After the shock of the beginning of the year, the flight of deposits is calming down a bit: they are decreasing by 11% on Schwab One - the brokerage platform - and by 16% on Schwab Bank compared to the previous quarter.

On a sequential basis, the first quarter of 2023 saw $515 billion in deposits melt by 31% compared to $739 billion held in the first quarter of 2022. This is a measure of the extent of the panic that has gripped the public.

The shock is violent but, fortunately, this is only robbing Peter to pay Paul, because at the same time the money market products offered by Schwab collect $202 billion. To put it plainly: the non-invested money of the clients has not left the house; it has simply moved from the deposit accounts to the money market products, which are certainly not very lucrative, but nevertheless under control.

There was no movement in the other asset classes: funds, ETFs and financial securities held by clients themselves remained at comparable levels. New brokerage account openings are back on the rise compared to the previous quarter.

Schwab has thus - so far - absorbed the panic well. Revenues and net income are up by 10 and 14%, both driven by the rise in rates, which allows the net interest margin to increase by $587 million compared to the first quarter of 2022.

It is noteworthy that his reassuring statements were accompanied by a personal investment in the group's shares by its CEO Walter Bettinger, to the tune of $3 million: the signal is strong, even if it would be imprudent to take it at face value.

Is the worst over? Possibly, but not without damage. To cover all eventualities and ensure its solvency, Schwab borrowed $45.6 billion from the federal government, thus increasing its debt from $26 billion to $73 billion between the first quarter of 2022 and the first quarter of 2023.

This emergency liquidity comes with a frankly very expensive note - a 5% interest rate - that will squeeze profitability over the next two years, by which time Bettinger has pledged to pay it back. The $310 billion of financial assets held by the group only pay an average interest of minus 2%.

Schwab's problem is therefore less about liquidity than about profitability. As such, the group would be in a difficult position if interest rates were to fall again.