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City National profit jumps, beating Wall Street estimates

October 21, 2010 |  4:42 pm

City National Corp. reported a fourfold increase in third-quarter profit, with deposits growing rapidly, fee income increasing and a loan losses declining for the fourth straight quarter at the Los Angeles bank.

City National said in its quarterly financial report that it earned $34.4 million, or 65 cents a share, during the quarter, compared with $8.0 million, or 5 cents, a year earlier. (The 2009 per-share earnings were reduced by dividend payments on $400 million received from the government during the financial crisis. It has since repaid that infusion of emergency capital.) 

Quarterly revenue was $254.5 million, up 11%, reflecting the acquisition of three failed banks in La Jolla, San Diego and Las Vegas over the last year.

Excluding unusual items, earnings were 76 cents a share, beating Wall Street's consensus estimate of 58 cents. The earnings were announced after the close of trading Thursday, which saw City National's shares decline 31 cents to $59.16.

The bank said the weak economy and charge-offs of uncollectible commercial mortgages and construction loans resulted in a shrinking loan portfolio -- $11.4 billion on Sept. 30, down 7% from a year earlier and down 1% from the second quarter. (The figures exclude loans from the acquired banks that are covered by a loss-sharing agreement with the Federal Deposit Insurance Corp.)

Non-real estate loans to businesses grew, along with the high-balance residential mortgages City National provides to wealthy homeowners.

The results included a $13-million provision for losses on non-FDIC covered loans, 59% lower than in the second quarter of 2010. Net charge-offs declined 16% while soured loans and other nonperforming assets, excluding FDIC-covered assets, declined 5%.

Chief Executive Russell Goldsmith said the bank "continues to energetically seek out quality lending relationships"  and pointed out, as he enjoys doing, that "City National does not have the foreclosure problems and risks that are getting headline attention at some of the nation's largest banks."

-- E. Scott Reckard