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FRC

First Republic Bank NYSE:FRC Stock Report

Last Price

US$140.61

Market Cap

US$25.7b

7D

3.5%

1Y

-30.1%

Updated

05 Oct, 2022

Data

Company Financials +
FRC fundamental analysis
Snowflake Score
Valuation3/6
Future Growth2/6
Past Performance4/6
Financial Health6/6
Dividends0/6

FRC Stock Overview

First Republic Bank, together with its subsidiaries, provides private banking, private business banking, and private wealth management services to clients in metropolitan areas in the United States.

First Republic Bank Competitors

Price History & Performance

Summary of all time highs, changes and price drops for First Republic Bank
Historical stock prices
Current Share PriceUS$140.61
52 Week HighUS$222.86
52 Week LowUS$130.35
Beta1.12
1 Month Change-5.78%
3 Month Change-6.99%
1 Year Change-30.12%
3 Year Change50.85%
5 Year Change35.97%
Change since IPO403.62%

Recent News & Updates

Sep 03

RiverPark Advisors - First Republic Bank:  Compounding Revenues At +18%

Summary First Republic’s competitive strategy of doing only a handful of things well results in a superior value proposition to its customers. FRC compounded revenues at an +18% rate from 2016 to 2021. Recently, the dramatic rise in long-term interest rates has caused mortgage industry underwriting volumes to plummet. Despite this, First Republic turned in an astonishing +23% growth rate in mortgage originations during the second quarter of 2022. First Republics’ prudent and deliberate approach to trade-offs offers competitive differentiation that should continue to drive exceptional growth over the long term. The following segment was excerpted from this fund letter. First Republic Bank (FRC) First Republic Bank is one of the most differentiated business models in our large cap universe. What makes the Company so different is not necessarily the activities that it does, but the activities it does not do. These trade-offs are an incredibly important strategic decision that every company must make. However, in our experience, rarely are these forgone activities lauded or even recognized as critical differentiators. The Company does mention these foregone activities, on page 45 of its most recent investor presentation appendix. When we consider the financial industry, especially banking, is fraught with competition, simply being better than any of the other massive money-center banks is not enough to sustain many decades or even years of superior performance. Rather than try to outcompete every bank in the country, First Republic’s competitive strategy of doing only a handful of things well, results in a superior value proposition to its customers. These trade-offs are easy to understand, but difficult to copy, given widespread competitive and institutional imperatives that pressure management teams to revert to the mean. First Republic organizes its entire business around keeping long-term relationships with its bankers and clients. This strategic decision contrasts with competitors that have underlying strategic goals to drive as much client activity as possible. As a result, client development activities at First Republic look very different from those of its competitors. For example, while most companies strive – or at least market – to provide excellent client service by bombarding clients with digital touchpoints, First Republic will not open an account with its typical well-healed client without first engaging in a personal conversation. For many, this sounds like an arduous and inefficient task that can be handled or even automated by scores of digital software solutions. Paradoxically, First Republic has outgrown its peers over the past several years. The Company compounded revenues at an +18% rate from 2016 to 2021 and is now one of largest single family mortgage lenders in the U.S. Despite this impressive top-line growth, particularly in first mortgages, First Republic doesn’t even make the top-10 list of annual mortgage volume generators. In contrast to the vast majority in the banking industry that sells its mortgages to government-sponsored enterprises ((GSE)), First Republic keeps nearly all its mortgage underwriting loans on its balance sheet. Part of this is because of necessity – First Republic underwrites mostly non-conforming or “jumbo” mortgages that are ineligible to be purchased by GSEs. But the strategic decision to avoid the correspondent mortgage industry aligns the Company with its customers and shareholders because a long-term servicer and underwriter relationship favors more prudent underwriting standards and more favorable long-term economics. This is borne out in the Company’s industry-low, net charge off ratios over the past few business cycles. And more recently, the dramatic rise in long-term interest rates has caused mortgage industry underwriting volumes to plummet – mostly due to a decline in refinance activity. Despite this, and admittedly to our surprise, First Republic turned in an astonishing +23% growth rate in mortgage originations during the second quarter of 2022. That is not to say things won’t slow from here, given the continued rise in rates, but it was another important, contrasting data point of how the Company’s business model differs from most large money-center peers. Competitors’ overwhelming reliance on the securitization markets as well as mortgage correspondent mass-market focus was in no small part to blame for the industry slowdown. As First Republic keeps these functions in-house and focuses mostly on jumbo mortgage financing, there were no third parties or vendor partner upheavals that the Company had to contend with to continue providing its customers with reliable mortgage underwriting service. Of course, to execute this client-centric approach of providing superior customer service, the Company’s entire capital structure must align to this goal. For example, banks are required to hold a larger buffer of capital for on-balance sheet mortgages than, for example, a mortgage-backed security. As a result, First Republic has less capacity to repurchase shares by holding on to mortgages. But again, paradoxically, First Republic equity has traded at premium earnings multiple relative to banking peers for the past several years, despite rivals that have been repurchasing tens of billions in shares. In addition, and unlike nearly all large cap banks in the U.S., First Republic does not offer any kind of credit card product to its personal banking customers. We think the advantages of this trade-off are multifold. First, credit cards are a low touch business, where most of the interactions are between the customer and a merchant, so First Republic has very little ability to influence the customer experience in that framework. Second, credit card receivables take up a disproportionate amount of balance sheet capacity compared to other forms of lending, albeit at higher interest rates.

Shareholder Returns

FRCUS BanksUS Market
7D3.5%6.3%4.4%
1Y-30.1%-21.8%-18.2%

Return vs Industry: FRC underperformed the US Banks industry which returned -21.8% over the past year.

Return vs Market: FRC underperformed the US Market which returned -18.2% over the past year.

Price Volatility

Is FRC's price volatile compared to industry and market?
FRC volatility
FRC Average Weekly Movement4.4%
Banks Industry Average Movement3.5%
Market Average Movement6.9%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: FRC is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: FRC's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19856,902Mike Rofflerhttps://www.firstrepublic.com

First Republic Bank, together with its subsidiaries, provides private banking, private business banking, and private wealth management services to clients in metropolitan areas in the United States. It operates in two segments, Commercial Banking and Wealth Management. The company accepts deposit products, such as noninterest-bearing checking, interest-bearing checking, money market checking accounts, money market savings accounts, and passbook accounts, as well as certificates of deposit.

First Republic Bank Fundamentals Summary

How do First Republic Bank's earnings and revenue compare to its market cap?
FRC fundamental statistics
Market CapUS$25.69b
Earnings (TTM)US$1.47b
Revenue (TTM)US$5.48b

17.5x

P/E Ratio

2.0x

P/B Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
FRC income statement (TTM)
RevenueUS$5.48b
Cost of RevenueUS$0
Gross ProfitUS$5.48b
Other ExpensesUS$4.01b
EarningsUS$1.47b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 14, 2022

Earnings per share (EPS)8.04
Gross Margin100.00%
Net Profit Margin26.83%
Debt/Equity Ratio75.5%

How did FRC perform over the long term?

See historical performance and comparison

Dividends

0.8%

Current Dividend Yield

12%

Payout Ratio