Analysts at Sandler O'Neill & Partners have raised earnings estimates for City National Corp. after the Los Angeles company reported strong second-quarter earnings growth that was aided by improved asset quality and "promising" gains in its commercial-and-industrial loan portfolio.

In a research note Friday, analysts Aaron Deere and Andrew Lietsch raised their earnings-per-share estimates for 2011 by 11 cents, to $3.35, and increased their 2012 estimates by a nickel, to $3.80.

Late Thursday, the $22 billion-asset City National reported a profit of $47.5 million for the quarter, up 15% from the same period a year earlier. Its diluted earnings per share rose 19%, to 88 cents, and the Sandler analysts said that even after backing out a nine-cent one-time gain relating to the April acquisition of a failed Las Vegas bank, City National still beat their estimate by two cents.

The earnings gains were driven largely by a sharp drop in nonperforming assets. At June 3o, nonperforming assets totaled $180.4 million, down 43% from the same quarter last year. As a result of its improving credit quality, City National did not take a loan-loss provision for the second straight quarter.

City National's loan growth was bolstered by a mix of new originations and gains from a purchase of a $170 asset-based lending portfolio made up largely of national credits. Between the first and second quarters of this year, total loans, excluding loans covered by loss-sharing agreements with the Federal Deposit Insurance Corp., increased 3.5%, to $11.7 billion. Total C&I loans increased 7.4% in the three-month period, to$4.8 billion.

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