City National Bank in Beverly Hills, sometimes called "the banker to the stars," said Tuesday that it will close six of 22 branches and lay off 175 employees, or 12% of its work force.
A unit of City National Corp., the financial institution has traditionally catered to the rich and famous, with a clientele that ranged from well-known entertainers such as Frank Sinatra to Hollywood's corporate elite.
City National used to brag about the safety of its loans, but--like most other financial institutions in Southern California during the 1990s--it has been hit hard by a depressed regional economy. According to Vice Chairman Steven Bridy, City National is closing the branches as a way to cut costs and boost profit.
In the past year, City National has grappled with problems ranging from inadequate capital and troubled loans to its rapidly shrinking size. Its assets fell to $3 billion as of Sept. 30--down 23% from a year ago. City National also lost $11.5 million in the first nine months of 1993, compared to a $60.2-million loss for the same three quarters in 1992.
The financial institution said it will close branches in Sherman Oaks, Woodland Hills, Santa Monica, Brentwood, Newport Beach and the mid-Wilshire area. The closures and layoffs should be accomplished by the end of March and will result in a $12-million restructuring charge in the fourth quarter, bank officials said.
Federal regulators ordered City National to boost its capital in 1992 after the financial institution sustained steep losses and saw bad loans swell to nearly 12% of total assets. City National met the order by raising $81 million in a stock sale in June, raising capital above the federally required minimums.
In February, the bank announced an aggressive program to rid itself of bad assets that has whittled problem loans down to 3.6% of total assets as of Sept. 30.
One Wall Street analyst, who asked not to be named, commended the bank for taking the streamlining measures.
"They probably had some marginal branches out there which didn't make sense to focus on, going forward," the analyst said. "Their (problem loans) are trending down, and they have gotten their capital in shape with the recapitalization."
Kenneth I. Frankel, an analyst with Drake Capital Securities in Santa Monica, was more pessimistic about the near future, saying, 'I don't think anything good is going to happen in the L.A. economy in the next year that's going to help a bank that is as dependent on the L.A. economy as City National."
City National shares closed up $0.25 to $7.50 on Tuesday in New York Stock Exchange trading.