First Republic Q4 Earnings Beat Estimates, Costs Rise

Driven by top-line strength, First Republic Bank’s (FRC - Free Report) delivered a positive earnings surprise of 10.3% in fourth-quarter 2019. Earnings per share of $1.39 surpassed the Zacks Consensus Estimate of $1.26. Also, the bottom line jumped 7.8% from the year-ago quarter.

Results were supported by increase in net interest income (NII) and non-interest income. Moreover, the company’s balance sheet position remained strong in the quarter. Also, decline in provisions came as a positive factor. However, expenses witnessed a rise.

Net income available to common shareholders grew 9.5% year over year to $235.6 million.

Revenues Increase, Expenses Escalate

Total revenues were $877.5 million, up 8.2% year over year. Also, the figure surpassed the Zacks Consensus Estimate of $849.8 million.

NII jumped 7.9% year over year to $720.1 million, primarily supported by growth in average earning assets. Net interest margin came in at 2.73%, down from 2.98%.

Non-interest income was $157.3 million, up 9.6% year over year. The rise was backed by increase in almost all fee components, except loan servicing fees.

Non-interest expenses for the reported quarter were up 12.1% year over year to $558.8 million. An increase in salaries and benefits, occupancy and information systems expenses from the continued investments in the expansion of the franchises led to the rise.

The efficiency ratio was 63.7% compared with 61.5% recorded in the prior-year quarter. It should be noted that rise in the efficiency ratio indicates lower profitability.

Healthy Balance Sheet

As of Dec 31, 2019, net loans climbed 5.2% sequentially to $90.3 billion while total deposits were up 5.1% to $90.1 billion. Loan originations were $11.2 billion, up 2.4% sequentially.

First Republic’s total wealth management assets were $151 billion as of Dec 31, 2019, indicating 7.7% sequential rise. This increase resulted from net new assets from existing and new clients, and market appreciation.

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