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4 Reasons to Buy First Republic Bank (FRC) Stock Right Now
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Investors have been shying away from investing in the Finance industry as global headwinds continue to weigh on market sentiments. However, entirely overlooking the sector is not very wise either as there are a number of companies with a decent performance history and strong growth potentials, that signal profitable investment opportunity ahead.
First Republic Bank is one such company, which still exhibits strength in several areas. Thus, adding the stock to your investment portfolio may not be a bad idea. Notably, shares of this California-based bank gained more than 10% year to date, compared with the 3.9% decline of the KBW Nasdaq Bank Index.
With assets worth over $64 billion, First Republic provides private banking, private business banking and private wealth management, including investment, trust and brokerage services. Its geographic markets include San Francisco, Los Angeles, Portland, Boston, San Diego and New York.
Revenue Growth: Organic growth remains the key strength at First Republic as total revenue grew at a compound annual growth rate (CAGR) of 10% over the last three years (2013–2015). Net interest income (NII) – the bank’s primary source of income from operations – grew at a CAGR of 7% over the same time frame, despite the low interest rate environment. This improving trend continued in the first half 2016 as well.
We expect a persistent upward momentum in revenues with sustained growth in loans and potential rising interest rates in the near term as well as rising fee income from an improvement in its wealth management business. Management expects loan growth in the mid teens for 2016.
Earnings Per Share: First Republic’s earnings per share recorded a CAGR of nearly 5% over the last three years (2013–2015). The first half of 2016 witnessed bottom-line growth as well.
Moreover, earnings are expected to see an upside in the near term given the the company’s projected EPS growth (F1/F0) is 29.2%. Also, First Republic has a decent earnings surprise history as it surpassed the Zacks Consensus Estimate by an average of 2.3% over the trailing four quarters.
Strong Capital Position: As of Jun 30, 2016, the company maintained a strong capital position with a Tier 1 leverage ratio and a Common Equity Tier 1 ratio of 9.51% and 10.62%, respectively, exceeding regulatory requirements. Further, it remains committed on enhancing shareholder value. This April, First Republic announced a 6.7% increase in its quarterly cash dividend to 16 cents per share
Upward Estimates Revisions: Over the past 60 days, the Zacks Consensus Estimate for First Republic was up 5.1% to $3.90 per share for 2016 and 3.3% to $4.44 per share for 2017. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #2 (Buy) for the stock.
Other Stocks to Consider
Some other stocks in the finance space worth considering include Credit Acceptance Corp. (CACC - Free Report) , Hancock Holding Company and HomeStreet, Inc. (HMST - Free Report) . All the three stocks sport Zacks Rank #1 (Strong Buy).
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4 Reasons to Buy First Republic Bank (FRC) Stock Right Now
Investors have been shying away from investing in the Finance industry as global headwinds continue to weigh on market sentiments. However, entirely overlooking the sector is not very wise either as there are a number of companies with a decent performance history and strong growth potentials, that signal profitable investment opportunity ahead.
First Republic Bank is one such company, which still exhibits strength in several areas. Thus, adding the stock to your investment portfolio may not be a bad idea. Notably, shares of this California-based bank gained more than 10% year to date, compared with the 3.9% decline of the KBW Nasdaq Bank Index.
With assets worth over $64 billion, First Republic provides private banking, private business banking and private wealth management, including investment, trust and brokerage services. Its geographic markets include San Francisco, Los Angeles, Portland, Boston, San Diego and New York.
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Why the Stock is an Attractive Pick Now
Revenue Growth: Organic growth remains the key strength at First Republic as total revenue grew at a compound annual growth rate (CAGR) of 10% over the last three years (2013–2015). Net interest income (NII) – the bank’s primary source of income from operations – grew at a CAGR of 7% over the same time frame, despite the low interest rate environment. This improving trend continued in the first half 2016 as well.
We expect a persistent upward momentum in revenues with sustained growth in loans and potential rising interest rates in the near term as well as rising fee income from an improvement in its wealth management business. Management expects loan growth in the mid teens for 2016.
Earnings Per Share: First Republic’s earnings per share recorded a CAGR of nearly 5% over the last three years (2013–2015). The first half of 2016 witnessed bottom-line growth as well.
Moreover, earnings are expected to see an upside in the near term given the the company’s projected EPS growth (F1/F0) is 29.2%. Also, First Republic has a decent earnings surprise history as it surpassed the Zacks Consensus Estimate by an average of 2.3% over the trailing four quarters.
Strong Capital Position: As of Jun 30, 2016, the company maintained a strong capital position with a Tier 1 leverage ratio and a Common Equity Tier 1 ratio of 9.51% and 10.62%, respectively, exceeding regulatory requirements. Further, it remains committed on enhancing shareholder value. This April, First Republic announced a 6.7% increase in its quarterly cash dividend to 16 cents per share
Upward Estimates Revisions: Over the past 60 days, the Zacks Consensus Estimate for First Republic was up 5.1% to $3.90 per share for 2016 and 3.3% to $4.44 per share for 2017. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #2 (Buy) for the stock.
Other Stocks to Consider
Some other stocks in the finance space worth considering include Credit Acceptance Corp. (CACC - Free Report) , Hancock Holding Company and HomeStreet, Inc. (HMST - Free Report) . All the three stocks sport Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>