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What's in the Cards for First Republic's (FRC) Q1 Earnings?

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First Republic Bank  is scheduled to report first-quarter 2022 earnings, before the opening bell, on Apr 13. The company’s quarterly revenues and earnings are likely to have improved year over year.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on increases in net interest income (NII) and non-interest income. However, a rise in expenses and elevated net loan charge-offs were headwinds.

First Republic has an impressive earnings surprise history. Its earnings surpassed the consensus estimate in the trailing four quarters, the average surprise being 10.1%.

First Republic Bank Price and EPS Surprise

 

First Republic Bank Price and EPS Surprise

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

Here are the factors that are likely to have influenced First Republic’s first-quarter performance:

Loan Growth: Ongoing economic expansion is expected to have supported the lending environment in the quarter under review. Amid this, loan growth is anticipated to have improved. Per the Fed’s latest data, loan demand, particularly residential real estate loans (comprising a major portion of First Republic’s total loan portfolio), consumer loans, and commercial and industrial loans, remained strong in January and February.

However, the momentum is likely to have been affected as the first quarter is seasonally slow for loan originations.

NII: In March, the federal reserve hiked short-term interest rates. The flattening of the yield curve (the difference between short and long-term interest rates) is likely to have hindered the bank’s net interest margin (NIM). Also, fewer days during the quarter are likely to have affected NII.

Nonetheless, the Zacks Consensus Estimate for average interest-earning assets of $177.6 billion indicates marginal sequential improvement. This is likely to have aided NII, which is pinned at $1.14 billion for the quarter, suggesting a 1.8% rise on a sequential basis.

Non-Interest Income:  While 2022 started on a positive note, the onset of the Russian-Ukraine war dampened the market performance. Weaker equity markets are expected to have affected FRC’s wealth management business.

Nonetheless, the bank has been expanding its investment management service offering to clients. This, along with marketing efforts and strategic hirings, is expected to have aided the company in acquiring clients, thereby increasing wealth management assets.

The consensus estimate for investment advisory fees (comprising 60% of total fee income) is pegged at $157 million, implying a rise of 4.7% sequentially.

The consensus estimate for brokerage and investment fees of $24.4 million indicates a 28.6% increase from the previous quarter’s reported number.

However, lower transaction volume from clients is expected to have hampered foreign exchange fee income. The consensus estimate for the same is pegged at $22.4 million, indicating a 6.7% dip from the previous quarter’s reported number.

The consensus estimate for total fee income is pegged at $253 million, suggesting a 2.4% rise sequentially.

Expenses: First Republic’s investments in franchise development or digital initiatives, including mobile banking applications and data analytics, are anticipated to have kept costs elevated during the quarter. The investments are expected to aid the company over the long term, but the rising current expense level has been curbing bottom-line expansion.

Asset Quality: With the gradual economic improvement, backed by continued market re-openings throughout the quarter, First Republic is likely to have released reserves in the first quarter, albeit at a slower level.

High inflation and rising interest rates are anticipated to have affected borrowers’ ability to meet repayments. Moreover, improving loan growth and uncertainty around the macro-outlook are likely to have affected provision releases in the first quarter.

The consensus estimate for non-performing assets is pegged at $138 million, suggesting a marginal decline sequentially.

Now let’s take a look at what our quantitative model predicts for the to-be-reported quarter:

Our proven model shows that First Republic has the right combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for First Republic is +0.40%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

The Zacks Consensus Estimate for first-quarter earnings has been unchanged over the past month at $1.89. Nonetheless, it suggests a rise of 5.6% from the year-ago reported figure.

Moreover, the consensus estimate for revenues of $1.4 billion indicates an increase of 23.7% from the year-ago reported figure.

Other Stocks That Warrant a Look

Comerica (CMA - Free Report) , M&T Bank (MTB - Free Report) and State Street (STT - Free Report) are a few other stocks that you might want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for CMA is +0.65% and the company carries a Zacks Rank #3 at present. CMA is slated to report first-quarter 2022 results on Apr 20.

The Zacks Consensus Estimate for CMA’s first-quarter earnings has moved north over the past week.

MTB is scheduled to release first-quarter results on Apr 20. MTB currently has a Zacks Rank #3 and an Earnings ESP of +4.07%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for MTB’s first-quarter earnings has moved south over the past 30 days.

STT is scheduled to release earnings on Apr 14. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.68%.

The Zacks Consensus Estimate for STT’s first-quarter earnings has been revised north over the past week.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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