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A top investor in Charles Schwab sold its entire $1.4 billion stake as the brokerage fell victim to the banking turmoil
Apr 14, 2023, 8:12 AM
https://markets.businessinsider.com/news/stocks/charles-schwab-investor-sold-entire-billion-stake-banking-turmoil-2023-4
A top investor in Charles Schwab dumped its entire $1.4 billion stake as the brokerage fell victim to turmoil in the banking sector, according to the Financial Times.

Florida-based GQG Partners was among Schwab's top 15 shareholders until fears of the bank's unrealized losses on its bond portfolio alongside a run on deposits took hold.

"We didn't see an existential risk but they were caught up in the sentiment around banks," Mark Barker, head of international at GQG Partners, told the Financial Times.

Banking jitters kicked off following the collapse of Silicon Valley Bank and Signature Bank, sparking a wave of mass withdrawals as depositors rushed to money-market funds they perceived a safer investment than uninsured deposits.

With all the inflows to money-market funds Charles Schwab is losing deposits revenue," said Barker.

Schwab was among one of the US lenders hit the hardest amid the turmoil, with the bank's share price dropping more than 30% since the start of March. Confidence in the bank also took a beating after Schwab revealed it has nearly $28 billion in unrealised losses across its held-to-maturity and available-for-sale bond portfolio.

Like SVB, Charles Schwab pumped billions of dollars into US Treasury securities at a time when interest rates were near-zero levels.

Given rates have surged over the past year thanks to the Federal Reserve's anti-inflation fight, those bonds have declined in value, and should the bank need to sell them, it could realize huge losses that may ultimately wipe out shareholders' equity.

With all the inflows to money-market funds Charles Schwab is losing deposits revenue," said Barker.

Schwab was among one of the US lenders hit the hardest amid the turmoil, with the bank's share price dropping more than 30% since the start of March. Confidence in the bank also took a beating after Schwab revealed it has nearly $28 billion in unrealised losses across its held-to-maturity and available-for-sale bond portfolio.

Despite last month's turbulence, Schwab reported that it logged the second-highest inflows in March in bank history, bringing in more than $54 billion of core net new client assets.

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