Schwab Bank - mediocre health rating?

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NYCaviator
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Schwab Bank - mediocre health rating?

Post by NYCaviator »

I was on the "deposit accounts" website looking at CD rates and came across the "health ratings" for banks and credit unions. Interestingly, Schwab Bank only gets a B grade where most of the local banks, credit unions, and national banks get an A or A+. Digging a little deeper it looks like this comes from a low capitalization rate and negative deposit growth. I know everything is insured by the FDIC up to the limits, but is this something to be concerned about?

I am curious if there is a way to find out if Schwab has a bunch of risky investments on the books as well.
UpperNwGuy
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Re: Schwab Bank - mediocre health rating?

Post by UpperNwGuy »

Could it be that Schwab operates the bank as a loss leader to attract investors to its brokerage?
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Cam894
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Re: Schwab Bank - mediocre health rating?

Post by Cam894 »

UpperNwGuy wrote: Sat Jun 27, 2020 6:01 pm Could it be that Schwab operates the bank as a loss leader to attract investors to its brokerage?
ding ding ding
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NYCaviator
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Re: Schwab Bank - mediocre health rating?

Post by NYCaviator »

Cam894 wrote: Sat Jun 27, 2020 6:09 pm
UpperNwGuy wrote: Sat Jun 27, 2020 6:01 pm Could it be that Schwab operates the bank as a loss leader to attract investors to its brokerage?
ding ding ding
So no real reason for concern?
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Stinky
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Re: Schwab Bank - mediocre health rating?

Post by Stinky »

:sharebeer
NYCaviator wrote: Sat Jun 27, 2020 6:40 pm
Cam894 wrote: Sat Jun 27, 2020 6:09 pm
UpperNwGuy wrote: Sat Jun 27, 2020 6:01 pm Could it be that Schwab operates the bank as a loss leader to attract investors to its brokerage?
ding ding ding
So no real reason for concern?
Is your money FDIC insured?

If so, you’re golden.
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BB76
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Re: Schwab Bank - mediocre health rating?

Post by BB76 »

In addition to the relationship of the bank being a loss leader for the brokerage, Charles Schwab bank is actually listed as the 25th healthiest national bank with assets over $1 billion by measure of the Texas Ratio. The individual bank's ratings page is at times difficult to understand because while a base measure may be outstanding, a minor adjustment in the trend of the base measure will result in a lower rating. Here is the listing page where you can fine tune your search for the healthiest institutions:

https://www.depositaccounts.com/banks/health.aspx#texas
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Re: Schwab Bank - mediocre health rating?

Post by HawkeyePierce »

Schwab is great as a hub bank or one-stop-shop but I can't see any good reason to keep lots of cash on the bank side of their house. Their rates on cash are abysmal.

I keep my primary checking account there and this doesn't concern me at all. I never have more than $15k in that account anyways.
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NYCaviator
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Re: Schwab Bank - mediocre health rating?

Post by NYCaviator »

HawkeyePierce wrote: Sat Jun 27, 2020 8:04 pm Schwab is great as a hub bank or one-stop-shop but I can't see any good reason to keep lots of cash on the bank side of their house. Their rates on cash are abysmal.

I keep my primary checking account there and this doesn't concern me at all. I never have more than $15k in that account anyways.
Seems like most rates are pretty abysmal these days, unfortunately. I don’t keep much in their savings, but the checking is great. The only bank I’ve found where I can deposit a six figure check through an app. Most local banks limit you to $2500 or $5000
tj
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Re: Schwab Bank - mediocre health rating?

Post by tj »

NYCaviator wrote: Sat Jun 27, 2020 8:31 pm
HawkeyePierce wrote: Sat Jun 27, 2020 8:04 pm Schwab is great as a hub bank or one-stop-shop but I can't see any good reason to keep lots of cash on the bank side of their house. Their rates on cash are abysmal.

I keep my primary checking account there and this doesn't concern me at all. I never have more than $15k in that account anyways.
Seems like most rates are pretty abysmal these days, unfortunately. I don’t keep much in their savings, but the checking is great. The only bank I’ve found where I can deposit a six figure check through an app. Most local banks limit you to $2500 or $5000
That's interesting, I've never had a problem depositing mobile with Alliant Credit Union. I actually started doing mobile deposit because I had a check that was apparnetly too large for an ATM deposit. And once i saw how easy the mobile deposit was, I never looked back.
ribonucleic
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Schwab Bank health check-up: Still undercapitalized

Post by ribonucleic »

[Thread merged into here, see below. --admin LadyGeek]

Since the last discussion of the health of Schwab Bank...

viewtopic.php?t=318764

... it looks like its deposit growth has dramatically improved. But its capitalization remains a below-average 7%:

https://www.depositaccounts.com/banks/c ... tml#health

Leaving aside the question of how small or large an inconvenience it might be to have the FDIC intervene in case of an unexpected bank failure (remember that the Washington Mutual failure wasn’t obvious to everyone beforehand), do you think that the Schwab Corporation would commit some of its other assets to prop things up before letting that happen? As, for example, Goldman Sachs did with its money market funds back in March 2020?

https://www.bloomberg.com/news/articles ... ithdrawals
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Re: Schwab Bank health check-up: Still undercapitalized

Post by Stinky »

Personally, I wouldn’t fret about the “health” of an FDIC insured bank.

I also wouldn’t exceed FDIC deposit limits in any bank.
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UpperNwGuy
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Re: Schwab Bank health check-up: Still undercapitalized

Post by UpperNwGuy »

ribonucleic wrote: Sat Jan 23, 2021 10:26 am Since the last discussion of the health of Schwab Bank...

viewtopic.php?t=318764

... it looks like its deposit growth has dramatically improved. But its capitalization remains a below-average 7%:

https://www.depositaccounts.com/banks/c ... tml#health

Leaving aside the question of how small or large an inconvenience it might be to have the FDIC intervene in case of an unexpected bank failure (remember that the Washington Mutual failure wasn’t obvious to everyone beforehand), do you think that the Schwab Corporation would commit some of its other assets to prop things up before letting that happen? As, for example, Goldman Sachs did with its money market funds back in March 2020?

https://www.bloomberg.com/news/articles ... ithdrawals
What question are you asking that wasn't addressed in the earlier discussion in your first link?
ribonucleic
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Re: Schwab Bank health check-up: Still undercapitalized

Post by ribonucleic »

UpperNwGuy wrote: Sat Jan 23, 2021 11:03 amWhat question are you asking that wasn't addressed in the earlier discussion in your first link?
Specifically, the likelihood or unlikelihood of Schwab committing outside resources to prop up what was (judging from the consensus opinion there) a loss leader to begin with.
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Re: Schwab Bank - mediocre health rating?

Post by LadyGeek »

I merged ribonucleic's thread into a similar discussion.
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simas
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Re: Schwab Bank health check-up: Still undercapitalized

Post by simas »

ribonucleic wrote: Sat Jan 23, 2021 12:27 pm
UpperNwGuy wrote: Sat Jan 23, 2021 11:03 amWhat question are you asking that wasn't addressed in the earlier discussion in your first link?
Specifically, the likelihood or unlikelihood of Schwab committing outside resources to prop up what was (judging from the consensus opinion there) a loss leader to begin with.
and why do you think random people on internet would give you anything of value on that question ? what resources , over what time period, in what form , etc?

if you want to use it ->use it
if you want experience of others with it -> people would share (i used it before but found it redundant to my equivalent fidelity account. no issues)

i worked for Schwab (one of the affiliates, not the Bank), it is its own organization. my read was that bank was
- a way to provide more complete offering and competing with likes of fidelity
- a way to gather assets (which is how Schwab really makes money)

I dont see organization I knew ever allowing this to go away or fail. Schwab is extremely profitable and knows how to make money
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Stinky
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Re: Schwab Bank health check-up: Still undercapitalized

Post by Stinky »

ribonucleic wrote: Sat Jan 23, 2021 12:27 pm
UpperNwGuy wrote: Sat Jan 23, 2021 11:03 amWhat question are you asking that wasn't addressed in the earlier discussion in your first link?
Specifically, the likelihood or unlikelihood of Schwab committing outside resources to prop up what was (judging from the consensus opinion there) a loss leader to begin with.
If I was a shareholder of Schwab, I might care (remotely, at most).

If I was a depositor at Schwab, I honestly wouldn’t care.
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DetroitRick
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Re: Schwab Bank - mediocre health rating?

Post by DetroitRick »

No concern with me, we use them. FDIC coverage is all I care about, and have seldom ever bothered researching financial ratings for banks (twice in my life, I think). For Schwab Bank in particular, I've never looked further.

Schwab's overall reputation is a nice extra too. Plus, I love that I can move cash instantaneously from my Schwab brokerage to checking. Very handy. Current interest rates are as bad at Schwab Bank as most others though. So, I use it mainly as a conduit these days.

If FDIC limits are an issue, consider either spreading accounts around or titling accounts to go beyond the $250k limit. Here's a link to the FDIC tool that will allow you to analyze those titling options and their impact on insurance coverage:
https://edie.fdic.gov/

But frankly, I've gone over the limits for short times without worry. To each their own.

I suppose if you really want to look under the hood at Schwab Corporation, and I wouldn't bother doing so (almost no risk to me as a Schwab customer, both bank and brokerage), I'd start by going to sec.gov. Then use their EDGAR system to pull a 10k (annual report) and filings. I don't think it's too worthwhile though.
https://www.sec.gov/edgar/search-and-access
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Re: Schwab Bank - mediocre health rating?

Post by ChicagoBear7 »

Insured banks and their holding companies are subject to extensive supervision by federal regulators - they are not "collapsible corporations" that might be common in other industries. The FDIC and Federal Reserve would not look kindly on Schwab the parent holding company not acting as a "source of strength" to its subsidiary bank. Given the size and strength of its parent company, there is definitely no reason to overcapitalize the subsidiary bank. Those bank strength tools/ratings are more appropriate to gauge the strength of smaller/community institutions that are not publicly traded or evaluated by S&P/Moody's etc. However, since Schwab owns all of the stock and controls the management of the bank, if it ran into problems, the holding company would be expected to pony up money before Uncle Sam, and the regulators have the tools to make this happen.
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