Charles Schwab Should Have Enough Equity and Liquidity To Ride Out Current Storm

Charles Schwab's stock price decreased 12.77% on March 9, as concerns rippled across a large swath of the financial sector due to an announcement from Silicon Valley Bank. Silicon Valley Bank announced that it sold substantially all of its available-for-sale securities portfolio, was booking a $1.8 billion after-tax loss related to the sale, and that it was raising equity capital. Many banks and companies with related banking entities, such as Charles Schwab, also have a material amount of fixed income securities on their balance sheet with unrealized losses, as recently rising interest rates have decreased the value of fixed income securities. Based on our initial analysis, we don't have concerns over wide-moat Charles Schwab's liquidity or capital levels, don't plan to make a material change to our $87 fair value estimate, and assess shares are undervalued.