Problem loans a drag on area banks’ results
Losses on housing-related loans socked Pasadena’s East West Bancorp with an unexpectedly large second-quarter loss of nearly $26 million, the bank reported Thursday, while City National Corp. of Beverly Hills and Los Angeles’ Cathay General Bancorp reported larger declines in profit than Wall Street had expected.
The banks all cited problem loans to developers and home builders. Such loans made up just 4.6% of City National’s total $12.2 billion in loans but caught the blame for nearly all of its $35 million in loan write-offs and additions to reserves for future loan losses. A year earlier, City National had made no such write-offs or provisions.
City National, the largest commercial bank based in the Los Angeles area, reported earnings of $35.5 million, or 73 cents a share, down 40% from $59.2 million, or $1.19, a year earlier.
The bank, a lender to small- and medium-size businesses across Southern California, suffered from “further deterioration in the housing market and its impact on our home builder clients,” Chief Executive Russell Goldsmith said in a statement.
The earnings were released after the end of trading Thursday, during which City National stock fell $3.16, or 6.3%, to $47.23.
East West, the second-largest commercial bank based in Los Angeles County, lost $25.9 million, or 41 cents a share, compared with a profit of $40.5 million, or 66 cents, a year earlier. Before the earnings were released, East West shares closed down $1.66, or 13%, at $11.10.
East West Chairman Dominic Ng said the bank reviewed its entire loan portfolio during the quarter -- doing new appraisals on all land and home-building loans -- resulting in a provision for loan losses of $85 million. He said the provision for losses should decline in the second half of this year.
Cathay earned $19.2 million, or 39 cents a share, down 37% from $30.6 million, or 60 cents, a year earlier. Before the announcement, its shares closed down $1.09, or 6.25%, at $16.36.
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