Patrick Iturra, Asset/Investment Manager & Consulting April 18, 2023
US Financial Institutions Experience Drop in Deposits
According to Reuters, several American financial institutions suffered a substantial decline in deposits in Q1 2023, as the industry faced its most extensive crisis in over a decade. State Street Corp (STT.N) and M&T Bank Corp experienced a 3% drop in deposits, while Charles Schwab (SCHW.N) Corp’s deposits declined by 11% from the previous quarter. State Street Corp’s stock plummeted by 9.2%, Charles Schwab Corp’s shares rose by 3.9%, and M&T Bank Corp’s increased by nearly 8%.
These developments have led customers to explore alternative investment options with higher returns, such as Apple (AAPL.O) Card’s savings account with a 4.15% yield, ten times higher than the national average. Investors are monitoring the impact of the Federal Reserve’s quantitative tightening and analyzing executive comments for further details.
Schwab and M&T Bank Exceed Profit Expectations, While State Street Corp Falls Short
Schwab (SCHW.N) and M&T Bank (MTB.N) exceeded profit expectations due to a surge in interest income. However, State Street Corp fell short due to an outflow of client funds that impacted its fees. Analysts attribute State Street Corp’s earnings shortfall to lower-than-expected net interest income.
CEO of Schwab Addresses Concerns About Portfolios of Debt Securities Held by Banks
Although Schwab also suffered from the crisis last month, CEO Walter Bettinger addressed concerns about portfolios of debt securities held by banks, including Schwab. These portfolios disclose unrealized losses in their earnings.
Fitch Senior Director Bain Rumohr stated that higher-cost funding sources might slightly pressure Schwab’s net revenue throughout 2023. However, the firm’s size and scale should support profit margins at levels consistent with historical levels.
As a result of these drawbacks, clients have been investigating alternative investment opportunities that offer higher returns.
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“I don’t sell houses. I grow your Assets” -Patrick Iturra, Asset/Investment Manager & Consulting.