Schwab: Clients Starting to Move Cash
A press release entitled, "Schwab Reports Monthly Activity Highlights," tells us, "The Charles Schwab Corporation released its Monthly Activity Report today. Company highlights for the month of April 2022 include: Core net new assets brought to the company by new and existing clients totaled negative $9.2 billion. Net new assets excluding mutual fund clearing totaled negative $6.5 billion. These flows reflect client cash disbursements during tax season. Total client assets were $7.28 trillion as of month-end April, down 1% from April 2021 and down 7% compared to March 2022. Average interest-earning assets were $636.7 billion in April, up 21% from April 2021 and down 1% compared to March 2022." CFO Peter Crawford comments, "Client cash disbursements during this year's tax season were the highest we've ever seen at Schwab. These outflows include the impact of client portfolio actions taken during 2021, a year marked by strong equity market performance and robust trading activity. Such seasonal activity is distinct from flows within client accounts rebalancing their cash positions between daily liquidity and investments such as money market funds. This rebalancing, or sorting, activity tends to occur as an extended period of low interest rates shifts into a rising rate environment and clients refresh their allocations." He adds, "While the Federal Reserve has taken initial steps to move interest rates higher thus far in 2022, short rates are just now approaching the point where we'd expect to see clients start to rebalance their cash positions. Assuming the Fed's tightening cycle remains consistent with current forecasts, we believe we could see rebalancing activity begin to surface before the end of the second quarter. Such actions may lead to a slight decline in balance sheet assets from current levels over the next quarter or two (assuming clients don't meaningfully shift their investments from equities to cash). As we help clients navigate this environment, we remain confident that the successful execution of our 'Through Clients' Eyes' strategy, coupled with our all-weather financial model, will support strong long-term growth - in our client base, and in value for our stockholders." Note: Crane Data's Peter Crane will be hosting a panel on money market fund and brokerage bank deposit issues in Phoenix Monday at SIFMA's AMA Roundtable event. We look forward to seeing our brokerage friends in Phoenix!
