Earnings of First Republic Bank (FRC) increased and exceeded expectations in the fourth quarter, reflecting a sharp growth in interest income amidst record loan growth. The positive results spurred a stock rally and the bank’s shares gained in the early trading hours Tuesday.
Net profit grew by 19.6% to $215.19 million and earnings per share rose 17.3% to $1.29 per share during the fourth quarter, surpassing analysts’ forecast.
At $810.8 million, revenues of the San Francisco-based financial services provider were higher by 16% compared to the fourth quarter of 2017, and above the market estimates. Wealth management revenues moved up 15.4% compared to last year, which represents about 14.8% of the total revenues. The overall outcome was positively impacted by the relatively low value of nonperforming assets.
During the fourth quarter, the overall performance was positively impacted by a decline in nonperforming assets
Driving the top-line growth, net interest income advanced 17.3% to $667.2 million and noninterest income moved up 10.2% to $143.5 million. Loan originations climbed 12% to an all-time high of $8.4 billion, aided by higher multifamily and business lending. At the end of the quarter, tangible book value per common share stood at $45.26, up 12% from last year. There was a 14.7% increase in deposits to $79.1 billion.
“Organic growth continues to be strong across the franchise. Our client-focused business model is driving our growth and delivering consistent results in all types of economic conditions,” said CEO Jim Herbert.
The management declared a cash dividend of $0.18 per share for the fourth quarter, to be paid on February 14, 2019, to shareholders of record on January 31, 2019.
Also see: First Republic Bank Q4 2018 Earnings Conference Call Transcript
Earlier, Citigroup (C) reported higher fourth-quarter earnings, mainly reflecting the management’s aggressive cost-cutting initiatives. Revenues declined, hurt by the continuing softness in the fixed income securities business. Among others, Wells Fargo (WFC) reported a decline in earnings and revenues for the fourth quarter.
Shares of First Republic Bank dropped about 6% over in the past twelve months. The stock, which closed the last trading session slightly lower, gained about 5% in early trading Tuesday following the announcement.