Charles Schwab Corp. boosted financial stocks on Wednesday on an upbeat comment from Deutsche Bank, after the money services company successfully raised about $2.35 billion in corporate debt with healthy pricing of the bonds.
Schwab
SCHW,
stock was up 2.4% as Deutsche Bank reiterated a buy rating on Schwab and said losses in its stock price in the previous session presented a buying opportunity.
Deutsche Bank analyst Brian Bedell said the bond offering on Tuesday “rekindled some investor concerns” around whether the company holds enough cash to cover client moves to pull money out of savings accounts into higher-yielding products.
Bedell said such concerns are overblown and said the stock’s 5% move down on Tuesday presents a buying opportunity.
“We do not see any significant changes to client cash withdrawal behavior, SCHW’s earnings profile, liquidity position or capital levels” since Schwab’s latest monthly update in July, he said.
Schwab on Tuesday filed plans to raise $2.35 billion in debt by offering $1.35 billion in 6.136% fixed-to-floating rate senior notes due 2034, as well as $1 billion in 5.875% fixed-rate senior notes due 2026.
The fixed-rate senior notes due 2026 priced at $99.916 per $100 of debt, with a spread to U.S. Treasuries of about 115 basis points, according to market sources. The bonds rose to $100.35 with a spread of 112 basis points on Wednesday and are performing well, sources said.
Also read: Rise in Treasury yields is almost entirely due to one factor, strategist says
Overall, most financial stocks moved into positive territory.
The KBW Nasdaq Bank Index
BKX,
was up 1% on Wednesday, on pace to snap a seven-day losing streak, according to Dow Jones Market Data. The Financial Select Sector SPDR Fund
XLF,
rose 1% and the SPDR Regional Banking ETF
KRE,
rose 1.3%.
Bank of America Corp.
BAC,
rose fractionally, while JPMorgan Chase & Co.
JPM,
moved up by 0.8% and Goldman Sachs Group Inc.
GS,
added 0.9%.
Citigroup Inc.
C,
rose 0.2% amid reports that it plans to reorganize its business again after moving on plans to sell off its overseas retail banking units.
Also read: Citi mulling further reorganization under CEO Jane Fraser: reports
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