Profit falls 20% at City National

City National Corp. stock fell 12% on Friday after the Beverly Hills-based bank reported lower fourth-quarter earnings and said this year’s profit would decline 7% to 12%.

The bank’s earnings report, issued after the markets closed Thursday, included a $20-million provision for loan losses, City National’s first loss provision in 17 quarters, and a 4.4% increase in expenses. The size of both was unexpected, Keefe, Bruyette & Woods analyst Manuel Ramirez said in a note to investors.

Bear Stearns Cos. downgraded City National from outperform to peer perform early Friday, and the bank’s stock fell $7.25 to $52.75.

City National, a business lender and wealth-management specialist, said it made the large loss provision in light of weaker economic conditions and their effect “on a small number of our loans.”

“It is worth emphasizing that City National has no sub-prime loans, no sub-prime [collateralized debt obligations] and no concerns with credit card debt, home equity loans or its money market funds,” Chief Executive Russell Goldsmith said in a statement.

For the fourth quarter, City National earned $46.9 million, or 96 cents a share, a 20% decline from $58.6 million, or $1.19, in the final quarter of 2006. Revenue rose 10% to $237 million.

For the full year, City National reported net income of $222.7 million, or $4.52 a share, down from $233.5 million, or $4.66, in 2006. Revenue rose 7% to $911 million.

City National said it expected profit in 2008 to be $3.98 to $4.20 a share.