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First Republic forecasts further NIM compression in Q4

San Francisco-based First Republic Bank said it expects continued compression in its net interest margin, which is forecast to slip to 2.75% in the fourth quarter from 2.80% in the third and 2.85% in the second.

For the full year, the bank expects NIM of 2.82%, compared to 2.95% in 2018.

The NIM guidance anticipates one more Fed rate cut in 2019, management said on the bank's third-quarter earnings call.

"The inverted yield curve continues to have an impact on net interest margin," CFO Michael Roffler said.

The bank has reduced its headcount and is managing expenses, management said, bringing its efficiency ratio to 63.8% from 64.5% in the second quarter.

First Republic has grown its balance sheet through refinancing activity in the low-rate environment, management said.

"The acquisition of new households is very powerful and far outweighs a few points of compression on NIM," Chairman and CEO James Herbert said.