Charles Schwab Is Trading Like It’s About to Explode, Is That Really the Case?

It’s quiet. Too quiet…

But one major financial institution is still trading like something’s wrong — Charles Schwab — one of the largest US banks and trading brokerages with $7T+ in assets.

Its stock is down ~30% since the start of March — swept into the bank panic in recent weeks.

What’s happening with Charles Schwab?

Like SVB, Schwab took customers’ deposits and invested them into long-term bonds — now sitting on $29B in unrealized losses.

• It’s ok: As long as Schwab holds those bonds until maturity, the losses will go away.
• It’s not ok: If mass customer withdrawals forced Schwab to sell those bonds — the losses will be “realized” into actual losses today.

Classic prisoner’s dilemma: Safe if no one sells, danger if everyone pulled their money out.

Last week, the CEO said, “there is a near-zero chance we’d need to sell” these assets, and even if 100% of deposits were withdrawn, they’d be able to cover it.

Is Schwab really different? Nearly 20% of its deposits are uninsured — much lower than SVB’s 94%, and it isn’t overexposed to one sector (i.e., tech, crypto). But if something were to happen, the impacts could be much larger.

Investors: The case for Charles Schwab

In a detailed analysis, Substack writer Scuttleblurb makes several cases:

• If return to “pre-SVB days,” the stock could see >30% upside back to its $70 levels.
• While not impossible, an unlikely Charles Schwab collapse could turn into “one of the biggest financial events in years.”