Schwab Began Hedging Interest-Rate Risk With About $3.9 Billion in Derivatives
(Bloomberg) – Charles Schwab Corp. started using derivatives to hedge interest rate-related risk during the first quarter.
The derivatives had a notional value of $3.9 billion as of March 31, the Westlake, Texas-based company said in a regulatory filing Monday.
Schwab, which runs both brokerage and bank businesses, has been ensnared in the tumult ravaging US regional banks after the Federal Reserve embarked on its most aggressive interest rate tightening cycle in decades last year.
The firm confronted swelling paper losses on securities it owns and grappled with dwindling deposits as customers moved cash into accounts that earn more interest. Schwab executives have said those withdrawals will abate. The pace of cash withdrawals is already starting to slow, Chief Financial Officer Peter Crawford said in a recent statement.
Shares of Schwab slid 0.31% to $47.47 at 9:38 a.m. in New York. The stock had plunged 43% this year through Monday.
Read more: At Charles Schwab, Being a Big Bank Has Become a Big Problem
To keep up with withdrawals, Schwab has been relying on higher-cost funding sources, including loans from the Federal Home Loan Bank system. Schwab had about $45.6 billion in outstanding FHLB loans and $6.8 billion in repurchase agreements at the end of March.
Read more here… https://finance.yahoo.com/news/schwab-began-hedging-interest-rate-005933433.html