First Republic Stock Forecast: Lower headline inflation sends FRC higher

First Republic Bank (FRC) stock has been showing signs of steady accumulation over the past three weeks despite its perceived weakness. FRC stock has gained 7.4% over the past five sessions and is now up 16% since its close on March 20. First Republic stock is now nearing a major hurdle that it will need to conquer in order for the stock to continue its slow rebound.

Headline inflation came in below expectations on Wednesday. This sent FRC stock up 0.9% to $14.25. The YoY headline Consumer Price Index (CPI) came in at 5%, while the MoM figure arrived at 0.1%. Both figures were well below the 5.2% and 0.3% figures that were expected. Core CPI came in perfectly in line with consensus. The lower inflation figures mean the Federal Reserve is less likely to raise interest rates at its May meeting, which would be good for all banks but especially First Republic.

First Republic Bank stock news

March's unexpected banking run that began with Silicon Valley Bank is still being felt by regional banks like First Republic. Many saw their deposit bases deteriorate as worried customers moved their cash to larger national banks or money market funds. Owing to its headquarters being in San Francisco, the epicenter of the banking fiasco, First Republic was hit harder than many other banks as about $70 billion worth of customer deposits disappeared in a matter of days.

At the federal government's urging, 11 of the largest US banks, such as JPMorgan (JPM) and Bank of America (BAC), deposited $30 billion with First Republic in order to stem the tide. Now these banks are seeking to shore up their own balance sheets. Bloomberg reported on Wednesday that those two banks along with Citigroup (C) and Wells Fargo (WFC) have each decided to set aside about $100 million in case of further stress in the banking sector.

FRC stock has borne the brunt of this banking odyssey as shares are off 89% from a year ago. Following widespread downgrades of its credit rating by the likes of Moody's and Standard & Poors, the only bright light is earnings on April 24 that may shed more clarity on the bank's current predicament.

Despite this deposit drain, First Republic is still expected to report earnings per share of $0.51 on revenue of $1.11 billion for the first quarter. Those figures are way down from a year ago or even the previous quarter but they show a bank that remains quite profitable. The market will also look for an update on the full-year results, which currently see the bank earning $0.90 a share.

First Republic has ended dividends on both its common stock and preferred shares in recent weeks, so profits in 2023 and probably 2024 will be used to repair the bank's balance sheet and place it on an improved footing.

First Republic stock forecast

With FRC stock tanking so deeply since the beginning of the year, the daily chart below zooms in on just the past four weeks of price action. As you can see, FRC dumped hard into the $12 level in mid-March but has mostly been rebounding at a gradual pace since then. The upward sloping lower trendline is set to run smack into the $14.75 resistance level that FRC has bumped up against on March 29, March 30, and April 3. This point of resistance produces a wedge with the higher lows created on the bottom side.

Bulls will watch in hope that FRC stock breaks and holds above $14.75 over the next two weeks. If it does, then expect bulls to make another run for the March 27th high of $16.38. The Moving Average Convergence Divergence (MACD) indicator shows a crossover that began at the start of April. If FRC stock gets pushed lower, then the 9-day moving average near $14 may also supply some necessary support.

FRC daily chart