The Charles Schwab Corporation
The Charles Schwab Corporation (NYSE: SCHW) is a savings and loan holding company. The Company, through its subsidiaries, engages in wealth management, securities brokerage, banking, asset management custody, and financial advisory services.
Recent Financial and Business Updates:
- In the first quarter of 2023, Schwab experienced robust business growth, with core net new assets amounting to USD 131.7 billion, reflecting an annualized organic growth rate of over 7%. Total client assets reached USD 7.58 trillion as of March 31, 2023, marking an 8% increase compared to the end of 2022. However, clients' daily average trades (DATs) declined by 10% from the previous year due to softer investor sentiment. Nonetheless, Schwab saw a growth in active brokerage accounts, with 1.0 million new accounts opened, bringing the total to 34.1 million at the end of the quarter, a 2% increase year-over-year.
- Schwab's financial performance in Q1 2023 demonstrated the company's sustained momentum, driven by rising interest rates. Net income reached USD 1.6 billion, representing a 14% increase compared to Q1 2022, and diluted earnings per common share (EPS) stood at USD 0.83, a 24% rise from the same period in the previous year. Adjusted diluted EPS, excluding certain costs, showed a 21% increase to USD 0.93 compared to Q1 2022.
- Total net revenues in Q1 2023 amounted to USD 5.1 billion, a 10% year-over-year growth. Net interest revenue contributed significantly, reaching USD 2.8 billion, a 27% increase from Q1 2022, driven by higher yields on interest-earning assets. Asset management and administration fees totaled USD 1.1 billion, rising 5% year-over-year, attributed to the growth in money market funds and the elimination of fee waivers.
- Schwab achieved a return on average of common stockholders' equity of 23% in Q1 2023, compared to 12% in Q1 2022. Return on tangible common equity (ROTCE) also showed a significant increase, reaching 83% in Q1 2023, compared to 26% in Q1 2022.
- Schwab maintained a diligent approach to balance sheet management in Q1 2023, aiming to support long-term growth while ensuring capital and liquidity. The total balance sheet assets decreased by 3% from year-end 2022 to March 31, 2023.
- During the first quarter of 2023, Schwab increased its quarterly common dividend by 14% to USD 0.25 per share. The company also returned capital through repurchases of common and preferred stock, amounting to USD 2.8 billion and USD 467 million, respectively. As a result of these actions, the company's Tier 1 Leverage Ratio stood at 7.1% at the end of Q1 2023.
- The company suspended its active share repurchase program in Q1 2023 due to anticipated changes in regulatory expectations and capital requirements. However, Schwab continues to prioritize opportunistic capital return as an important component of its long-term financial strategy.
Technical Observation (on the daily chart)
The price of SCHW stock has shown a consistent upward trend since making its 52-week low on March 13, 2023, with a return of approximately 26.25%. Currently, the stock is near an important resistance of USD 60.00-USD 66.00, from where price has taken resistance in the past. A breakout in upward direction from this range would likely initiate a new short-term trend in the up direction with targets of USD 75.00-USD 80.00. The RSI (14 period) momentum indicator is at a value of 60.11, with expectations of some consolidation or a short-term downward momentum. Moreover, the price is currently positioned above both the 21-day SMA and 50-day SMA trend-following indicators, which may act as dynamic short-term support levels.
Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
How to Read the Charts?
The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.
The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
The Blue colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps in easier and faster execution of the order.
The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.
Technical Indicators Defined: -
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
The reference date for all price data, currency, technical indicators, support, and resistance levels is July 07, 2023. The reference data in this report has been partly sourced from REFINITIV.
Abbreviations
CMP: Current Market Price
SMA: Simple Moving Average
RSI: Relative Strength Index
USD: United States dollar
Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.
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