Loan growth and asset management revenues, fueled by stimulus programs and a recovering economy, led San Francisco's First Republic Bank to increase quarterly earnings.
Asset Bank's profit of $ 155.8 billion in the first quarter rose 53% year over year to $ 316 million. Results included reserves of $ 14.6 million that the company released during the quarter.
The number of new loans increased 52% to $ 15.7 billion, mainly driven by mortgages and an increase in paycheck protection program loans. Revenue from the bank's wealth management business increased nearly 19% to $ 157 million.
Deposits rose 37%, despite executives saying they expect some money to leave the bank when the extended tax deadline hits in May.
While First Republic said it expects "middle-aged" credit growth this year, analysts expressed concerns that a housing supply crisis could hamper new mortgage origins. Mortgages made up about 44% of the bank's new loans.
Jim Herbert, CEO and chairman of the First Republic, said during a conference call Tuesday that the housing shortage "will not be a huge factor" and was optimistic that more households will come to market as more COVID-19 vaccines are distributed and the economy continues to rebound.
"As soon as COVID takes a back seat, we will increase the volume," said Herbert. "It's already starting to do this."
January had homes for sale in the US for less than two months, the lowest amount since the National Association of Realtors began publishing data in 1982. The supply rose to approximately 1.03 million homes in February.
While that is almost 30% less than last year, there are signs, according to Herbert, that things are returning to normal. In New York, the volume "increased significantly at the beginning of the year," he said.
"I think we'll be fine," said Herbert.
The growth of home loans in the First Republic has been a problem for some investors due to rising interest rates, analysts at Compass Point Research & Trading said in a statement to customers on Wednesday.
But First Republic 'has shown that it is able to maintain solid production in this area during a generally slower seasonal period, which should provide some comfort for [the bank] to continue to see healthy loan growth in over time this segment can achieve ". said the analysts.
First Republic revenue increased 24% to $ 1.1 billion. Noninterest expenses increased 23%, largely due to higher salaries and benefits, which executives say will likely come with higher earnings.
Distressed assets, which have grown steadily over the past year, decreased 5.4% to $ 174.1 million from the previous quarter as the economy improved. The total was 37% higher than a year earlier.