https://finance.yahoo.com/m/44d8662a-08c1-36ea-b74d-9e752b81dc44/schwab-stock-drops-amid.html
MATT KRANTZ04:55 PM ET 03/13/2023
Looks like the financial stock market freakout is taking down more than just regional banks. The U.S.' largest brokerage, Charles Schwab (SCHW), is feeling the heat too.
Shares of Schwab are down nearly 23% in the past two trading days, making it the 12th-worst-performing financial stock in the S&P 1500. Investors are concerned the San Francisco-based financial giant too might be sitting on a pile of uninsured deposits from high-tech firms as in the case of the failed Silicon Valley Bank. On Monday, shares were down as much as 23%. They closed Monday down 11.4% to 52.03 after recovering from the lows.
This wasn't just a blip. Schwab stock's drop at its worst point on the day was its largest percentage decrease on record (based on data that goes back to Sept. 23, 1987), according to Dow Jones. The stock fell five of the past six days. And it's its worst three-day drop on record.
The ramifications for the stock market are enormous. Schwab is arguably the largest online brokerage, with $7.4 trillion of investors' assets as of March. There are more than 34 million accounts at the firm. More than 80% of bank deposits are FDIC insured, Schwab says.
Schwab is vocally defending its financial strength: "Schwab has a broad base of high-quality customers across multiple lines of business, capital well in excess of regulatory requirements, a high-quality and relatively small loan book, and a conservative investment portfolio that is 80% comprised of securities backed by the U.S. Treasury and various government agencies," said Mr. Charles Schwab and CEO Walt Bettinger in a joint statement.
"I do think this is overdone for Schwab," said Stephen Biggar, analyst at Argus Research.
What This Means For Customers
What does this mean for customers? Keep in mind that bank accounts at Schwab are FDIC insured for up to $250,000. Also, securities and cash in brokerage accounts are insured by SIPC for up to $500,000 ($250,000 limit for cash).
And that in itself makes Schwab's situation much different than Silicon Valley Bank's, says Dean Kim, head of research at William O'Neil.
"SCHW is a different story from SIVB in that SIVB had a concentrated segment of the deposit market, namely (private equity) companies as their major deposit customers," Kim said. "SCHW, on the other hand, is more main stream and across different customer segments. In addition, SCHW is insured by SIPC up to $500,000 per account, higher than $250,000 for FDIC and banks."
And on Monday, Citi upped its rating on the bank's stock to "Buy" from "Hold," Barron's reported.
"Lots of liquidity and they have indicated some 80% of deposits are FDIC-insured, compared to 88% of SIVB's deposit NOT being FDIC-insured," Biggar said. "Much better interest rate risk management at Schwab, and they don't have a limited number of depositors with large dollar amounts draining down funds that resulted in SIVB's collapse."
It all boils down to human behavior, though. "When you are dealing with customer deposits, whether they be a bank, asset manager or brokerage, you run the risk of failure if most of the customers decide to pull their money out in a short period of time. This is regardless of how strong the balance sheet is," Kim said.
"So as long as people do not panic and pull their money out from SCHW all at the same time, SCHW should be able to weather this storm," Kim said
"Then there was a woman, a lion of a woman."
Recent SCHW News
- New Schwab Asset Management Study: ETF Investors Keep Calm and Carry On Amid Market and Political Uncertainty • Business Wire • 10/10/2024 12:00:00 PM
- Schwab Trading Activity Index™: September Score Slides by Biggest Margin Since June ’22 • Business Wire • 10/07/2024 04:30:00 PM
- Walt Bettinger to Retire as CEO • Business Wire • 10/01/2024 12:00:00 PM
- Schwab Asset Management Announces ETF Share Splits • Business Wire • 09/25/2024 07:03:00 PM
- Schwab Retirement Plan Services Ranks #1 in J.D. Power 2024 U.S. Retirement Plan Digital Experience Study • Business Wire • 09/24/2024 01:30:00 PM
- Schwab Announces Its Fall Business Update • Business Wire • 09/24/2024 12:45:00 PM
- Schwab IMPACT® 2024 to Provide Business-Critical Content for RIAs: Practice Management, Leadership, Investment Strategies and Client Experience • Business Wire • 09/19/2024 01:30:00 PM
- Microsoft Boosts Share Buyback, Raises Dividends by 10%, Intel Secures Chip Deal with Amazon • IH Market News • 09/17/2024 10:40:35 AM
- Schwab Reports Monthly Activity Highlights • Business Wire • 09/16/2024 12:45:00 PM
- GameStop plunges 11% on stock offering, DJT drops post-debate, GSK fails shingles vaccine trial • IH Market News • 09/11/2024 10:25:41 AM
- Schwab Trading Activity Index™: Score Remains at Moderate Levels Despite Dip in August • Business Wire • 09/09/2024 04:30:00 PM
- Nvidia Subpoenaed by DOJ, Athira Pharma Shares Plunge 71% After Study Fails, Zscaler Falls 15% Post-Earnings • IH Market News • 09/04/2024 09:50:25 AM
- Schwab Survey: Bullishness Among Traders Reaches Highest Level in Two Years • Business Wire • 08/28/2024 12:30:00 PM
- Schwab and Snowflake Retreat in Premarket, WeRide Postpones IPO, Halliburton Cyberattack, McDonald’s Instagram Hack • IH Market News • 08/22/2024 09:37:42 AM
- Schwab Survey Reveals That Americans Think It Takes $2.5 Million to Be Considered Wealthy in 2024 • Business Wire • 08/21/2024 12:00:00 PM
- Schwab Reports Monthly Activity Highlights • Business Wire • 08/14/2024 12:45:00 PM
- Fueling Future Leaders: Schwab Announces Recipients of Registered Investment Advisor Talent Advantage Student Scholarship • Business Wire • 08/13/2024 01:30:00 PM
- The Schwab Ultra-Short Income ETF (SCUS) Begins Trading • Business Wire • 08/13/2024 12:00:00 PM
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- Google Faces Antitrust Ruling; SunPower Files for Bankruptcy and Business Sale – Latest Business News • IH Market News • 08/06/2024 09:44:42 AM
- Schwab Trading Activity Index™: Score Moves Slightly Higher During the July Period, Remaining at Moderate Levels • Business Wire • 08/05/2024 04:30:00 PM
- Schwab to Launch the Schwab Ultra-Short Income ETF • Business Wire • 07/30/2024 12:00:00 PM
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