First Republic Planting The Seeds For A Later Harvest

It may be an exaggeration to say that 2023 is a lost year for First Republic (NYSE:FRC), particularly in mid January, but I don’t think it’s an exaggeration to say that the results this bank will post this year will not be representative of the real long-term earnings power of the business. First Republic is going to take a hit from much higher funding costs, but the bank is willing to pay that short-term cost to reap the long-term benefits of continuing to build a base of high net-worth customers that can continue to support above-average loan growth and profitability over the longer term.

First Republic shares have done pretty well in the brief time since my last update, climbing more than 12% in the last six weeks and outperforming peers (particularly smaller regional banks). The call on this stock is a fair bit more challenging today – while I think the shares are undervalued for investors looking for a long-term buy-and-hold name, I do think there's a better-than-average chance of another chance to buy at more attractive levels this year, particularly if the Fed maintains a harder line on rates through the end of the year.

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First Republic Planting The Seeds For A Later Harvest