Continued Excellence Driving First Republic, And The Valuation Is Reasonable

First Republic’s (FRC) high-quality growth continues to be recognized by the Street; the shares noticeably outperformed the major regional banking indices in 2018 (by around 20%). Even so, the minimal share price appreciation has allowed the underlying quality of the business to catch up a bit with the valuation, and I think the risk/reward balance is more attractive now early in 2019.

First Republic continues to generate exceptional loan growth, and I think the quality of the franchise – focusing on high net worth individuals, and what I’d call “high potential” younger clients, and a strong focus on customer service – can take the bank further. While a full-blown recession would certainly be a risk factor from here (and credit costs almost have to increase from here), I think this is an opportunity to buy into an attractive business at a reasonable valuation.

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Continued Excellence Driving First Republic, And The Valuation Is Reasonable