2023-05-15 08:58:19 ET
Charles Schwab ( NYSE: SCHW ) stock advanced 2.3% in Monday premarket trading after Raymond James upgraded shares of the brokerage giant to Outperform from Market Perform on the basis of easing headwinds from client cash sorting.
That, in turn, "should support balance sheet and net interest margin stabilization in" the back half of 2023, analyst Patrick O’Shaughnessy wrote in a note.
Cash sorting occurs when clients move their cash into higher-paying money market funds from lower-yielding bank deposit accounts, typically in the wake of a rising interest-rate environment.
Schwab ( SCHW ) finance chief Peter Crawford contended in January that such activity will slow down "at some point during 2023."
"Elevated cash sorting is a stark reminder of the interest rate risk inherent within Schwab’s business model," O’Shaughnessy said, while noting "the company has very little credit risk and an attractive core growth story that was unaffected by recent macro events."
Shares of Schwab ( SCHW ) have fallen victim to the broader selloff among regional bank stocks, dropping over 40% year-to-date, amid investors' concerns about paper losses on Schwab's bond portfolio.
O’Shaughnessy's Outperform rate diverges from the Quant system rating of Hold and aligns with the average SA analyst rating as well as the average Wall Street analyst rating, both at Buy.
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Charles Schwab raised to Outperform at RayJay as cash sorting eases