Charles Schwab $SCHW 4Q22
Held-to-maturity unrealized losses $15,580 mln / Tangible common equity $17,439 mln = HTM losses of equity 89%
Compared to Silicon Valley Bank $SIVB 4Q22
Held-to-maturity unrealized losses $15,160 mln / Tangible common equity $11,880 mln = HTM losses of equity 128%
source: https://twitter.com/hkeskiva/status/1634982958087159809
There's no liquidity risk anymore. This is just overreaction
This kinda happens with fuel cost hedging in aviation: if your airline locks itself into a high rate and prices drop, your competition buying at spot is going to offer better fares and you’ll bleed customers.
And vice-versa when you lock yourself into a price that becomes below-market: you’ll be able to offer better fares and gain customers.
Then comes down to whether you have enough equity to bleed (or hood enough marketing) to weather the storm created.
There's no harm in holding these assets to maturity. They're fine assets, they're just not paying as much interest as ones you can get today. But buying and holding them will result in a profit, eventually, barring some calamity
More Fed manipulation, if necessary, obviously.