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Is First Republic Bank's (NYSE:FRC) CEO Overpaid Relative To Its Peers?

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Simply Wall St
·3 min read
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Jim Herbert has been the CEO of First Republic Bank (NYSE:FRC) since 1985. First, this article will compare CEO compensation with compensation at other large companies. Then we'll look at a snap shot of the business growth. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. The aim of all this is to consider the appropriateness of CEO pay levels.

View our latest analysis for First Republic Bank

How Does Jim Herbert's Compensation Compare With Similar Sized Companies?

According to our data, First Republic Bank has a market capitalization of US$15b, and paid its CEO total annual compensation worth US$11m over the year to December 2018. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at US$900k. Importantly, there may be performance hurdles relating to the non-salary component of the total compensation. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$12m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts - even though some are quite a bit bigger than others).

Now let's take a look at the pay mix on an industry and company level to gain a better understanding of where First Republic Bank stands. On an industry level, roughly 43% of total compensation represents salary and 57% is other remuneration. Readers will want to know that First Republic Bank pays a modest slice of remuneration through salary, as compared to the wider sector.

So Jim Herbert receives a similar amount to the median CEO pay, amongst the companies we looked at. While this data point isn't particularly informative alone, it gains more meaning when considered with business performance. You can see a visual representation of the CEO compensation at First Republic Bank, below.

NYSE:FRC CEO Compensation April 7th 2020
NYSE:FRC CEO Compensation April 7th 2020

Is First Republic Bank Growing?

On average over the last three years, First Republic Bank has seen earnings per share (EPS) move in a favourable direction by 8.7% each year (using a line of best fit). It achieved revenue growth of 10% over the last year.

This revenue growth could really point to a brighter future. And the improvement in earnings per share is modest but respectable. So while performance isn't amazing, we think it really does seem quite respectable. You might want to check this free visual report on analyst forecasts for future earnings.

Has First Republic Bank Been A Good Investment?

Since shareholders would have lost about 1.8% over three years, some First Republic Bank shareholders would surely be feeling negative emotions. This suggests it would be unwise for the company to pay the CEO too generously.

In Summary...

Jim Herbert is paid around the same as most CEOs of large companies.

The company cannot boast particularly strong per share growth. And we think the shareholder returns - over three years - have been underwhelming. So many would argue that the CEO is certainly not underpaid. Shifting gears from CEO pay for a second, we've picked out 2 warning signs for First Republic Bank that investors should be aware of in a dynamic business environment.

If you want to buy a stock that is better than First Republic Bank, this free list of high return, low debt companies is a great place to look.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.