Back to top

Analyst Blog

Shares of First Republic Bank (FRC - Analyst Report) have recorded a year-to-date return of 54.9%. The strong price appreciation benefited from organic growth and considerable capital deployment activities. However, we are not so optimistic about these positives translating into further price appreciation down the road as the company’s top line will be under pressure.

After observing First Republic’s fundamentals following its third-quarter 2013 earnings release, it seems that keeping the company’s shares in your portfolio would not be a bad idea. However, we discourage further addition of First Republic’s shares to your portfolio.   

Reasons behind View

Though First Republic’s third-quarter 2013 operating earnings per share of 64 cents missed the Zacks Consensus Estimate by a penny, it was higher than 54 cents earned in the prior-year quarter.

Despite the overall sluggish economic environment, First Republic recorded growth in deposits and loans so far in 2013. Given this trend, both loan and deposit balances will expectedly rise further when economic improvement gathers momentum.

We also appreciate the company’s ability to increase net interest income (NII) amid the low interest rate environment.

However, First Republic’s top-line growth will likely be sluggish in the next few quarters owing to rising expenses and net interest margin (NIM) contraction. NIM declined 23 basis points year over year to 3.30% in the first nine months of 2013. Moreover, with implementation of new banking regulations, there will be pressure on fee income.

Over the last 30 days, the Zacks Consensus Estimate for 2013 and 2014 remained unchanged at $2.61 and $2.84 per share, respectively. Hence, First Republic now carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked financial stocks include BofI Holding, Inc. (BOFI - Snapshot Report), Preferred Bank (PFBC - Snapshot Report) and TriCo Bancshares (TCBK - Snapshot Report). All these have a Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 2.88 +3.22%
CENTURY ALU… CENX 22.25 +3.20%
UNITED CONT… UAL 48.95 +2.66%
ILLUMINA IN… ILMN 174.82 +2.54%
CITI TRENDS… CTRN 22.05 +2.42%