The Charles Schwab Corp. (NYSE: SCHW) is among the most affected financial firms facing a drop in customer deposits due to the increased interest rate environment in the United States, according to its Q3 2023 report.
This presents a real challenge for a company that relies primarily on clients’ uninvested cash to fund its interest-earning businesses. Charles Schwab’s consumer bank deposits tumbled 28% year-over-year (YoY), causing its net interest revenue to drop 23.5% in the third quarter, which also negatively affected its quarterly revenue of $4.61 billion (-16.2% from Q2).
Charles Schwab’s position on Bitcoin and crypto
Interestingly, the U.S. financial giant has always assumed a skeptical position related to Bitcoin (BTC) and the cryptocurrency market. It also does not offer these digital assets in the spot market, despite offering alternative ways to speculate on them.
Particularly, the Schwab Center for Financial Research posted an article on this topic in 2022 that explicitly says Bitcoin does not have the necessary characteristics for being a global currency, nor a reliable store of value or inflation hedge like gold. In this context, Charles Schwab deemed it as a purely speculative asset:
“We suggest that investors who want to invest in cryptocurrencies treat them as a speculative asset using funds outside a traditional long-term portfolio. Because the value of Bitcoin is currently not tied to the value of a basket of goods or services, its value as an inflation hedge is a matter of speculation and is unpredictable.”— Schwab Center for Financial Research
Nevertheless, Bitcoin is up 55.5% since October 21, 2022. Trading at $29,804 by press time.
SCHW price analysis
Meanwhile, Charles Schwab stock has lost more than 25% in both the last quarter and in the year-over-year period mentioned for Bitcoin’s positive price performance. SCHW is trading at $50.87 per share by press time, as opposed to $68.19 per share three months ago, and $68.26 per share on October 21, 2022.
Walter William Bettinger, Charles Schwab’s CEO and Co-Chairman, said that the Federal Reserve’s actions are slowing the rate of inflation, but at a significant cost to the markets, to consumers, to investors, and to firms like Schwab. On that, JPMorgan CEO warned we are living in ‘the most dangerous times’.