Charles Schwab
stock was jumping Monday after it was upgraded at Raymond James amid signs that its deposit issues have started “winding down.”
Raymond James analyst Patrick O’Shaughnessy upgraded Charles Schwab stock (ticker: SCHW) to Outperform from Market Perform. The reason for the optimism comes down to hopes that flows from the broker’s low-yielding sweep accounts into higher-yielding money-market funds are starting to slow. “With bank sweeps as a percentage of total client cash quickly approaching their low point over the last
8+ years, we believe most rate-sensitive client cash has already moved to money-market funds,” O’Shaughnessy writes.
That would be great news for Schwab stock. Since the failure of Silicon Valley Bank, Schwab stock has been treated like a regional bank. Its stock has dropped 39% during the past three months, a touch better than the
SPDR S&P Regional Banking ETF’s
(KRE) 43%. A big reason for that is the deposit issue, which has seen people move their cash out of accounts that yield almost nothing to those that offer 4% or more. It was that dynamic that caused
SVB
to fail and has pressured regional bank stocks ever since. While Schwab isn’t a regional bank, it does have that same issue in its sweep accounts.
The good news is that Schwab is still attracting money. “Importantly, concerns about the stability of the banking system have not impaired Schwab’s ability to attract new accounts and assets,” O’Shaughnessy writes.
Schwab stock has gained 3% Monday, while the
Dow Jones Industrial Average
has dipped 0.2% and the
S&P 500
is little changed.
Write to Ben Levisohn at ben.levisohn@barrons.com
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