The Financial Times reported on Friday that GQG Partners, a major investor of Charles Schwab located in Florida, has completely sold its stake in the brokerage in response to the banking upheaval that ensued after the failure of Silicon Valley Bank.
During the third quarter of 2022, GQG Partners invested in the financial services and brokerage firm, acquiring approximately 1% of the stock. By the end of the year, their ownership had grown to 17.4 million shares valued at $1.4 billion, as per the company’s filings.
The decision to divest its stake in Charles Schwab SCHW was made by investment managers at GQG due to concerns over potential losses related to its bond portfolio, as well as the potential impact of deposit fluctuations on the brokerage firm’s future growth prospects, according to statements given to the Financial Times by GQG representatives.
After experiencing a decline that commenced in March following the collapse of Silicon Valley Bank and two other U.S. lenders, Charles Schwab’s stock has dropped by 38% year-to-date. However, shares were up by 0.41% in premarket trading on Friday, indicating a possible shift in investor sentiment towards the brokerage firm.
As a result of the banking turmoil, Charles Schwab’s customers reportedly shifted their deposits towards higher-yielding products, such as the firm’s money-market funds. This trend could result in a loss of deposit revenue for the brokerage firm, as mentioned by GQG’s Mark Barker in an interview with the press.
The extent of the impact from the ongoing banking crisis on Charles Schwab is yet to be fully determined. Investors will need to wait until the company releases its results on Monday to assess any potential toll on the brokerage firm’s performance.
In the face of recent turbulence in the banking sector, Charles Schwab reported last week that its business remained “extremely robust,” citing a steady flow of new client money and deposits that have been “fairly consistent” over time. While the full extent of the impact from the ongoing banking crisis is yet to be determined, these recent developments suggest that the brokerage firm may be better positioned to weather the storm than some had initially thought.