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First Republic (FRC) Q3 Earnings Beat Estimates, Revenues Lag
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First Republic Bank’s third-quarter 2022 earnings per share of $2.21 have surpassed the Zacks Consensus Estimate of $2.19. Additionally, the bottom line improved 15.7% from the year-ago quarter.
Results have been supported by increased net interest income (“NII”) and non-interest income. The company’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses (owing to loan growth) were the offsetting factors.
Net income available to common shareholders increased 17.4% year over year to $405 million.
Revenues, Expenses Flare Up
Total revenues were $1.52 billion in the September-end quarter, up 16.9% year over year. The figure lagged the Zacks Consensus Estimate of $1.54 billion.
The NII jumped 20.6% year over year to $1.26 billion, primarily supported by growth in average interest-earning assets. The net interest margin increased to 2.71% from the prior-year quarter’s 2.65%.
Non-interest income was $254 million, up 1.8% year over year. The rise mainly resulted from higher brokerage and investment fees, partially offset by a fall in investment management fees.
Non-interest expenses for the reported quarter flared up 15.2% year over year to $919 million. Continued investments in business expansion, including additional hiring to support growth and information system initiatives, resulted in the uptick.
The third-quarter efficiency ratio of 60.3% was down from 61.3% in the prior-year quarter. A lower ratio indicates an increase in profitability.
Robust Balance Sheet
As of Sep 30, 2022, net loans climbed 4.8% sequentially to $158.76 billion, while total deposits were up 4.1% to $172.38 billion. Loan originations were $17.99 billion for the quarter, up 16.4% year over year.
Also, First Republic’s total wealth management assets were $249.5 billion as of Sep 30, 2022, marking a marginal sequential increase. The increase was primarily due to net client inflow, partially offset by market decline.
Strong Credit Quality
In the third quarter, credit metrics were strong. Net loan charge-offs were $1 million, up from net charge-offs of $0.3 million in third-quarter 2021. Also, the provision for credit losses of $36 million was recorded, primarily driven by loan growth, compared with $34 million in third-quarter 2021.
Nonetheless, on a year-over-year basis, total non-performing assets declined 5.5% to $120 million. Also, the non-performing assets to total assets ratio was 0.06%, down from the year-ago quarter’s 0.07%.
Decent Capital Position
As of Sep 30, 2022, the company’s Tier 1 leverage ratio was 8.59% compared with 8.55% as of Sep 30, 2021. Tangible book value per share increased 11.3% year over year to $72.54.
However, Tier 1 capital to risk-weighted assets was 11.76%, down from 12.25% in third-quarter 2021.
Our Viewpoint
First Republic's balance sheet position has been decent and its growth prospects look promising, driven by consistent loan growth. We believe that a strong capital position will help it pursue organic moves and 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
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First Republic (FRC) Q3 Earnings Beat Estimates, Revenues Lag
First Republic Bank’s third-quarter 2022 earnings per share of $2.21 have surpassed the Zacks Consensus Estimate of $2.19. Additionally, the bottom line improved 15.7% from the year-ago quarter.
Results have been supported by increased net interest income (“NII”) and non-interest income. The company’s capital position was decent in the quarter. Yet, higher expenses and elevated provision for credit losses (owing to loan growth) were the offsetting factors.
Net income available to common shareholders increased 17.4% year over year to $405 million.
Revenues, Expenses Flare Up
Total revenues were $1.52 billion in the September-end quarter, up 16.9% year over year. The figure lagged the Zacks Consensus Estimate of $1.54 billion.
The NII jumped 20.6% year over year to $1.26 billion, primarily supported by growth in average interest-earning assets. The net interest margin increased to 2.71% from the prior-year quarter’s 2.65%.
Non-interest income was $254 million, up 1.8% year over year. The rise mainly resulted from higher brokerage and investment fees, partially offset by a fall in investment management fees.
Non-interest expenses for the reported quarter flared up 15.2% year over year to $919 million. Continued investments in business expansion, including additional hiring to support growth and information system initiatives, resulted in the uptick.
The third-quarter efficiency ratio of 60.3% was down from 61.3% in the prior-year quarter. A lower ratio indicates an increase in profitability.
Robust Balance Sheet
As of Sep 30, 2022, net loans climbed 4.8% sequentially to $158.76 billion, while total deposits were up 4.1% to $172.38 billion. Loan originations were $17.99 billion for the quarter, up 16.4% year over year.
Also, First Republic’s total wealth management assets were $249.5 billion as of Sep 30, 2022, marking a marginal sequential increase. The increase was primarily due to net client inflow, partially offset by market decline.
Strong Credit Quality
In the third quarter, credit metrics were strong. Net loan charge-offs were $1 million, up from net charge-offs of $0.3 million in third-quarter 2021. Also, the provision for credit losses of $36 million was recorded, primarily driven by loan growth, compared with $34 million in third-quarter 2021.
Nonetheless, on a year-over-year basis, total non-performing assets declined 5.5% to $120 million. Also, the non-performing assets to total assets ratio was 0.06%, down from the year-ago quarter’s 0.07%.
Decent Capital Position
As of Sep 30, 2022, the company’s Tier 1 leverage ratio was 8.59% compared with 8.55% as of Sep 30, 2021. Tangible book value per share increased 11.3% year over year to $72.54.
However, Tier 1 capital to risk-weighted assets was 11.76%, down from 12.25% in third-quarter 2021.
Our Viewpoint
First Republic's balance sheet position has been decent and its growth prospects look promising, driven by consistent loan growth. We believe that a strong capital position will help it pursue organic moves and 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-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 Banks
Fifth Third Bancorp (FITB - Free Report) is slated to report third-quarter 2022 results on Oct 20.
The Zacks Consensus Estimate for Fifth Third’s third-quarter earnings of 98 cents indicates a 4.3% rise from the prior-year quarter’s reported figure.
Citizens Financial Group (CFG - Free Report) is slated to report third-quarter 2022 results on Oct 19.
The Zacks Consensus Estimate for Citizens Financial’s third-quarter earnings of $1.22 is flat with the prior-year quarter’s reported number.