Charles Schwab exceeds expectations as State Street stumbles
Charles Schwab (SCHW) announced on Monday that it lost $41 billion in deposits during the first three months of 2023, and detailed for the first time how the company weathered the banking crisis of last month that put it at the center of the turmoil for investors. The decline was slightly below analysts' expectations. The brokerage also said first-quarter earnings were $1.6 billion and revenues were $5.1 billion, up from the first quarter of 2022 but down from the fourth quarter. The revenue was better than expected. The securities firm's stock has fallen nearly 40% so far this year, including more than a 30% drop in March, the worst month in the company's history. In pre-market trading, the stock was almost flat.
The bank was not the only one in the spotlight on Monday. State Street's (STT) first-quarter revenue of $549 million was down 9% from the same period last year and 25% from the fourth quarter. Revenues were below expectations, and the stock fell more than 10% in pre-market trading.
Buffalo-based regional lender M&T (MTB) saw it's stock rise more than 2% in pre-market trading after announcing an increase in profits from the same period last year, driven by a doubling of net interest income.
These results are the latest in the earnings season that is being closely watched by US banks about a month after the Silicon Valley bank failure. Banks of all sizes will be struggling over the next few weeks to show investors how they are better positioned than their competitors to weather future turmoil.
On Friday, the four largest US banks said their first-quarter net profits and revenues had increased sharply from a year ago, demonstrating the resilience of industry giants. The country's largest bank, JPMorgan Chase (JPM), reported a profit of $12.6 billion, up 52% from the first quarter of 2022. Wells Fargo (WFC) made $5 billion, Citigroup (C) made $4.6 billion and PNC (PNC) made $1.7 billion.
Bank of America (BAC) and Goldman Sachs (GS) will report first-quarter earnings tomorrow.
Investors have been punishing Schwab since the Silicon Valley bank failure on March 10 and have been looking for other institutions that may face deposit outflows or significant paper losses on debt securities due to rising interest rates. Their concerns center around Schwab's bank customers potentially moving funds from their "sweep accounts" to higher-yielding alternative accounts, forcing the company to sell some of its bonds at a loss.
