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City National Corp (CYN)

Bank of America Merrill Lynch Banking and Financial Services Conference Call

November 13, 2012 9:40 am ET


Christopher J. Carey – Chief Financial Officer


Erika Penala – Bank of America Merrill Lynch


Erika Penala – Bank of America Merrill Lynch

We have City National presenting, which is widely accepted as one of the premier mid-size institutions in the country. So last year, egg on our face, we downgraded the stock after they presented at this conference. And this year, we have the dynamic CFO, Chris Carey, back to tell us about a company that despite margin pressure seems to be hitting on all cylinders. In other words, why I was wrong to downgrade the stock in the first place last year and now, with egg on my face, I would like to turn the stage over to Chris.

Christopher J. Carey

Thank you, Erika. Thanks to Erika and Merrill Lynch for having us here. I don't always agree with Erika, but she pulled one her quotes the other day. She is a great analyst, despite fact we don't always agree. She is right more than she is wrong by the way.

Anyway, so it’s great to be here in New York. I’m glad to see after the terrible storm, we are getting more back to normal but as soon as you say that you need someone that barely just got their power back on. But at least the city seems to be functioning pretty well. The tunnel that I came through last night apparently only had been open for a few days.

So first off I’ll be making some forward-looking statements under the protection of the Private Securities Litigation Act and you can look at the back of the presentation for more details. So this is a very brief overview of our company. I am appreciative of Erika's mentioned, we consider ourselves the premier private and business bank.

We are the 24th largest commercial bank in the country with $26 billion in assets and $2.7 billion in market cap. 78 offices, including 16 regional offices and one of the things we will talk about more is our wealth management business, which is a large business for a bank our size.

So here six themes we are going to cover today about why we think City National is a very good investment over the longer term. Part of what you will hear also today is what we don't do. These are all the strong parts of our business, but part of our story is as much what we don't do is what we do.

So I might just stop on this schedule, because it's not that often I get to get up here and talk about 44% earnings growth. It's more like a tech company. We are out in that tech area. But we had a great quarter, we are having great year and I think Erika is right, everything seems to be going the right way. It is a combination of things we've really done over the last five years, and that is more of our story. We are not working on just next year at any point in time. We continue to invest, but very strong earning growth. We did mention there were some unusual items in there, but we were still up like 30% without the unusual items.

Loan growth and deposit growth obviously 15% and 12%. And then lastly, we continue to have improvement in credit quality. We are probably getting to the end of that story, but our credit metrics are all continuing to get better. So for some people here, maybe don't understand us as well, this is probably the key slide in the presentation for just understanding what we do.

We are very focused. We are not trying to do all things for all people. So this little blue bar in the middle shows what we are going after and importantly I think see that we aren't a retail bank. That's not something we were going after. We compete against the mega-banks and the community banks in what we call the sweet spot of banking. Besides being very focused, the way that we differentiate ourselves more than anything is through service.

We spend more with staff differently, so we obviously have to have the right products and services but our differentiator is that we have a client service model, not a sales model. So we get very high levels of client satisfaction and retention. To back that up, we have a slide in here by an independent group that does a survey every year or two that shows we ranked number one in client satisfaction. We received seven excellence awards for business banking. So besides us talking about it, every year that this comes out we get recognized that we are very good at it.

So now, our clientele. While we continue to grow and spread out in different specialties throughout the country, our biggest market is still California, the world’s ninth largest economy. And I think as you can see by this slide, even though there is 38 million people in California, the 27 million of the 38 million people are aggregated along the coast in these very dense markets. And that is our business focus. Wherever we go, we are going into very, very dense markets as a business bank. I think we’ve got a slide here.

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