The Charles Schwab’s CEO Meeting Takeaways

Deutsche Bank analysts shared their views on The Charles Schwab Corporation (NYSE:SCHW) following their meeting with the company’s CEO Peter Crawford.

While the financial outlook was consistent with the summer business update commentary in late July, the analysts mentioned several key takeaways from the meeting, including (1) cash sorting is consistent with management expectations at this early stage in the process and there is no reason to believe it will be any worse than the prior rate tightening cycle, (2) the balance sheet investment strategy continues to be focused on liquidity although the analysts believe that securities reinvestment yields are higher than the yields of securities rolling off and this positive gap is poised to improve, (3) the primary constraint for share repurchases is the targeted 6.75-7.00% Tier 1 Leverage ratio, and the analysts believe there is ample capacity for repurchase activity to resume once a 7.00% threshold is exceeded for a period of time, (4) the business model is designed to generate positive operating leverage in a normalized macro backdrop with an annualized high single-digit to low-double-digit revenue growth profile along with roughly mid-to-high single digit normalized expense growth.

Furthermore, the analysts noted that the organic growth in lending and wealth management is poised to substantially expand once the Ameritrade integration is complete. The analysts raised their price target to $95 from $90, while reiterating their buy rating.