City National Corp Posts Strong 3Q Results

City National Corp.

reported 3Q10 EPS of $0.65. Excluding one-time items related to prior FDIC deals and the early extinguishment of TRUPs, core EPS of $0.76 was well above J.P Morgan's $0.68 estimate as well as consensus of $0.56. The beat was almost entirely attributable to provision expense coming in well below forecast. While this lower run-rate for provision should benefit 4Q EPS, it doesn't materially alter JPM's view of 2012 or long- term earnings power at CYN. With another strong quarter of core EPS growth, J.P Morgan likes the direction the company is headed. On top of key credit indicators all pointing in the right direction and management guiding to expect required provision to remain low through YE10, CYN is armed with strong capital levels, flush with liquidity, and has levers to pull until loan growth returns, including exploring additional acquisition opportunities. It pegs long-term earnings power at CYN in the $6 range, which puts the shares at 8.6x, in line with peers. JPM maintains OverWeight on CYN. JPM has a price target of $65 on CYN CYN is trading at $53.44