Schwab: An Island of Sanity

Nov.11.11 | About: The Charles (SCHW)

I just did something very counter-intuitive. I bought 100 shares of my bank.

It's not that I expect to make money on Charles Schwab & Co. (SCHW) although, at $12/share, my exposure to loss on 100 shares is very limited.

I just wanted to say thanks to that rarest of institutions, a bank that doesn't nick me to death with fees, and a broker that's not hanging out at the race track.

Under CEO Walter Bettinger, who officially took over from Mr. Schwab in 2008, the company has been pretty boring. It hasn't offered special deals like TD Ameritrade. It hasn't entirely matched prices with E*Trade.

Chuck, as he's called in the company's commercials, is now his firm's Col. Sanders, its Dave Thomas, its Papa John. If Bettinger does change the formula I expect him to holler. Otherwise, smile for the camera.

Schwab has taken the power the end of Glass-Steagall gave it and acted responsibly with it. Schwab Bank holds my mortgage. They haven't sold it. I can use their debit card without paying for it, I get my ATM charges back every month.

Schwab runs mutual funds but they're nothing special. Schwab has offices but they're usually on the bottom floors of an office tower, not the top. Schwab people aren't being paid to churn my account, they never call me with great ideas. They have tools that tell me I should be more heavily-invested in bonds, but I ignore that advice, and I've done well with that.

What investors seem to want from banks and brokers is more top-line revenue, meaning more fees, or more investment income, meaning more gambling. OK, Schwab bought optionsXpress recently, closing the deal just last week at $1 billion. They haven't told me, as a Schwab customer, about this deal. They haven't tried to up-sell me.

Compared to almost anyone else in the banking or brokerage space, Schwab is practically a credit union. Their latest earnings release was a “miss” but that was mainly because equity markets fell, so customers didn't trade as much. In other words Schwab didn't go to the racetrack with my money in order to make the number.

Schwab is leveraged to a higher market, to economic growth, to things getting better. But if everything goes toes-up they seem well protected, because the customers will take those losses directly, not the bank. That's how it should be.

So give me boring, please.

Disclosure: I am long SCHW. As noted in the story I own 100 shares of SCHW.