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Tags: charles schwab | silicon valley bank | banking sector buying opportunity

Schwab Rated a 'Buy' in SVB-Fueled Selloff

Schwab Rated a 'Buy' in SVB-Fueled Selloff
A Charles Schwab Financial Services brokerage office in New York (John Nacion/AP)

By    |   Friday, 10 March 2023 04:36 PM EST

With Silicon Valley Bank going into receivership, becoming the biggest bank to fail since the financial crisis of 2008, analysts are pointing to Charles Schwab (SCHW) as a buying opportunity, CNBC reports.

SVB’s demise was also the second-biggest failure of federally insured bank in U.S. history.

A California regulator shut Silicon Valley Bank (SIVB) Friday and appointed the Federal Deposit Insurance Corporation as receiver. Investors lost confidence in SVB when it failed to raise $2 billion to offset bond sale losses — causing the financial sector to drop 4.1% Thursday for its worst one-day decline since June 2020.

Analysts at four leading investment banks say fears over the banking sector are overblown since SVB serves the venture capital (VC) market, and point to Charles Schwab as now attractively priced.

“Parallels to SIVB only run skin-deep,” UBS analyst Brennan Hawken wrote in a Thursday note. “While SCHW does have a relatively long-dated securities portfolio and declining deposit balances, the similarities, in our view, end there.

“SIVB is a traditional lender primarily serving early/mid-state technology and VC-backed growth companies, while SCHW caters to retail wealth management, a structurally stickier deposit base,” Hawken continued.

“Although SCHW has seen its fair share of deposit flight (avg. deposits are down 9% Y/Y), they have several levers they can pull before selling securities at a loss,” Hawken said.

UBS has a Buy rating on Schwab with a price target of $90, indicating a 35% upside from the stock’s $66.47 closing price on Thursday.

Analysts at Deutsche Bank, Morgan Stanley and Piper Sandler also pointed to SCHW as an opportunistic buy.

Deutsche’s Brian Bedell called the stock an “attractive buying opportunity,” also putting a Buy rating on the stock with a price target of $109.

Analyst Michael J. Cyprys of Morgan Stanley thinks the stock could rally 50%, writing in a client note the “sharp sell-off presents a compelling entry point for a high-quality franchise that should be able to better navigate liquidity risks than the market prices in, given significant financial strength/flexibility, liquidity profile and significant earnings/capital generation.”

Piper Sandler, overweight the stock, has a price target of $100 for Schwab. Analyst Richard Ripetto wrote in a Friday note: “We see a significantly different scenario compared to banks like SIVB.

“SCHW remains well above its regulatory capital minimum,” Ripetto added. “We feel that yesterday’s sell off is overdone and could present an attractive entry point into one of the strongest brands in financial services.”

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StreetTalk
With Silicon Valley Bank going into receivership, becoming the biggest bank to fail since the financial crisis of 2008, analysts are pointing to Charles Schwab (SCHW) as a buying opportunity, CNBC reports.
charles schwab, silicon valley bank, banking sector buying opportunity
408
2023-36-10
Friday, 10 March 2023 04:36 PM
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