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First Republic (FRC) Q1 Earnings Beat Estimates, Dividend Up

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·4-min read
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First Republic Bank’s FRC first-quarter 2022 earnings per share of $2 have surpassed the Zacks Consensus Estimate of $1.90. Additionally, the bottom line improved 11.7% from the year-ago quarter.

Results were supported by an increase in net interest income (“NII”) and non-interest income. The company’s capital position was strong in the quarter. Higher expenses and elevated provision for credit losses were the offsetting factors.

Net income available to common shareholders jumped 15.2% year over year to $364 million.

Revenues, Expenses Flare Up

Total revenues were $1.40 billion in the March-end quarter, up 23% year over year. The figure missed the Zacks Consensus Estimate by 0.44%.

The NII jumped 21.9% year over year to $1.15 billion, primarily supported by growth in average interest-earning assets. Net interest margin increased marginally to 2.68% from the prior-year quarter’s 2.67%.

Non-interest income was $251 million, up 28.1% year over year. The rise mainly resulted from higher wealth management fees, brokerage and investment fees, and foreign exchange fee income.

Non-interest expenses for the reported quarter flared up 20.2% year over year to $866 million. Continued investments in business expansion, including additional hiring to support growth and information system initiatives, resulted in the uptick.

The first-quarter efficiency ratio of 62% was down from 63.5% in the prior-year quarter. A lower ratio indicates an increase in profitability.

Decent Balance Sheet

As of Mar 31, 2022, net loans climbed 4.7% sequentially to $140.6 billion, while total deposits were up 3.7% to $162.1 billion. Loan originations were $17.8 billion for the quarter, up 5.5% sequentially.

First Republic’s total wealth management assets were $274.2 billion as of Mar 31, 2022, marking a 1.9% sequential fall. The decrease was primarily due to market depreciation, significantly offset by net client inflow.

Wealth management assets included investment management assets, brokerage assets, money market mutual funds, and trust and custody assets.

Improving Credit Quality

In the January-March period, credit metrics were decent. On a year-over-year basis, total non-performing assets decreased 19.5% to $140 million. The non-performing assets to total assets ratio was 0.08%, down from the year-ago quarter’s 0.11%. Net loan recoveries were $0.3 million against net charge-off of $0.5 million in first-quarter 2021.

However, provision for credit losses of $10 million was recorded against reversal of $15 million in first-quarter 2021.

Strong Capital Position

As of Mar 31, 2022, the company’s Tier 1 leverage ratio was 8.70% compared with 8.32% as of Mar 31, 2021. Tangible book value per share increased 14.2% year over year to $68.47.

Tier 1 capital to risk-weighted assets was 12.25%, up from 11.6% in first-quarter 2021.

Dividend Hike

The bank announced an increase of 5 cents in its first-quarter cash dividend to 27 cents per share. The dividend will be paid out on May 12 to shareholders of record as of Apr 28, 2022. This marks the 11th consecutive year of dividend increase for the company.

Our Viewpoint

First Republic's balance sheet position has been decent and its growth prospects look promising, driven by consistent growth in loans. We believe that a strong capital position will help it pursue organic moves as well as strategic acquisitions in the near future.

However, rising costs on investments in business expansion might hurt its bottom line in the near term.

First Republic Bank Price, Consensus and EPS Surprise

First Republic Bank Price, Consensus and EPS Surprise
First Republic Bank Price, Consensus and EPS Surprise

First Republic Bank price-consensus-eps-surprise-chart | First Republic Bank Quote

First Republic currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Stocks

Fifth Third Bancorp FITB is slated to report first-quarter 2022 results on Apr 19.

Over the past 30 days, the Zacks Consensus Estimate for Fifth Third’s first-quarter earnings has moved 2.8% lower to 70 cents. This indicates a 24.7% decline from the prior-year quarter.

First Horizon National Corporation FHN is slated to report first-quarter 2022 results on Apr 19.

Over the past 30 days, the Zacks Consensus Estimate for First Horizon’s Q1 earnings has moved 2.9% lower to 34 cents. This indicates a 33.3% decline from the prior-year quarter.

Citizens Financial CFG is slated to report first-quarter 2022 results on Apr 19.

Over the past 30 days, the Zacks Consensus Estimate for Citizens Financial’s first-quarter earnings has moved 3% lower to 96 cents. This indicates a 31.9% decline from the prior-year quarter.


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Citizens Financial Group, Inc. (CFG) : Free Stock Analysis Report

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