Fitch Ratings has affirmed the long-term Issuer Default Rating (IDR) and short-term IDR of City National Corporation (CYN) and its bank subsidiary, City National Bank, at ''A-'' and ''F1'', respectively. Concurrent with this action, Fitch has downgraded CYN''s Individual Rating to ''B/C'' from ''B''. CYN''s ratings have been removed from Rating Watch Negative, where they were placed on May 28, 2009. The Rating Outlook for CYN is Negative. A complete list of ratings is provided at the end of this release.
The affirmation of CYN''s IDRs reflects the company''s sound financial performance, including earnings that have absorbed sharply higher credit costs. CYN''s focused business and private banking strategy continues to generate good spread and fee income. The solid net interest margin is driven by a large core deposit base that includes a significant noninterest bearing component. The company''s wealth management businesses have been impacted by lower market valuations over the last year but remain significant contributors to earnings. CYN has bolstered its loan loss reserve, and capital remains solid, even if it should repay the preferred stock issued to the U.S. Treasury under the Capital Purchase Program (CPP).
The Negative Outlook reflects CYN''s growing, albeit manageable nonperforming assets (NPAs). To date, asset quality deterioration has been centered in residential development and construction and commercial and industrial lending. However, real estate markets in many parts of CYN''s footprint remain under pressure, and Fitch''s expected loss rates in commercial real estate in general have increased. These factors were the primary drivers in lowering CYN''s Individual Rating. The Outlook also reflects concern that credit quality could deteriorate beyond Fitch''s current expectations. Further or prolonged economic stress could place additional pressure on other parts of the loan portfolio. Additionally, the size of CYN''s large credit relationships and its concentration in California could create volatility in credit losses.
Fitch has also widened the notching on CYN''s outstanding hybrid equity, which includes the CPP preferred stock. As discussed in Fitch''s press release, ''Expectations for Higher Loan Losses Driving U.S. Bank Ratings Review'', dated May 7, 2009, an analysis of the notching between IDRs and hybrid equity instruments has been underway, and Fitch has taken similar action on other issuers.
Fitch has taken the following rating actions:
City National Corporation
--Long-term IDR affirmed at ''A-'';
--Senior debt affirmed at ''A-'';
--Preferred stock downgraded to ''BBB'' from ''BBB+'';
--Short-term IDR affirmed at ''F1'';
--Individual rating downgraded to ''B/C'' from ''B'';
--Support affirmed at ''5'';
--Support floor affirmed at ''NF''.
City National Bank
--Long-term IDR affirmed at ''A-'';
--Long-term deposits affirmed at ''A'';
--Subordinated debt affirmed at ''BBB+'';
--Short-term IDR affirmed at ''F1'';
--Short-term deposits affirmed at ''F1'';
--Individual rating downgraded to ''B/C'' from ''B'';
--Support affirmed at ''5'';
--Support floor affirmed at ''NF.
The Rating Outlook is Negative.
Fitch''s rating definitions and the terms of use of such ratings are available on the agency''s public site, ''www.fitchratings.com''. Published ratings, criteria and methodologies are available from this site, at all times. Fitch''s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ''Code of Conduct'' section of this site.
Contacts:
Fitch Ratings
Doris Hoffmann, 312-368-2057, Chicago
Ken Ritz,
212-908-0368, New York
or
Media Relations:
Brian Bertsch,
212-908-0549, New York
Email: brian.bertsch@fitchratings.com
