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First Republic's Revenue Growth on Track, Higher Costs a Woe

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On Aug 11, we issued an updated research report on First Republic Bank (FRC - Free Report) . The company benefits from solid organic growth and capital strength. However, increasing expenses remains a key challenge.

The company’s second-quarter 2017 earnings per share lagged the Zacks Consensus Estimate despite recording higher revenues and loans balances. The positives were offset by higher provisions and expenses.

The company’s shares have gained 5.7% year to date, outperforming nearly 4% decline of the industry.

First Republic’s Zacks Consensus Estimate for current-year earnings have remained stable over the last seven days. The stock currently carries a Zacks Rank #3 (Hold).

First Republic Bank displayed an impressive revenue growth story. Net Interest Income has increased at a compound annual growth rate (CAGR) of 11.6% over a period of five years (ended 2016). Further, in the same time period, non-interest income witnessed a CAGR of 23.6%. Also, the rising rate environment and loan growth should further boost the company’s top line.

Further, First Republic’s strong capital position keeps it well poised for the future endeavors. The company has compiled with all the regulatory ratio requirements. Moreover, it successfully cleared the stress test in 2017, which depicts further stability.

However, the company’s expenses have been consistently increasing over the last few years. It has lately been involved with investments in its digital initiatives which include mobile banking applications and data analytics. Thus, the expenses might remain elevated in the near-term.

Stocks to Consider

Some better-ranked stocks in the same space are Zions Bancorporation (ZION - Free Report) , People's Utah Bancorp (PUB - Free Report) and FS Bancorp, Inc. (FSBW - Free Report) . All these stock sport a Zacks Rank #1 (Strong Buy). You can the complete list of today’s Zacks #1 Rank stocks here.

Zion’s Zacks Consensus Estimate for current-year earnings has been revised 8.9% upward over the last 30 days. Further, its shares have gained 44.1% over the past year.

People's Utah witnessed an upward earnings estimate revision of 2.9% for the current year, over the last 30 days. Its share price has increased 27.6% in the past 12 months.

FS Bancorp’s Zacks Consensus Estimate for current-year earnings have been revised nearly 16% upward in the last 30 days. The company’s share price has increased almost 44.9% in a year.

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