Tax reform likely positive for FRC
We believe that concerns around FRC's exposure to tax reform are overdone. Our analysis suggests that FRC's typical client in a high-tax state is likely to experience a net benefit from tax reform once additional factors such as marital status and child tax credits are accounted for. In addition, the secondary benefits of stronger economic growth and wage inflation should clearly be beneficial for FRC's clients. After factoring in a slightly higher efficiency ratio in 2018 we have lowered our FY18 and FY19 EPS forecasts by 3%. However, with the stock now trading at a 5% PE discount to the S&P500 compared to an average 10% premium over the last 5 years, we reiterate our Overweight recommendation.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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