Charles Schwab’s Strategic Shift and Stabilization: A Long-Term Growth and Value Creation Outlook

Charles Schwab (SCHW) has received a new Buy rating, initiated by BMO Capital analyst, .

BMO Capital’s rating is based on several key factors that highlight Charles Schwab’s potential for long-term growth and value creation. The firm has successfully stabilized its balance sheet after the rate and liquidity challenges of 2023, and while earnings growth is expected to slow as wholesale funding is reduced, this has been anticipated by market consensus. However, what sets Schwab apart is its strategic shift towards a more flexible funding model, which could significantly enhance capital efficiency and earnings potential over time. By leveraging third-party banks for excess deposits, Schwab is adopting a ‘bank-lite’ approach that could lead to increased capital efficiency and create room for more share buybacks in the future.
BMO Capital also notes that Schwab’s core growth is back on track, with organic asset growth projected at the lower end of the 5-7% range. The company’s net new asset momentum is improving, and despite competitive pressures, client engagement and retention remain strong, reinforcing Schwab’s leadership in retail investing and advisory services. With the balance sheet risks largely mitigated and a credible path to improved capital efficiency, Schwab presents an attractive risk/reward profile. Although near-term earnings growth may moderate, the structural improvements and accelerating asset trends provide a solid foundation for long-term value creation.

In another report released today, Truist Financial also maintained a Buy rating on the stock with a $112.00 price target.

Based on the recent corporate insider activity of 137 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of SCHW in relation to earlier this year.