4Q snap: costs disappoint again
FRC delivered a disappointing Q4 result with the efficiency ratio of 63.7% well above consensus at 62.4% (and guidance of 62-63%). So despite a 2% revenue beat, driven by strong non-interest income, operating earnings (pre-provisions) were a 2% miss. Provisions were modestly above consensus due to a reserve build following strong loan growth but credit quality remained pristine with net recoveries of $1m during the quarter. However, the biggest confusion was in the tax line with FRC reporting an effective tax rate of 18% despite previous guidance of 4-6% in 4Q17 due to a DTA write-down. So the headline EPS was a 12% miss but we calculate that this was a 5-6% miss on a normalised basis. Management guided to an effective tax rate of 19% in 2018.First Republic Bank is a commercial bank and trust company. The company conducts its business through two reportable business segments: Commercial Banking and Wealth Management. The principal business activities of the Commercial Banking segment are accepting funds from the general public, originating loans (primarily real estate secured mortgage loans) and investing in investment securities. Wealth Management segment consists of subsidiary First Republic Investment Management, Inc.; the company's money market mutual fund activities through third-party providers and the brokerage activities of First Republic Securities Company, LLC; the Trust Company; and the company's foreign exchange activities.
Formed in 2003 by an established team from Cazenove, one of the most respected investment banks in the UK, Atlantic Equities conducts and publishes fundamental, bottom up research on mid and large cap US companies.
Atlantic provide order execution through a wide range of DMA products and algorithmic trading suites.
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