Charles Schwab’s CEO says the company is liquid and not seeking capital or deals

NEW YORK, March 14 (Reuters) – Charles Schwab (SCHW.N) has enough liquidity, the bank and brokerage’s CEO said Tuesday, to allay concerns about a “doomsday” scenario following the bankruptcy of two US lenders since Friday.

“We have not raised any capital and we are not in the M&A market at this time,” Walt Bettinger, CEO of Charles Schwab, said in an interview with Reuters.

The company had seen a $4 billion influx of assets to its parent company on Friday as customers moved assets from other companies to Schwab, Bettinger said.

Schwab reported Monday that total client assets fell to $7.38 trillion in February, down 4% from a year ago.

Bettinger said Schwab was comfortable with the assets in his banking portfolio, which is separate from his brokerage. He compared it to the portfolios of other companies that had run into trouble.

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“Our available-for-sale portfolio is short-term and high-quality, and our held-to-maturity portfolio is slightly longer, but still short compared to many people, and very high-quality,” said Bettinger, who has led Schwab since the 2008 financial crisis.

Banks can classify bonds as “held to maturity” (HTM) and are not required to count changes in value if the securities are held until repaid, or they can hold the bonds as “available for sale” (AFS), meaning that they must deduct unrealized losses from the capital, but are free to sell the securities at any time.

Shares of Schwab closed 9.2% higher at $56.68 on Tuesday, along with a broad rise in banking stocks. But Schwab shares are still down 25.6% from last Wednesday, the day before many bank stocks began a downward spiral in response to problems at Silicon Valley Bank (SIVB.O). Supervisors closed SVB on Friday.

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“I appreciate and understand the doomsday scenario, but I also think it’s really important to get the facts out there – that our customers are not reacting in the way the doomsday scenario would indicate,” Bettinger said.

Richard Repetto, general manager at Piper Sandler, said Schwab had higher unrealized securities portfolio losses relative to its capital levels, compared to many regional banks that have come under pressure over the past week.

“That said, due to robust additional liquidity sources, we believe it is very unlikely that SCHW (Schwab) will ever need to sell HTM securities to meet deposit withdrawal requests,” he said in a note to clients on Monday.

The downward pressure on Schwab shares eased after Bettinger told CNBC earlier on Tuesday that he had bought 50,000 shares of Schwab stock, while billionaire investor Ron Baron said he had “modestly” increased his holding in Schwab.

About 82% of Schwab’s deposits were insured and fell below the Federal Deposit Insurance Corporation’s $250,000 limit.

The bank said Monday it had “access to significant liquidity,” including an estimated $100 billion in cash flows from available cash, portfolio-related cash flows and new assets.

Reporting by Lananh Nguyen and Nupur Anand; Additional reporting by John McCrank Edited by Leslie Adler and Bradley Perrett

Our Standards: The Thomson Reuters Principles of Trust.


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