The American charles schwab bank, the tenth US bank which is part of the homonymous financial group leader in stock brokerage, is not in the conditions of the Silicon Valley Bank but keeps the markets in suspense. The reason for the tension that is gathering on Charles Schwab Bank is simple and is due – as Il Sole 24 Ore wrote yesterday – both to the flight from deposits and to potential losses on bonds.
Since the beginning of this year, Charles Schwab Bank has been losing $20 billion a month in deposits and is experiencing unrealized losses on its securities portfolio that stood at $2022 billion at the end of 15 and are now expected to rise to $20 billion, i.e. more than the double the assets which is 7,9 billion. It is therefore not surprising that, faced with such a critical situation, Charles Schwab Bank has lost more than 30% on the stock market since the beginning of March
Charles Schwab is in trouble but it's not like Silicon Valley Bank
Markets fear that the tenth-largest US bank could repeat the sad case of the SVB due to the similar composition of assets and the potential losses of the 150 billion US government bonds which, if sold to meet deposit outflows, would generate much higher losses to the capital. Unlike the SVB, Charles Schwab Bank has excess liquidity and 80% of deposits secured. But the virus of market mistrust can do incalculable damage at lightning speed.
Markets on the alert and risks of profit cuts to deal with outflows from deposits
For all the reasons set out above and despite the reassurances provided by the bank, the markets are alert and keeping an eye on the liquidity strains even if the Liquidity coverage ratio was, as of September 2022, at a level equal to 118% "above – writes Il Sole 24 Ore – to the required threshold of 100% but much lower than the 150% of European banks”.
