SVB actions highlight Schwab cash sorting risks, says Raymond James

Raymond James analyst Patrick O’Shaughnessy notes news that SVB Financial (SIVB) needed to raise capital to offset losses that were triggered when it sold its available-for-sale securities portfolio would seem to have read-throughs for Charles Schwab (SCHW). Specifically, both Schawb and Silicon Valley Bank had roughly 60% of their interest-earnings assets in their respective securities portfolios as of Q4 2022, with an average securities yield around 1.8%. Furthermore, both have seen deposit outflows in recent quarters, and to the extend they look to plug the balance sheet hole with short-term FHLB and repo financing, they are paying around 4.7%, the firm notes. That said, Raymond points out that there are important differences as well. The firm highlights, nonetheless, that its below consensus EPS estimates on Charles Schawb reflect its view that it may need to take out more short-term financing, and for longer, than it might otherwise hope for. Raymond has a Market Perform on Schawb.