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Why Republic Bancorp Inc (NASDAQ:RBCA.A) May Not Be As Risky Than You Think

Petra Goodwin

Improving credit quality as a result of post-GFC recovery has led to a strong environment for growth in the banking sector. Economic growth impacts the stability of salaries and interest rate level which in turn affects borrowers’ demand for, and ability to repay, their loans. As a small-cap bank with a market capitalisation of USD $818.71M, Republic Bancorp Inc (NASDAQ:RBCA.A)’s profit and value are directly affected by economic activity. Risk associate with repayment is measured by the level of bad debt which is an expense written off Republic Bancorp’s bottom line. Today we will analyse Republic Bancorp’s level of bad debt and liabilities in order to understand the risk involved with investing in the bank. See our latest analysis for Republic Bancorp

NasdaqGS:RBCA.A Historical Debt Jan 18th 18
NasdaqGS:RBCA.A Historical Debt Jan 18th 18

How Good Is Republic Bancorp At Forecasting Its Risks?

The ability for Republic Bancorp to accurately forecast and provision for its bad loans shows it has a strong understanding of the level of risk it is taking on. If the bank provision covers more than 100% of what it actually writes off, then it is considered sensible and relatively accurate in its provisioning of bad debt. Given its large bad loan to bad debt ratio of 245.35%, Republic Bancorp excessively over-provisioned by 145.35% above the appropriate minimum, indicating the bank may perhaps be too cautious with their expectation of bad debt.

What Is An Appropriate Level Of Risk?

Republic Bancorp is engaging in risking lending practices if it is over-exposed to bad debt. Loans that cannot be recovered by the bank are known as bad loans and typically should make up less than 3% of its total loans. When these loans are not repaid, they are written off as expenses which comes directly out of the bank’s profit. Since bad loans only make up a very insignificant 0.41% of its total assets, the bank exhibits very strict bad loan management and is exposed to a relatively insignificant level of risk in terms of default.

How Big Is Republic Bancorp’s Safety Net?

Handing Money Transparent
Handing Money Transparent

Republic Bancorp operates by lending out its various forms of borrowings. Customers’ deposits tend to carry the smallest risk given the relatively stable interest rate and amount available. As a rule, a bank is considered less risky if it holds a higher level of deposits. Since Republic Bancorp’s total deposit to total liabilities is within the sensible margin at 76.83% compared to other banks’ level of 50%, it shows a prudent level of the bank’s safer form of borrowing and an appropriate level of risk.

Final words

With positive measures for all three ratios, Republic Bancorp shows a prudent level of managing its risky assets. It seems to have a clear understanding of how much it needs to provision each year for lower quality borrowers and it has maintained a safe level of deposits against its liabilities. The company’s judicious lending strategy gives us higher conviction in its ability to manage its operational risks which makes Republic Bancorp a less risky investment. Keep in mind that a stock investment requires research on more than just its operational side. There are three key factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for RBCA.A’s future growth? Take a look at our free research report of analyst consensus for RBCA.A’s outlook.

2. Valuation: What is RBCA.A worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether RBCA.A is currently mispriced by the market.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.