Schwab is selling down today (3/3/20) with the Fed’s surprise cut in interest rates. Majority of SCHB’s income comes from investing customers deposits, so falling interest rates will over time compress net interest margins (NIM). YTD, the finance sector is the third worst performing sector down -9.26% (behind energy -21.7% and materials -10.47). With today’s decline SCHW is down -11.4% YTD, so it is not an outlier. There is no other news on Bloomberg outside of heavy volume on stocks and options. As a point of reference BAC is down -5.5% today and down -16.6% YTD.
As investors sell stocks and raise cash balances, the higher deposits will help Schwab offset NIM declines. Also, it takes time as in several quarters for the NIM for SCHW and most banks to decline meaningfully.
Please let me know if you have any questions.
Thanks,
John
John R. Ingram CFA
Chief Investment Officer
Partner
Direct: 617.226.0021
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109