WSJ on Schwab's Deposit Drop
The Wall Street Journal says, "Schwab Taps Credit Markets to Raise $2.5 Billion in Debt." The article comments, "Charles Schwab is selling $2.5 billion in long-term debt, people familiar with the matter said. The brokerage giant said Wednesday in a regulatory filing that it would offer senior notes due in 2029 and 2034. Schwab issued $1.2 billion of bonds due in 2029 and $1.3 billion of bonds due in 2034, according to a person familiar with the matter. The bonds due in 2029 were issued at a 5.643% yield, or 2.05 percentage point higher than U.S. Treasurys, while the notes due in 2034 were sold at a 5.853% yield or 2.27 percentage point spread." The piece tells us, "Schwab's finances have been under scrutiny since early March, when the collapse of Silicon Valley Bank triggered widespread concerns over how other midsize banks would navigate higher interest rates and a loss of deposits. Schwab's bank deposits dropped by roughly $40 billion over the first quarter, or 11%, as brokerage customers continued to shift idle cash into money-market funds and other higher-yielding investments. Schwab has moved to offset the loss of bank deposits by issuing CDs and borrowing from the Federal Home Loan Bank system. Those higher funding costs are expected to weigh on its earnings for another year or so.... Schwab Chief Executive Walt Bettinger said in an interview with The Wall Street Journal in March that the brokerage giant would have sufficient liquidity even if it lost most of its deposits over the next year."
