First Republic Bank (FRC): The Rising Star in the Banking Industry

Bank of America Corp (NYSE:BAC) and Citigroup are likely to fall under this category of large internationally active banks. Citigroup reported its leverage ratio to be 7.48% in 2012. Though its net income was down in FY12 by 32% compared to FY11, Citigroup is taking steps to increase its business in profitable areas. Citigroup plans to open offices in Iraq to gain from the $1 trillion infrastructure spending there. Recently, Citigroup also bid to fund and Iraq to Jordan oil pipeline.

Bank of America has recently been directed to confront a Texas property fees suit relating to the fees it attempted to evade by using MERS to track property transactions.

Conclusion

Based on my analysis, I would recommend buying First Republic Bank (NYSE:FRC) as it is currently undervalued compared to the industry. Also, the bank’s business is flourishing day by day and it continues to expand its network of operations. The bank’s strengths can be seen in several areas, such as its lowest efficiency ratio at 52%, expanding profit margins, 39.11% price return in the past one year, falling non-performing loans — below 1%, growth in earnings per share and compelling growth in ROE of 13.54% in FY12.

Bank of America should be sold due to its continuously rising NPLs, weak ROE of 1.27% owing to the drastic decline in its interest and non-interest income and its high efficiency ratio of 85.59%. The recent lawsuit is also cause for concern.

usman iftikhar has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and Citigroup Inc (NYSE:C) .

The article First Republic Bank: The Rising Star in the Banking Industry originally appeared on Fool.com and is written by usman iftikhar.

usman is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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