On Aug 16, 2016, we issued an updated research report on The Charles Schwab CorporationSCHW . The company's elevated expenses, sensitivity to interest rates and significant dependence on fee-based revenue streams remain matters of concern. Nonetheless, the new fully automated investment advisory service offered by Schwab will likely boost trading revenues, going forward.
Schwab's diversified revenue streams remain a major strength. Management's aggressive efforts to boost its client base in advisory solutions continue to reap benefits. Further, management expects to witness uptrend in the future as well.
Schwab continues to witness growth in its trading revenues. Moreover, the anticipated gradual rise in interest rates and enhanced client confidence will further support the rise. Going forward, management expects revenue growth to be in the low-teens.
However, persistent rise in operating expenses remains a cause of concern for the company. Furthermore, costs related to compensation and regulatory spending will likely keep overall expenses high in the upcoming quarters. Nonetheless, the company plans to manage expenses in order to adjust to the economic environment.
Additionally, Schwab's business model is highly sensitive to interest rates. Low rates have forced the company to waive fees charged from its clients for managing the funds. Notably, such fee waivers are expected to continue weighing on the company's financials until there is a significant improvement in the interest rate environment.
Over the past 30 days, the Zacks Consensus Estimate has remained steady for 2016 and increased 0.7% for 2017.
Currently, Schwab carries a Zacks Rank #3 (Hold).
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