City National's (NYSE:CYN) Credit Quality Improves for Fifth Straight Quarter

The credit quality of City National (NYSE:CYN) has improved for the fifth quarter in a row, but in order to grow, noted UBS, their loan portfolio will have to kick in.

UBS says, "Bottom-line, CYN's 4Q10 results evidenced its fifth straight quarter of material credit quality improvement. Positive growth in operating revenues continued despite a lack of loan growth thanks to fee income gains. While the announced doubling of its dividend to a 25% payout ratio reflects its strong capital position, we believe a return of more robust loan demand/higher short-term interest rates will be needed to drive the shares higher. Its 2011outlook calls for increased profitability on a continuation of asset quality improvement and lower credits cots. Its loan growth guidance remains cautious pointing to an only modest increase. We remain concerned with its NIM in this low rate environment and look for continued pressure near term. A solid franchise nevertheless."

"...we are maintaining our 2011 EPS estimate at $3.20, as lower credit-related costs substantially offset our reduced net interest margin forecast. Our inaugural 2012 EPS estimate is $3.45."

Barclays maintains a "Buy' rating on City National (CYN), which closed Friday at $59.37, down $2.75, or 4.43 percent. Barclays has a price target of $65 on City National.

City National's (NYSE:CYN) Guidance Expected to Show Increased Profitability

With an increased in acquisition appetite and expected branch expansion in 2011, Barclays sees City National's (NYSE:CYN) guidance to show increased profitability for the year.

Barclays noted, "We expect CYN to report 4Q10 EPS of $0.76
compared to the $0.68 consensus. Our estimate excludes an expected $6.8-million ($0.08) charge related to its October 16th redemption of $250 million in trust preferred securities...We expect CYN to offer its initial 2011 EPS guidance on its earnings call, which is likely to call for improved profitability in 2011 relative to 2010. We believe its acquisition appetite is increasingly shifting toward traditional M&A and expect it to remain focused on opportunistic branch expansion in 2011."

Barclays maintains an "Overweight" rating on City National, which closed Tuesday at $61.91, gaining $0.19, or 0.31 percent. Barclays has a price target of $65 on them.