It appears that the financial stock market freakout is bringing down more than just regional banks. America’s largest brokerage firm, Charles Schwab (SCHW), also feels the heat.
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Shares of Schwab have fallen nearly 30% in the past two trading days, making it the 11th worst-performing financial stock in the S&P 1500. Investors worry that it may also be sitting on a pile of uninsured deposits from high-tech firms, as in with the failed Silicon Valley Bank. On Monday, the shares fell as much as 23 per cent.
This isn’t just a blip. Schwab stock’s drop would be the biggest percentage drop ever (based on data going back to Sept. 23, 1987), according to Dow Jones.
The consequences for the stock market are enormous. Schwab is arguably the largest online brokerage with $7.4 trillion in investor assets as of March. There are more than 34 million accounts in the company. More than 80% of bank deposits are FDIC insured, Schwab says.
Schwab loudly defends its financial strength: “Schwab has a broad base of high-quality clients across multiple industries, capital well above regulatory requirements, a high-quality and relatively small loan book, and a conservative investment portfolio that is 80% comprised of securities that is supported by the US Treasury Department and various government agencies,” Charles Schwab and CEO Walt Bettinger said in a joint statement.
What does this mean for customers? Remember that bank accounts at Schwab are FDIC insured up to $250,000. Securities and cash in brokerage accounts are also insured by SIPC for up to $500,000 ($100,000 limit for cash).
Biggest economic two-day decline
| company | Ticker | 2-day shift |
|---|---|---|
| First Republic | (FRC) | -80.2% |
| Customers Bancorp | (DICE) | -72.9% |
| PacWest Bancorp | (PACW) | -72.2% |
| Comerica | (CMA) | -46.8% |
| East West Bancorp | (EWBC) | -41.9% |
| KeyCorp | (KEY) | -38.0% |
| Zion’s Bancorporation | (ZION) | -36.4% |
| UMB Financial | (UMBF) | -32.8% |
| Bank of Hawaii | (BOH) | -30.6% |
| Fifth Third Bancorp | (FITB) | -29.0% |
| Charles Schwab | (BLACK) | -28.9% |
Follow Matt Krantz on Twitter @Matt Krantz
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