Charles Schwab CEO says firm has liquidity, not seeking capital or deals
NEW YORK, March 14 (Reuters) - Charles Schwab (SCHW.N) has ample liquidity, the chief executive of the bank and brokerage said on Tuesday, moving to allay concerns about a "doomsday scenario" that has weighed broadly on bank stocks after the failure of two U.S. lenders since Friday.
"We have not raised capital and we are not in the market at this point for M&A transactions," Walt Bettinger, CEO of Charles Schwab, told Reuters in an interview.
The firm had seen an influx of $4 billion in assets to its parent company on Friday as clients moved assets to Schwab from other firms, Bettinger said.
Schwab on Monday reported that total client assets had slid to $7.38 trillion in February, down 4% compared with a year ago.
Bettinger said Schwab was comfortable with the assets on its bank portfolio, which is separate from its brokerage business. He contrasted it with the portfolios of other companies that had run into trouble.
"Our available for-sale portfolio is short in duration and high in quality, and our held-to-maturity is slightly longer in duration 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 kept until they are repaid, or they can keep the bonds as "available-for-sale" (AFS), which means they must count unrealized losses against capital, but are free to sell the securities at any time.
Schwab's shares closed 9.2% higher at $56.68 on Tuesday, along with a broad rise in bank stocks. But Schwab shares are still down 25.6% from their close last Wednesday, the day before many bank shares began a downward spiral in reaction to problems at Silicon Valley Bank (SIVB.O). Regulators shut SVB on Friday.
The banking collapse has roiled global markets. Even though fears of a contagion have eased, concerns remain. The S&P 500 regional banks index (.SPLRCBNKS) is down 26% over the past five sessions. read more
"I appreciate and understand the doomsday scenario but I also think getting the facts out is very important - that our clients are not reacting in the manner that the doomsday scenario would indicate," Bettinger said.
Richard Repetto, a managing director at Piper Sandler, said that, compared with many regional banks that have come under pressure in the last week, Schwab had higher unrealized securities portfolio losses relative to its capital levels.
"That said, due to robust supplemental liquidity sources, we think it is very unlikely that SCHW (Schwab) will ever need to sell HTM securities to meet deposit withdrawal requests," with $150 billion to $200 billion of available liquidity, he said in a note to clients on Monday.
Downward pressure on Schwab's stock eased after Bettinger told CNBC earlier on Tuesday that he had bought 50,000 Schwab shares, while billionaire investor Ron Baron said he had "modestly increased" his position in Schwab.
About 82% of deposits held by Schwab were insured, falling under the Federal Deposit Insurance Corporation's limit of $250,000.
The bank said on Monday it had "access to significant liquidity", including an estimated $100 billion of cash flow from cash on hand, portfolio-related cash flows, plus new assets.
Our Standards: The Thomson Reuters Trust Principles.