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
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.
