Wealth management revenues boosted fourth-quarter earnings for First Republic Bank in San Francisco, though investments in its student loan repayment business Gradifi and other ventures as well as higher interest-related costs cut into those gains.
The $87.8 billion-asset bank reported net income of $194.3 million, which was an 8.5% increase from the year-earlier period. Yet earnings per share of $1.10 fell short of the $1.25 average that analysts anticipated, according to FactSet Research Systems.
“2017 was another strong year for growth in deposits, loans and wealth management assets,” Chairman and CEO Jim Herbert said in a press release. “Our stable, client-centric business model continues to perform well across the franchise.”
Total revenues increased 16.6% to $699.2 million in the fourth quarter. Those figures included a 15.9% gain in net interest income to $568.9 million.
Loans (excluding those held for sale) totaled $62.8 billion at the end of the fourth quarter, or 20.8% higher than the same period in 2016. First Republic said its loan growth was driven mainly by increases in single-family, multifamily and business loans.
Noninterest income increased 19.7% to $130.3 million, which First Republic mainly attributed to increases in its wealth management business.
Wealth management revenues increased 30% to $103.7 million in the fourth quarter, driven by both market appreciation and new assets from existing and new clients. Wealth management assets increased 28% year over year to $107 billion.
Total deposits increased 17.6% to $68.9 billion, and it was one of the reasons (along with higher borrowing costs) that interest expenses doubled to $94 million. First Republic said it paid an average of 28 basis points for deposits in the quarter, compared with 25 in the fourth quarter of 2016.
Noninterest expenses increased 23.7% to $445.5 million in the fourth quarter. First Republic said this was partly due to its ongoing investments in its investments in Gradifi, its student loan repayment business, as well as increases in salaries and benefits. First Republic’s efficiency ratio increased to 63.7%, compared with 60.1% a year earlier.
Nonperforming assets totaled 0.04% of total assets at Dec. 31, and First Republic recovered a net $1.1 million in the fourth quarter, compared with $207,000 it charged off a year ago.