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Lower Interest Rates to Mar First Republic (FRC) Q4 Earnings

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First Republic Bank FRC is scheduled to report fourth-quarter and full-year 2019 earnings, before the opening bell on Jan 14. While its revenues are expected to have improved year over year, earnings are likely to have declined.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate on increase in NII and non-interest income. However, rise in expenses served as a headwind.

Notably, First Republic has a decent earnings surprise history. Its earnings surpassed the consensus estimate in three of the trailing four quarters, with the average positive surprise being 3.5%. 

First Republic Bank Price and EPS Surprise

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 does not have 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 -0.99%.

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

Though estimates for the to-be-reported quarter have been revised slightly downward over the past 30 days, the Zacks Consensus Estimate for earnings of $1.26 suggests growth of 2.3% from the year-ago reported figure.

Also, the consensus estimate for sales of $851.2 million indicates an increase of 5%.

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

Soft Loan Growth: First Republic is likely to have witnessed a slight rise in loans in the fourth quarter, as lower interest rates might have boosted demand for mortgage loans. Also, per Fed’s latest data, pickup in commercial real estate loans during the quarter might have lend support.

Muted Net Interest Income: Lower interest rates during the quarter are likely to have hurt First Republic’s net interest margin. However, loan growth might have provided some support to the company’s interest income.

Higher Non-Interest Income: Inflows from the investment management business might have been recorded on market gains in the quarter. In addition, trust income is likely to have improved on rebound in equity markets.

Higher Expenses: First Republic’s investments in franchise development or digital initiatives, including mobile banking applications and data analytics, might have kept costs elevated in the quarter.

Stocks That Warrant a Look

Here are some stocks that you may want to consider, as according to our model these have the right combination of elements to post an earnings beat in the fourth quarter.

Fifth Third Bancorp FITB is slated to release quarterly results on Jan 22. The company has an Earnings ESP of +0.59% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

M&T Bank Corporation (MTB - Free Report) is scheduled to report quarterly earnings on Jan 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.38%.

Earnings ESP for Northern Trust Corporation NTRS is +0.45% and it currently carries a Zacks Rank of 2 (Buy). The company is set to report quarterly numbers on Jan 22.

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