Charles Schwab CEO says firm has liquidity, not seeking capital or deals

By Lananh Nguyen and Nupur Anand

NEW YORK (Reuters) – Charles Schwab (NYSE:) 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 saw an influx of $4 billion in assets to the parent company on Friday as clients moved assets to Schwab from other firms, Bettinger said.   

Schwab on Monday reported that total client assets 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 — contrasting it with 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.   

Compared to many regional banks that have come under pressure in the last week, Schwab has higher unrealized securities portfolio losses in comparison to its capital levels, said Richard Repetto, a managing director at Piper Sandler.   

“That said, due to robust supplemental liquidity sources, we think it is very unlikely that SCHW 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.   

The 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 “modestly increased” his position in Schwab. 

Schwab’s shares closed up 9.2% at $56.68 on Tuesday, along with a broad rise in bank shares. Schwab shares, however, are 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. SVB was shut down by regulators on Friday.    

About 82% of deposits held by Schwab were insured, falling under the Federal Deposit Insurance Corporation’s limit of $250,000.   

The bank has “access to significant liquidity” including an estimated $100 billion of cash flow from cash on hand, portfolio-related cash flows, plus new assets.