City National reports layoffs amid focus on controlling costs

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City National Bank in Los Angeles is laying off more employees as its Canadian parent company seeks to control costs following a difficult year at the U.S. unit.

The $93.4 billion-asset bank did not say how many jobs are being eliminated across its multi-state footprint, but it reported to California officials on Monday that it would permanently lay off 56 employees in Los Angeles County.

"We regularly review our staffing plans and models to ensure they align with our strategic priorities and allow us to best serve our clients and communities. As a result, we have made the difficult decision to eliminate a targeted number of roles in some parts of the business across City National's footprint," the bank said in a written statement.

"Clients will continue to receive uninterrupted service, and we are providing resources to support the impacted colleagues through the transition," the statement continued.

The recent job losses follow 71 permanent layoffs that City National reported to California officials last September.

City National, which was acquired by Toronto-based Royal Bank of Canada in 2015, ran into trouble last year as a result of rising deposit costs, higher expenses, larger provisions for credit losses and unrealized securities losses. It reported losses of $285 million between May and October 2023.

City National, long known as the "Bank to the Stars" because of its deep ties to the entertainment industry, got a leadership shakeup last fall. Greg Carmichael, the former CEO of Fifth Third Bancorp, became executive chair. And Howard Hammond, another former Fifth Third executive, was named CEO.

The Los Angeles bank's noninterest expenses ballooned from $2.01 billion in 2022 to $2.68 billion last year, according to call report data.

In addition, City National's headcount rose from 5,800 in October 2022 to 6,230 a year later, according to a bank spokesperson. Earlier this week, the headcount was down to 6,200, which represents less than a 1% decline over the last five months.

Royal Bank of Canada CEO Dave McKay has recently indicated that controlling costs at City National is a priority in 2024. 

"We're starting to get a much better handle on the cost structure," McKay said in January. "And there remains a very significant opportunity for us to start to bring that cost structure in line with the size of the organization."

McKay said that moving jobs from California to British Columbia represents one way to reduce costs, though he didn't specify whether he was referring to City National positions.

RBC is expected to report its quarterly earnings on Feb. 28.

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In addition to its business challenges, City National has also been dealing with regulatory problems. In January 2023, the bank agreed to pay $31 million to settle allegations of lending discrimination. Then last month, the Office of the Comptroller of the Currency fined the bank $65 million after finding that it had systemic deficiencies in its risk management practices.

City National has roughly 70 locations across the U.S., including 53 in California, according to its website. The others are in New York, Nevada, Georgia, Pennsylvania, Florida, Massachusetts, Virginia, Tennessee, Delaware and Washington, D.C.

It is far from the only bank turning to layoffs as a way to cut expenses.

In a report this week about the U.S. banking industry, analysts at Fitch Ratings wrote: "Expenses should stabilize in 2024, running from modest declines to modest growth, supported by industry-wide job cuts."