City National Corp. said it will cut its dividend after reporting first quarter net income had plunged. The results were better than Wall Street expected.
The Los Angeles parent of City National Bank late Thursday reported net income of $7.5 million, but net income available to common shareholders was $2 million (4 cents per share), reflecting the dividend paid on the government's preferred stock under the United States Treasury's TARP program. A year ago the company reported net income of $44 million (91 cents).
The company took a charge of $11.2 million for securities losses. Excluding the charge, net income was $13.2 million (27 cents). Analysts surveyed by Thomson Reuters on average expected adjusted per-share earnings of 22 cents.
During the quarter, the bank set aside $50 million to cover potential loan losses, almost three times as much as it had a year ago.
Net interest income fell 3 percent to $148 million. Net loan charge-offs were $33.6 million, or 1.1 percent of average total loans and leases, compared with $12.1 million, or 0.42 percent a year ago.
City National also said it was cutting its dividend 60 percent to 10 cents per share. A Sterne Agee analyst cut his recommendation on shares from "neutral" to "sell."
"We believe we have made it through the worst of our residential construction credit problems," Chief Executive Russell Goldsmith said in a conference call.
"We think home values are in the process of bottoming out here in California."
City National shares closed up $3.21, or 9 percent, to $38.02 on the New York Stock Exchange. Overall markets were boosted on Friday after the government unveiled its methods for "stress testing" the health of banks, which could lead more financial institutions to raise more money in the capital markets.
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