City National raises $100 million, says will repay TARP
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Two days before the government is set to order some of the country’s biggest banks to raise more capital, Beverly Hills-based City National Corp. offered investors 2.8 million new shares on Tuesday -- and found eager takers.
The parent of City National Bank said it priced the shares at $39 each, raising about $100 million. The offering price was a 2.7% discount to the stock’s closing price of $40.10 on Monday. In a good sign, the stock rose after the deal was completed, closing up $1.28, or 3.2%, to $41.38, its highest since Jan. 7.
City National CEO Russell Goldsmith said the bank didn’t need to raise more capital but felt that this was a good time to test the market with the stock sale, after the recent surge in bank share prices.
He said the bank was buoyed by the reception for the offering: ‘We think it’s a signal of the confidence investors have’ in City National.
Goldsmith is confident enough to say that City National now wants to repay the $400 million capital injection it received last fall under the Treasury’s Troubled Asset Relief Program.
‘We’d like to repay the whole thing,’ he said, although he added that the bank hadn’t yet applied to the Treasury to return the money, and couldn’t give a timetable.
A total of 557 banks have received $198 billion in TARP injections, which were aimed at strengthening bank balance sheets and encouraging lending.
But many banks, and their shareholders, have been chafing under the rules governing TARP. Some smaller banks already have repaid the money, saying the restrictions the government imposed on employee pay and on dividend payments to shareholders put them at a competitive disadvantage.
Some of the biggest banks, by contrast, may have to take more government money after regulators on Thursday release the results of their ‘stress tests’ of industry titans. About 10 of the 19 biggest banks are expected to be ordered to raise more capital to bolster themselves against possible future loan losses. . . .
City National, with $17 billion in assets, is the biggest bank based in L.A. County but is dwarfed by giants such as Bank of America Corp. and Wells Fargo & Co. City National has long been known as a major financier and money manager to entertainment-industry clientele. Despite rising loan losses, the bank has remained profitable, and its ratio of tangible capital to assets was 7.1% as of March 31, well above the levels of many larger rivals.
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, whose family controls 17% of City National’s stock, didn’t bad-mouth TARP or express regret about taking the capital. He 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,’ he said.
-- Tom Petruno