Schwab Pares refused after broker tried to appease investors

(Bloomberg) – Charles Schwab Corp. recovered from a record intraday drop after the online brokerage sought to reassure investors that it had enough liquidity to handle any volatility following the collapse of Silicon Valley Bank.

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Shares of Westlake, Texas-based Schwab fell 9.6% to $53.05 at noon in New York after falling as much as 23% earlier.

The broker, which also owns a bank, has “abundant liquidity” to accommodate client withdrawals, Piper Sandler analyst Rich Repetto said in a note to clients Monday. Schwab’s deposits were largely from retail brokerage clients that weren’t susceptible to the “rapid withdrawal of deposits” that affected Silicon Valley Bank because of its commercial clients.

Schwab, like SVB, has a large portfolio of investment securities and is suffering substantial losses on paper on its hold-to-maturity books. The company moved nearly $189 billion of securities to a hold-to-maturity facility last year and had $14 billion in unrealized losses on its dealer mortgage-backed securities portfolio at the end of the year. year. However, unlike SVB, most of Schwab’s customer deposits are insured.

“Given our substantial access to other sources of liquidity, there is little chance that we will have to sell them before maturity,” said Chief Financial Officer Peter Crawford.

‘Safe port’

Founder and co-chairman Charles Schwab and CEO Walt Bettinger said in a separate statement that the company has a broad customer base and capital that exceeds regulatory requirements,

“Schwab’s longstanding reputation as a safe harbor during a storm remains intact, fueled by record-setting business performance, prudent balance sheet, strong liquidity position and diversified base form of more than 34 million investment account holders with Schwab every day,” the executives wrote.

Stocks began to weaken last week as depositors withdrew money from SVB Financial Group’s Silicon Valley Bank, prompting investors to scrutinize other financial companies. Schwab’s bank-scanning accounts have been withdrawn this year as customers seek higher yields.

The company says it has access to approximately $100 billion in cash flow, more than $300 billion in growth potential with the Federal Home Loan Bank and other short-term facilities, and more than 80% of deposits. at their bank is Federally insured. Deposit Insurance Corporation

Outflows in February were about $5 billion lower than in January, Crawford said, and Schwab predicts cash-flow movements will ease.

–With support from Michael J. Moore.

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