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First Republic Depicts Organic Growth: Time to Hold?
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First Republic Bank continues to grow organically, backed by the company’s balance-sheet strength among other factors. The company looks poised for top-line growth, primarily driven by the rise in net interest income. However, escalating expenses remains a key concern.
First Republic’s improving loan and deposit balances continue to support its organic growth potential. Notably, loan originations witnessed a four-year compound annual growth rate (CAGR) (2014-2017) of 17.5%. Total deposits have witnessed a four-year CAGR of 22.9% (2014-2017), with similar growth witnessed during the first six months of 2018 as well.
Solid top-line performance is expected to drive First republic’s growth over the long run. Net-interest income exhibited a five-year CAGR (2013-2017) of 15.1%, with the trend continuing in first-half 2018. This is expected to continue backed by the increase in earning assets and rising interest rates. Non-interest income also reflects a strong five-year CAGR (2013-2017) of 17.2%. The increasing trend continued in the first half of this year as well.
Further, compliance with regulatory ratio requirements indicates stability and a good capital position. As of Jun 30, 2018, the bank’s Tier 1 leverage ratio was 8.83%. This enables the company to pursue any acquisition opportunities for faster growth.
Despite these positives, we remain cautious due to several challenges plaguing the company. Notably, operating expenses witnessed a five-year CAGR (2013-2017) of 20.9%, with the trend continuing in first-half 2018. Investments in digital initiatives, including mobile banking applications and data analytics, will likely keep expenses elevated, in turn, straining the bottom line.
The company’s shares have gained 4.8% over the past six months, outperforming the industry’s growth of 0.2%. The stock currently carries a Zacks Rank #3 (Hold).
Over the last 60 days, the Zacks Consensus Estimate for Bank of Commerce’s current-year earnings has been revised 8.8% upward. Its share price has gained 26.1% in the past year.
Bank of Marin’s earnings estimates for 2018 have been revised 5.6% upward over the past 60 days. Its shares have surged 35.1% in a year’s time.
Over the last 60 days, Northrim BanCorp’s 2018 earnings estimate moved 15.4% north. Over the past year, its share price has appreciated 48.3%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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First Republic Depicts Organic Growth: Time to Hold?
First Republic Bank continues to grow organically, backed by the company’s balance-sheet strength among other factors. The company looks poised for top-line growth, primarily driven by the rise in net interest income. However, escalating expenses remains a key concern.
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First Republic’s improving loan and deposit balances continue to support its organic growth potential. Notably, loan originations witnessed a four-year compound annual growth rate (CAGR) (2014-2017) of 17.5%. Total deposits have witnessed a four-year CAGR of 22.9% (2014-2017), with similar growth witnessed during the first six months of 2018 as well.
Solid top-line performance is expected to drive First republic’s growth over the long run. Net-interest income exhibited a five-year CAGR (2013-2017) of 15.1%, with the trend continuing in first-half 2018. This is expected to continue backed by the increase in earning assets and rising interest rates. Non-interest income also reflects a strong five-year CAGR (2013-2017) of 17.2%. The increasing trend continued in the first half of this year as well.
Further, compliance with regulatory ratio requirements indicates stability and a good capital position. As of Jun 30, 2018, the bank’s Tier 1 leverage ratio was 8.83%. This enables the company to pursue any acquisition opportunities for faster growth.
Despite these positives, we remain cautious due to several challenges plaguing the company. Notably, operating expenses witnessed a five-year CAGR (2013-2017) of 20.9%, with the trend continuing in first-half 2018. Investments in digital initiatives, including mobile banking applications and data analytics, will likely keep expenses elevated, in turn, straining the bottom line.
The company’s shares have gained 4.8% over the past six months, outperforming the industry’s growth of 0.2%. The stock currently carries a Zacks Rank #3 (Hold).
Key Picks
A few better-ranked stocks in the same space are Bank of Commerce Holdings (CA) , Bank of Marin Bancorp (BMRC - Free Report) and Northrim BanCorp Inc. (NRIM - Free Report) . All these stocks flaunt a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the last 60 days, the Zacks Consensus Estimate for Bank of Commerce’s current-year earnings has been revised 8.8% upward. Its share price has gained 26.1% in the past year.
Bank of Marin’s earnings estimates for 2018 have been revised 5.6% upward over the past 60 days. Its shares have surged 35.1% in a year’s time.
Over the last 60 days, Northrim BanCorp’s 2018 earnings estimate moved 15.4% north. Over the past year, its share price has appreciated 48.3%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>