The Charles Schwab Shares Plunged 8% Since Q4 Miss, BofA Double Downgrades the Stock

The Charles Schwab Corporation (NYSE:SCHW) dropped more than 8% since the company’s reported worse-than-expected Q4 results on Wednesday and a double downgrade from BofA Securities today. EPS came in at $1.07, compared to the Street estimate of $1.09. Revenue was $5.5 billion, missing the Street estimate of $5.56 billion.

Net interest revenue grew 33% year-over-year to $10.7 billion, as higher interest rates outweigh the negative effects of balance sheet contraction caused by client cash sorting.

Analysts at Deutsche Bank view the quarterly results as being mixed, with better-than-expected NII, cost control, and capital return, offset by weaker fees in the Ameritrade Bank Deposit Account (BDA), as well as fee rate pressure in asset management & admin services.

While the analysts now expect lower revenue yield in the BDA to reduce the company's 2023 EPS growth rate to 23-24% from 27% previously, they continue to expect EPS growth to exceed 20% in 2023 and 2024, after EPS growth of 20% in 2022 & 37% in 2021.