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March 13, 2023 at 12:48 PM
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 9.2% to $53.30 at 2.50 p.m. in New York after earlier plunging as much as 23%. The stock has tumbled roughly 36% this year.
The brokerage firm, which also owns a bank, has “ample liquidity” to meet client withdrawals, Piper Sandler analyst Rich Repetto said Monday in a research note. 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’s shares tumbled last week as depositors pulled money from Silicon Valley Bank and investors questioned the strength of balance sheets at smaller lenders, including First Republic Bank, PacWest Bancorp and Western Alliance Bancorp. New York-based Signature Bank was closed by regulators on Sunday.
While the biggest U.S. banks are subject to the most stringent regulations, “only a few” lenders may have problems similar to those at SVB Financial Group’s Silicon Valley Bank, former Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said in a tweet.
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 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 there is very little chance that we’d need to sell them prior to maturity,” Chief Financial Officer Peter Crawford said in a statement.
