Schwab Stock Pares Decline After Brokerage Seeks to Calm Investors
Charles Schwab Corp. rebounded from a record intraday decline after the online brokerage sought to reassure investors that it has sufficient liquidity to handle any volatility following the collapse of Silicon Valley Bank.
Shares of Westlake, Texas-based Schwab dropped 10.7% to $52.42 at 12.47 p.m. in New York after earlier plunging as much as 23%.
The brokerage, which also owns a bank, has “ample liquidity” to meet client withdrawals, Piper Sandler analyst Rich Repetto said in a note to clients Monday. Schwab’s deposits are largely from retail brokerage clients not prone to “the level of rapid deposit outflows” that hit Silicon Valley Bank because of its commercial clients.
Schwab, like SVB, has a large investment securities portfolio and is sitting on significant paper losses in its held-to-maturity books.
The firm transferred almost $189 billion of securities to a held-to-maturity basis last year, and had $14 billion in 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 there is very little chance that we’d need to sell them prior to maturity,” Chief Financial Officer Peter Crawford said in a statement.
‘Safe Port’
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 customers and capital in excess of regulatory requirements.
