Chan said credit quality deteriorated more than she had anticipated.

During the quarter, the bank set aside $50 million to cover loan losses, nearly three times as much as it set aside in the prior-year period.

Net loan chargeoffs, or loans written off as unpaid, were $33.6 million, or 1.10 percent of average total loans and leases, up from $12.1 million, or 0.42 percent, in the year-ago period.

"We remain concerned about City National's above-average exposure to commercial and commercial real estate lending and its footprint in California and Nevada," Chan wrote in a research note Friday.

SunTrust Robinson Humphrey analyst Jennifer Demba maintained a "Neutral" rating on the shares, saying the bank represents an excellent investment for long-term investors given its solid earnings power, wealth management operation and strong Los Angeles deposit base.

However in the near term, Demba expects weaker revenue and higher credit costs to pressure earnings. She slashed her full-year profit estimate to 15 cents per share from $1.36 per share.

Net interest income, or income from loans and deposits, was $148.4 million, down 3 percent from the first quarter of last year.