As at its rival, E*Trade (ETFC), Charles Schwab’s (SCHW) July metrics were not a total disaster. In fact, FBR believes the brokerage showed some measure of resilience:
- daily average revenue trades (DARTs) rose 10.5% sequentially (translating to a gain in market share in trading from ETFC (+9.2%) during July)
- net client inflows totaled $10.4 billion ($2.4 billion short of FBR’s model)
- net new account openings were 16,000 during July
So as a token of goodwill, FBR raised SCHW’s target $1 to $19. Still, FBR’s rather dour thesis remains intact. The economy will screw Charles Schwab (and E*Trade (ETFC)) sooner or later:
Higher trading activity and still-resilient, although down, client inflows in a difficult economic environment are certainly challenging our thesis of building consumer headwinds impacting the company. However, evidence to support the thesis may be building, albeit slowly.
During July, Schwab clients were net sellers of equity mutual funds, as accounts withdrew $2.56 billion from equity mutual funds, breaking a streak of three consecutive months of inflows. In contrast, clients added $4.96 billion to money market mutual fund holdings, reversing three straight months of outflows. This asset allocation shift could suggest investor concern over market conditions but, for our thesis to be proven, a more dramatic de-leveraging of household balance sheets will have to occur.
FBR reiterates UNDERPERFORM on Charles Schwab (SCHW), target raised from $18 to $19.
Business Insider Emails & Alerts
Site highlights each day to your inbox.