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Ipanic saint charles coupon8/10/2023 ![]() Our optimistic sentiment is significantly aided by its excellent FQ1'23 guidance of a GAAP pre-tax profit margin of up to 43%, compared to FQ1'22 levels of 39.4%. This was triggered by the acceleration in its net income growth by +22.7% YoY to $7.18B as well. Therefore, it makes sense that SCHW has been expanding its non-GAAP Return on Tangible Common Equity (to 42% in FY2022, compared to 22% in 2021). ![]() The sum was impressive indeed, attributed to the rising interest rates thus far. The company's net revenue also expanded by 12% YoY to $20.8B in FY2022 as well, with the net interest revenue growing by 33% YoY to $10.68B, comprising 51.3% of its revenues compared to FY2021 levels of 43.3%. Therefore, we are cautiously confident that SCHW need not realize the losses in its Available-For-Sale securities at $12.29B (+150.8% YoY) and in its Held-To-Maturity securities at $15.58B in FY2022. The acceleration was notable indeed, compared to the February 2023 daily average of $2.02B and the January 2023 daily average of $1.58B. In addition, the banking crisis over the past two weeks had only demonstrated the clients' growing trust in the management's forward execution, with the brokerage company receiving $16.5B of core net new assets between March 10 and 16, 2023, averaging at $3.3B daily. Therefore, it was apparent that SCHW's well-diversified offerings resonated well with its clients, no matter the macroeconomic outlook, preventing the migration of funds to competitors. While there were some concerns about the decline in the company's Bank Deposit Account balances by -7% YoY to an average of $147.27B in FY2022, we must also highlight that it recorded higher BDA fee revenues of $1.4B at the same time, expanding by +7.1% YoY.įurthermore, the decline was mostly attributed to the clients' rotation from the company's bank to the company's CDs/ treasury bills/ money market funds with higher yields, with the total assets remaining stable. This was on top of the $300B of additional liquidity from the Federal Home Loan Bank and the recent Bank Term Funding Program (BTFP), suggesting the company's more than sufficient liquidity in covering the current bank deposits. Therefore, SCHW's risk management is much improved, in our opinion, compared to SVB Financial ( SIVB) at an uninsured deposit ratio of 88%, JPMorgan ( JPM) at 56%, Bank of America ( BAC) at 37.9%, Citigroup ( C) at 85.2%, and Wells Fargo & Company ( WFC) at 36.8%.įurthermore, SCHW's expanding liquidity coverage ratio of 123% ( +17 points YoY) demonstrated its excellent liquidity sources, with $93.98B (-20% YoY) of High-Quality Liquid Assets (HQLA) in FY2022. Furthermore, less than 20% of its deposits exceeded the FDIC insurance limits of $250K. Particularly, 91% of its bank deposits were tied up in deposits swept from brokerage accounts for stock and securities trading. Particularly, only 11.7% (-0.2 points YoY) of the assets were comprised of cash as of February 2023, attributed to its clients' transactional balances from their brokerage accounts.Įven if there were any 'bank runs,' about $25.8B (-14.2% YoY) of checking and savings/other deposits were at risk, comprising only 7% of the company's $366.72B bank deposits in FY2022. SCHW has been a provider of financial services, specializing in brokerage accounts with $7.38T (-6.1% YoY) in managed assets as of March 17, 2023, expanding by +4.2% from December 2022 levels of $7.05T. Particularly, we think the pessimism is unwarranted since SCHW is primarily a brokerage company, with a value-added banking service to support its clients' asset management. We believe The Charles Schwab Corporation ( NYSE: SCHW) has been overly sold at these levels, negatively impacted by the banking crisis over the past two weeks. Wildpixel/iStock via Getty Images Buy The Panic-Driven Discount
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