The Charles Schwab Corporation

(New York Stock Exchange)
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Slightly Bearish -20

Why Charles Schwab (SCHW) Stock Is Falling Today

Earnings report Guidance lowered AI-generated analysis

πŸ“‰ SCHW shares fell 3.1% after Q3 revenue of $7.17 billion met analyst expectations while guidance pointed to the lower end of full-year interest-margin targets.

πŸ’° Adjusted earnings per share reached $1.69, surpassing the $1.66 consensus, driven by a net interest margin that widened to 3.04%.

πŸ“ˆ Core net new assets hit a record $190.4 billion for the quarter, demonstrating strong asset gathering despite higher borrowing costs.

🏦 CFO Mike Verdeschi stated loan growth has run ahead of deposit growth, necessitating increased reliance on other funding sources.

🎯 Management expects full-year revenue growth to finish near the lower end of the 17.5% to 18.5% range previously outlined in summer updates.

βš–οΈ The company anticipates approximately 800 basis points of positive operating leverage for the year, double the expectation set in January.

πŸ“Š CEO Rick Wurster noted that demand for tax-focused long/short strategies exceeded expectations due to competitor capacity limitations.

πŸ› οΈ Schwab throttled growth in mid-September by raising minimums and is now building proprietary long/short products to meet demand without straining capacity.

πŸ“‰ The stock has declined 7.4% year-to-date, trading at $94.03 per share, which is 17.3% below its 52-week high of $113.65.

🌍 Macro headwinds from the Federal Reserve's recent rate hikes continue to impact loan demand and capital-markets activity in the financial sector.

Bullish Signals
  • Adjusted earnings per share of $1.69 exceeded the $1.66 analyst consensus, indicating strong profitability despite market headwinds.
  • Core net new assets reached a record $190.4 billion for the quarter, highlighting robust asset gathering capabilities.
  • Net interest margin widened to 3.04%, reflecting effective management of funding costs and yield on earning assets.
  • The company expects approximately 800 basis points of positive operating leverage for the year, significantly higher than the January forecast.
Risk Factors
  • Shares fell 3.1% after management guided full-year revenue growth and net interest margin expansion toward the lower end of previously stated ranges.
  • Loan growth has run ahead of deposit growth this year, forcing the company to draw more on other funding sources which may impact margins.
  • The stock is down 7.4% since the beginning of the year and trades 17.3% below its 52-week high, reflecting ongoing market skepticism.
Full Analysis
Charles Schwab (SCHW) shares fell approximately 3% in the afternoon session following its third-quarter earnings report, which showed net revenue of $7.17 billion, up 17% year-over-year and roughly in line with analyst consensus. Adjusted earnings per share came in at $1.69, beating the $1.66 consensus estimate, while core net new assets reached a record $190.4 billion. The company reported a net interest margin of 3.04%, widening from the prior period. During the earnings call, CFO Mike Verdeschi noted that loan growth has outpaced deposit growth this year, leading the firm to rely more on alternative funding sources. Consequently, management guided full-year revenue growth and net interest margin expansion toward the lower end of their previously stated ranges, with Q4 margins expected between 3.25% and 3.30%. The company also anticipates about 800 basis points of positive operating leverage for the year. CEO Rick Wurster highlighted that demand for tax-focused long/short strategies grew faster than expected due to competitor capacity constraints, prompting Schwab to raise minimums in mid-September to throttle growth. The firm is now building its own long/short products to meet this demand without straining capacity. Despite the initial stock decline, shares recovered slightly to $94.03, trading 17.3% below its 52-week high. The broader market context includes recent Federal Reserve rate hikes aimed at curbing elevated inflation, which has led to slower loan demand and softer capital-markets activity. These macroeconomic factors continue to weigh on growth-sensitive financial earnings, contributing to the selling pressure despite Schwab's solid operational performance and record asset inflows.