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

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.