Barclays: Schwab Best Positioned In Rising Rate Environment, Trading Volumes To Grow Steadily
Analyst Kenneth Hill explained that price action in the e-broker segment “has been heavily influenced by rate expectations over the past few years,” while expecting to enter 2016 with the first hike for the year already under way.
“Moving forward, we anticipate a steady move higher in short-term rates, somewhere between what we see as conservative investor expectations and our bullish house view,” Hill stated.
No Initial Volatility Does Not Limit Future Volatility
Although the initial rate increase period is expected to be smooth and without any meaningful increase in volatility, Hill noted that there could be an increase in volatility as 2016 progresses.
According to the Barclays report, “[T]he first 100bps rise in Fed Funds will add roughly 60bps of incremental NIM improvement and completely remove MMF fee waivers.”
The report also recommends that investors stay long heading into the first hike in rates, with Charles Schwab expected to generate strong organic growth going forward.
The 2016 EPS estimate has, however, been reduced from $1.48 to $1.46, based on the outlook for the year.
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Latest Ratings for SCHW
|Dec 2016||Keefe Bruyette & Woods||Initiates Coverage On||Outperform|
|Oct 2016||SunTrust Robinson Humphrey||Maintains||Hold|
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