Pedestrians pass in front of a Charles Schwab bank branch in downtown Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images
Karl Schwab Stocks slid on Monday as concerns deepened over the health of regional banks amid the recent collapse of tech-focused banks Silicon Valley Bank and crypto related signature bank.
The Westlake, Texas-based financial company fell as much as 23.3% during Monday’s trading. The stock was last down 20.3% on the day. It would be Schwab’s worst one-day sell-off ever if the drop were worse than the 19% it suffered in April 2000.
The sharp pullback came despite Schwab reassuring shareholders and customers that there were no significant outflows amid broader concerns about the banking system. Schwab pointed out that more than 80% of his total bank deposits are under the Federal Deposit Insurance Corp.’s insurance limits. falling, adding that it has “access to significant liquidity” and its business continues to “perform exceptionally well”.
“Our financial performance continues to be strong,” the company said in a statement Monday. “Schwab is well positioned to navigate the current environment as we continue to serve clients and shape the future of modern wealth management. And we applaud the efforts of our regulators to support depositors at this critical time, helping to boost confidence across the American banking system.”
“Persuasive” entry point?
Schwab is the eighth largest U.S. bank by assets with $7.05 trillion in customer assets and 33.8 million active brokerage accounts at the end of 2022. Due to its retail brokerage deposit model with ample liquidity, some Wall Street analysts believe that they will not experience a rush Like the SVB.
“Due to robust supplemental liquidity sources, we believe it is very unlikely that SCHW will ever need to sell HTM [held-to-maturity] Securities to fulfill requests for deposit withdrawals,” Piper Sandler’s Richard Repetto said in a note on Monday. The analyst maintained an overweight stance.
Meanwhile, Citi analyst Christopher Allen upgraded Schwab to “buy” from neutral, saying the company’s shares face limited risk of cash flight and current valuation levels present a “compelling entry point.”
Schwab’s shares are down 43% in 2023, nearly 59% off its 52-week high.
The SVB collapse was the largest US banking collapse since the 2008 financial crisis – and the second largest ever. Banking regulators rushed to stop depositors with money at the SVB and have now smashed Signature Bank to ease fears of systemic contagion.
First Republic Bank experienced a more severe selloff Monday, down more than 70%, after saying on Sunday it had received additional liquidity from the Federal Reserve and JPMorgan Chase.