Despite a sharp drop in City National Corp.'s stock price so far in 1999, analysts are predicting a big year for the Beverly Hills, Calif., banking company.

This week First Security Van Kasper raised its rating on the stock from "buy" to "strong buy," with a six-month price target of $40 a share; Advest Inc. has estimated the stock could hit $48.

At midday Thursday, the stock was trading at $33 a share.

"We're very bullish on the stock," said Anthony J. Polini, an Advest analyst in New York. "They have strong loan growth and excellent credit quality."

"City National's performance is far superior to the average community bank," said Joseph K. Morford 3d, an analyst at First Security Van Kasper in San Francisco. "This is a buying opportunity that couldn't go unnoticed."

Analysts further cited low levels of nonperforming assets, minimal net charge-offs, favorable earnings-per-share momentum, and an attractive distribution network to sell products to small and midsize businesses.

City National, parent of City National Bank, is the largest independent bank headquartered in Southern California, with $6.3 billion of assets and 39 branches between Los Angeles and San Diego.

This week the bank extended its string to 19 straight quarters of double-digit growth in earnings per share by reporting a 16% rise in first- quarter net income, to $26 million. At 55 cents a share, that beat the Wall Street consensus by three cents.

The surge was largely fueled by significant increases in commercial and construction lending.

However, City National's stock price has languished. The bank's stock has tumbled 21% since hitting its 52-week high of $41.625 on Dec. 31. Meanwhile, the Western Bank Index compiled by American Banker has dropped just 6.97%.

Nevertheless, Russell Goldsmith, City National's chief executive officer, said the company's "prospects are better today than ever before." He said the bank is "cherry picking" top California banking talent in the wake of mergers, diversifying its loan portfolio, and expanding its territory. He also predicted that the bank's year-old technology lending division will "carve out a leadership role" in Southern California.

And the bank recently created a services division to improve its delivery systems. The unit's executives were plucked from the former First Interstate Bank and Home Savings of America. Fee income and cross-selling opportunities are also expected to come from the acquisition of North American Trust Co. last year, Mr. Goldsmith added.

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