First Republic Bank

The views expressed below are those of Anchor Capital Advisors, LLC (“Anchor”) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

FRC: NYSE

First Republic Bank engages in the provision of private banking, business banking, real estate lending, and wealth management. The company was founded in February 1985, and is headquartered in San Francisco, CA. [1]

Investment thesis

First Republic is reputedly known for strong brand recognition and has a very strong client focused culture. In our view, the company has seen market share growth, and strong loan growth, as well as having strong risk control, and credit quality. First Republic has new lead generation initiatives which we think could add to growth in the future.[2]

Confirmation through research

In terms of brand recognition, we believe First Republic is well known in its niche of high net worth banking. They have focused on delivering exceptional customer service with each customer having a single point of contact. The bank has seen over 50% of growth come from existing customers, and 25% come from word-of-mouth referrals.[3] Further the exceptional customer service can be seen by the banks high net promoter score, which is 2x higher than the U.S banking industry.[4] In terms of market share growth, the bank has continued to gain share, and now has 4.2% market share.[5] As for loan growth, the company has seen total loans grow at 18% per year since 2012.[6] The credit quality and risk control can be seen by the charge-offs of loans being less than one tenth of one percent over the last 17 years, compared to the industry average which is almost six times that.[7] Finally, in terms of new lead generation, the company acquired Gradifi, which helps individuals repay student loans.[8] Over time, these individuals have the ability to become long-term customers for the bank as they become employed.

Variant Perception

We believe that the market is not assigning a fair value to the business considering the company’s strong brand, market share gains, risk controls, and growth going forward.