Fair-market value of Schwab’s held-to-maturity bonds $14.1 billion less than balance-sheet value

Six large U.S. banks including Charles Schwab and PNC Financial Services Group  together switched the classifications on more than $500 billion of their bond investments last year.

The banks’ held-to-maturity bonds had a combined $1.14 trillion balance-sheet value as of Dec. 31. 

The $1.14 trillion figure was $118 billion higher than the bonds’ fair-market values. 

The $118 billion was equivalent to 18% of the banks’ total equity.

Growing concern about whether a significant portion of many banks’ capital is illusory.

The biggest such reclassification was by Charles Schwab. It transferred $188.6 billion of securities to the held-to-maturity category from available-for-sale. 

Schwab wasn’t labeling any of its bonds as held-to-maturity at the end of 2021.

By the end of last year, the fair-market value of Schwab’s held-to-maturity bonds was $14.1 billion less than their balance-sheet value. The unrealized losses were equivalent to 39% of Schwab’s total equity. 

The unrealized losses exceeded Schwab’s $6.2 billion of tangible common equity.

Jonathan Weil WSJ 29 March 2023 

https://www.wsj.com/articles/as-interest-rates-rose-banks-did-a-balance-sheet-switcheroo-8e71336f

Charles Schwab Survived the Deposit Crisis. What Comes Next? - WSJ

”Det skulle finnas tillräckligt med likviditet för att täcka om 100 procent av vår banks insättningar försvann”,

 sade Walt Bettinger, Schwabs vice ordförande och vd, till Wall Street Journal. 

Det skulle kunna göras ”utan att behöva sälja ett enda värdepapper”, tillade han.

Bolagets aktie har fallit med 33 procent i år.

DI 23 mars 2023

https://www.di.se/live/charles-schwab-vi-klarar-av-en-uttagsflykt/

Duration Risk

Higher rates mean falls in the price of assets with a long duration. 

Buying long-term fixed-rate government bonds when you have short-term floating-rate liabilities is a very basic mismatch — so basic that everyone in finance assumed it could not happen again.

https://englundmacro.blogspot.com/2023/03/duration-risk.html

Charles Schwab Corporation

https://en.wikipedia.org/wiki/Charles_Schwab_Corporation