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Loan Growth to Support First Republic's (FRC) Q1 Earnings

Zacks Equity Research

First Republic Bank FRC is scheduled to report first-quarter 2019 earnings, before the opening bell on Apr 15. Its revenues and earnings are expected to grow year over year.

The company’s fourth-quarter earnings surpassed the Zacks Consensus Estimate on higher revenues. However, rise in provisions and expenses were headwinds.

Notably, First Republic has an impressive earnings surprise history. Its earnings surpassed the consensus estimate in three of the trailing four quarters, the average beat being 3.5%. 

First Republic Bank Price and EPS Surprise

First Republic Bank Price and EPS Surprise | First Republic Bank Quote

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 has 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: The Earnings ESP for First Republic is +1.27%.

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 last seven days, the Zacks Consensus Estimate for earnings of $1.22 reflects growth of 8% year over year.

Also, the consensus estimate for sales of $814 million indicates an increase of 12.9%. 

Here are the factors influencing First Republic’s first-quarter results:

Net Interest Income (NII) to Rise: Per the Fed’s latest data, Commercial and Industrial and consumer lending activities showed modest growth in the first quarter, thereby benefitting NII. Also, full quarter benefit of December 2018 rate hike is likely to support expansion of net interest margin.

Non-Interest Revenues to Disappoint: Investment banking is expected to display a disappointing performance due to a considerable reduction in equity underwriting volumes globally on trade-war fears, government shutdown in January and expectations of global economic slowdown.

Further, rise in interest rates is likely to have slowed down companies’ involvement in debt issuance activities. Also, decline in global M&A deal volume and value in the first quarter will likely hamper related fees to some extent.

Also, decline in global M&A deal volume in the first quarter will likely hamper the company’s advisory fees to some extent.

Expenses Might Rise: First Republic’s investments in digital initiatives, including mobile banking applications and data analytics are likely to keep costs elevated in this quarter as well. Also, management expects costs to rise in mid-teens in the first quarter.

Other Stocks That Warrant a Look

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

Comerica Incorporated CMA is scheduled to release results on Apr 16. It has an Earnings ESP of +0.52% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Bank of New York Mellon Corporation BK is scheduled to release results on Apr 17. The company, which carries a Zacks Rank of 3, has an Earnings ESP of +0.17%.

The Earnings ESP for BankUnited, Inc. BKU is +1.89% and it carries a Zacks Rank of 3. The company is scheduled to report quarterly numbers on Apr 24.

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