City National earnings increase
Southern California’s regional banks have put many of their loan problems behind them and are reporting solid results for the second quarter despite the sluggish economy and record low interest rates that are pinching lending profits.
The latest positive surprise arrived Thursday, when City National Bancorp reported net income of $54.8 million, or $1.01 per share, up 15% from $47.5 million, or 88 cents, a year earlier. Even excluding one-time gains, the results beat Wall Street’s expectations of 88 cents.
The results looked better across the board, with revenue up 3%, deposits up 12% and a 14% increase in loans (not counting loans acquired from failed banks in loss-sharing agreements with the government). Loan originations were at record levels for the second straight quarter.
And City National’s defaulted loans, foreclosed properties and other nonperforming assets amounted to 0.98% of total assets, down from 1.54% a year earlier.
“City National’s results for the first half of the year reflect another very solid performance,†bank Chief Executive Russell Goldsmith said in a statement, “as the company continued to add new clients and expand its products, services and technology.â€
Other banks reporting better results this week included PacWest Bancorp of Los Angeles (profit up 21%), Cathay General Bancorp of L.A. (up 23%), and East West Bancorp of Pasadena.
East West, the largest Chinese American bank, grew commercial and trade-finance lending and reported this week that its net income reached $70.6 million, or 47 cents a share, up 17% from $60.5 million, or 39 cents, a year earlier.
The slowdown in China’s economic growth concerned some analysts on a conference call Thursday with East West Chairman Dominic Ng, but he said new clients would pick up the slack.
“Basically, we are gaining more market share, specifically from the export side,†Ng said. “I think we’ll see the next six months will be pretty certain that we will be growing.â€
Sterne, Agee bank analyst Brett Rabatin sounded a sour note Thursday by downgrading East West, which he said is likely to suffer in the low interest rate environment, and the bank’s shares fell 6%. Rabatin also said revenue growth was unlikely at Cathay, whose shares fell about 4% on the day.
But Sandler O’Neill analyst Aaron Deer said nothing had changed his view that the California banks were performing well.
“The banks are eager to lend and are finding some success among commercial borrowers,†Deer said.
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