Schwab Pares slips after brokerages try to pacify investors

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(Bloomberg) — Charles Schwab Corp rebounded from a record one-day decline as the online brokerage sought to reassure investors that it had enough liquidity to handle any volatility following the collapse of the Silicon Valley bank.

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

Piper Sandler analyst Rich Repetto said in a note to clients on Monday that the brokerage, which also owns a bank, has “sufficient liquidity” to meet customer withdrawals. Schwab’s deposits are largely from retail brokerage clients that are not prone to the “rapid deposit outflow levels” that affect the Silicon Valley bank because of its commercial clients.

Schwab, like SVB, has a large investment securities portfolio and significant paper losses in its held-to-maturity books. The firm last year moved approximately $189 billion of securities to maturity, and had $14 billion of unrealized losses on that portfolio of agency mortgage-backed securities at year-end. Unlike SVB, however, most of Schwab’s customer deposits are insured.

“Given our significant access to other sources of liquidity it is highly unlikely that we will need to sell them prior to maturity,” chief financial officer Peter Crawford said in a statement.

‘safe harbor’

Founder and co-chairman Charles Schwab and chief executive officer Walt Bettinger said in a separate statement that the firm has a broad base of clients and capital that exceeds regulatory requirements,

“Schwab maintains its long-standing reputation as a safe harbor in the storm, backed by record-setting performance, a conservative balance sheet, a strong liquidity position and more than 34 million accounts investing with Schwab. Driven by a diverse base of holders. Every day,” the officials wrote.

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Shares began to weaken last week as depositors pulled money out of SVB Financial Group’s Silicon Valley bank, prompting investors to scrutinize other financial firms. Schwab’s bank sweep accounts have seen outflows this year as clients seek higher returns.

The company said it has access to approximately $100 billion in cash flow, more than $300 billion in incremental capacity with the Federal Home Loan Bank and other short-term facilities, and more than 80% of deposits at its bank are federally insured. is done. Deposit Insurance Corporation

Crawford said outflows were about $5 billion lower in February than in January, and Schwab expects cash flow to decrease.

–Michael J. With the help of Moore.

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