Bloomberg - Evening Briefing - Cracks in a $7 trillion empire

On the surface, Charles Schwab being swept up in the wave of recent financial meltdowns makes little sense. The firm, a half-century mainstay in the brokerage industry, isn’t overexposed to crypto, startups or venture capital. Fewer than 20% of Schwab’s depositors exceed the FDIC’s $250,000 insurance cap, compared with about 90% at the now-defunct Silicon Valley Bank. And with 34 million accounts, an army of financial advisers and more than $7 trillion of assets, it towers over regional institutions.

Charles Schwab Photographer: Daniel Acker

And yet, there are some questions. Investors are starting to unearth some risks that have been hiding in plain sight. Unrealized losses on a balance sheet loaded with long-dated bonds ballooned to more than $29 billion last year. At the same time, higher interest rates are encouraging customers to move their cash out of the very accounts that underpin Schwab’s business. Schwab shares have lost more than a quarter of their value since March 8. It’s all another indication that the US Federal Reserve’s effort to arrest inflation has caught the financial world flat-footed. —Natasha Solo-Lyons

Another American mass-shooting: Three children and three adults were shot dead at an elementary school in Nashville, Tennessee. The alleged shooter, who police said they killed, was a 28-year-old local woman believed to be a former student. The shooter allegedly had two assault-type rifles and at least one pistol.

Children hold hands as they leave the Nashville school on March 27. Photographer: Jonathan Mattise/AP

First Citizens agreed to buy the remains of Silicon Valley Bank. The deal to settle SVB’s fate could help further tamp down the banking turmoil of the past few weeks. Shares of regional banks rallied on the news, with First Citizens up 44%. But the fallout isn’t over yet: Ammar Al Khudairy, the chairman of Credit Suisse’s largest shareholder, has resigned just days after his comments helped trigger the spiral in stocks and bonds that ultimately lead to the Credit Suisse takeover by UBS.

Bank customers shifted their deposits to large US financial institutions amid the banking upheaval of the past few weeks. Weekly data collected by the Federal Reserve showed that large banks gained $120 billion in deposits while their smaller counterparts lost $109 billion. 

Gains in financial shares lifted US stocks Monday while Treasuries retreated, a potential signal that fears of broader contagion may have eased. Tech shares slumped. Here’s your markets wrap. 

Disney has begun the first of what is expected to be 7,000 employee terminations. The company is jettisoning its workers as part of a promise to investors that it will save $5.5 billion. The first group of employees to be fired will be notified over the next four days, Chief Executive Officer Bob Iger said in a memo to staff on Monday. Wall Street rewarded Iger on his cuts, with Disney closing up almost 2%.

Walt Disney Studios in Burbank, California. Photographer: Eric Thayer/Bloomberg

Household budgets are going to face a shock later this year when student loan payments resume. After a three-year pause in required payments, borrowers with federal loans may soon face monthly bills again. That presents risks similar to the effects of the 2013 fiscal cliff, when tax increases led to reduced consumer spending, Jefferies money market economist Thomas Simons wrote in a note. While the Biden administration set forth an ambitious loan forgiveness program, recent arguments before the US Supreme Court and its the GOP-appointed supermajority don’t bode well for the plan’s future. And in the Senate, Republicans there are now trying to kill it, too.

Isolated by unprecedented protests, Israel’s far-right government under Benjamin Netanyahu finally bent—at least temporarily—to the will of masses of demonstrators, as well as a revolt within the military. Netanyahu, the current subject of a corruption prosecution, retreated from his widely condemned plan to weaken the nation’s judiciary. However, counter-protests from the government’s supporters erupted on Monday.

Demonstrators during a counter-protest in support of Benjamin Netanyahu’s proposed judicial branch restrictions in Jerusalem on March 27.  Photographer: Kobi Wolf/Bloomberg

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On day one of the annual Watches and Wonders trade show in Geneva, a handful of debuts from Rolex received outsized attention. “New” for Rolex usually means subtle tweaks on existing models and the occasional ultra-blinged jewelry watch. Last year when it released a GMT Master-II for left-handed wearers, it almost broke the watch internet. Here are some of the pieces that made a splash this time.

Rolex Oyster Perpetual GMT-Master II  Source: Rolex

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