Earlier this week,
The Charles Schwab Corporation
) announced a tie-up with
Piper Jaffray Companies
) - a leading asset management company - to expand the reach of
municipal bond offerings to retail investors. Through this
collaboration, Schwab will provide its clients an access to Piper
Jaffray's new municipal bonds with the help of its BondSource
PIPER JAFFRAY (PJC): Free Stock Analysis
SCHWAB(CHAS) (SCHW): Free Stock Analysis
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For long, Schwab's clientele was unable to access the variety of
municipal bonds offerings owing to limited reach of Schwab's bond
business. With the Piper Jaffray alliance, the company's
customers will now be exposed to a wide array of municipal bond
offerings in the mid-western region of the country. Moreover,
Piper Jaffray served as an underwriter/ financial adviser to 900
municipal bond transactions totaling over $52 billion last year.
Schwab's BondSource platform provides plethora of products
including municipal bonds, corporates, Certificate of Deposits,
Treasuries, agency bonds, and sub-investment grade bonds through
trading platforms, bond underwriters and dealers along with
Schwab's own inventory. The platform already has access to nearly
930 new issue offerings, including access to almost 600 new issue
municipal deals over the last twelve months ending August 31,
The bonds, which will be available through Piper Jaffray, would
accompany the newly issued municipal bonds that are already
presented to Schwab's clients on its platform through previous
Therefore, considering the credentials of both these companies,
it is expected that investors will greatly benefit from the
aforementioned alliance. Moreover, this tie-up reflects Schwab's
willingness to make its revenue stream less dependent on interest
rates. Low interest rate environment has remained a drag on the
company's revenue, forcing it to waive fees. In the first nine
months of 2012, fee waivers jumped nearly 12% from the year-ago
period to $445 million.
Moreover, diversifying business reach in terms of both products
and location will help Schwab to generate enhanced revenue in the
upcoming quarters. As a part of this effort, the company has
already announced the launch of certain initiatives, including
Schwab Index Advantage and Independent Branch Services, which
would help augment revenue going forward, with or without a Fed
Schwab currently retains a Zacks#3 Rank, which translates into
short-term Hold rating. We believe that the collaboration with
Piper Jaffray will result in strong upward estimate revisions for
the stock, thereby aiding it to achieve a better Zacks Rank.
Considering the fundamentals, we also maintain a 'Neutral'
recommendation on the stock.