FRC stock to pop as bank run averted

First Republic Bank (NYSE: FRC) stock price has rebounded sharply after tumbling heavily last week. The stock, which plunged to a low of $46.21 on Friday, ended the week at $81.95. It is expected to open sharply higher on Monday after the US moved to protect depositors of Silicon Valley Bank. 

First Republic Bank bank run averted

The banking sector has been under significant strains in the past few days. Last week, we saw the collapse of Silvergate Capital, a bank I had written on here. Silvergate Bank collapsed last week, and during the weekend, regulators took over Signature Bank.

On Sunday, American regulators announced plans to make Silicon Valley Bank’s customers whole. This includes customers with uninsured funds in the company. This measure will boost confidence in the banking sector.

It will also prevent a likely bank run on First Republic Bank, a company that also caters to wealthy people. In a statement, the company said that it had shored its balances using funds from the Federal Reserve and JP Morgan. This funding will give it up to $70 billion in unused liquidity.

Therefore, there is a high possibility that the First Republic Bank share price will go vertical when the market opens on Monday. However, the reality is that the panic in regional banks will still see more people pull out money from similar banks.

During the collapse of Silicon Valley Bank, most people were withdrawing funds and depositing them in large banks like JP Morgan and Bank of America. These big banks are more regulated and often subjected to stress test by the Fed. They are also considered too big to fail institutions.

Therefore, in the medium term, we will likely see more outflows from high-risk regional banks to relatively safe big banks.

First Republic Bank stock forecast

FRC chart by TradingView

The daily chart shows that the FRC stock price collapsed hard last week. It crashed to a low of $45.40, the lowest level since 2015. At its lowest point, the shares were about 70% below the highest point this year. The stock crashed below the key support level at $106, the lowest level on November 9.

It has moved below the 25-day and 50-day moving averages while the Relative Strength Index has retreated. Therefore, the stock will likely jump at the open as buyers target the key resistance point at $106, which is about 31% above the current level.