Charles Schwab Corp. SCHW,
It was raised to buy from neutral on Monday by Citigroup analysts, who see a “compelling entry point” from its 23% decline in two days. Shares of the financial services company were down 7% in premarket trading, hit by the Silicon Valley bank failure. “We see near-term revenue/earnings headwinds from rising funding costs and continued client cash sorting, but we believe these are reflected in the current stock price. We do not see a material risk to deposit SCHW, given the structure of its deposit base and customer protection ($750K in insurance, 3 bank charters), Citi analysts Christopher Allen and Alessandro Balbo said. They noted that Schwab pointed to $100-$150 billion of funding potential from supplemental liquidity sources — retail CDs, advances from federal home loan banks and wholesale funding/repos. It had borrowed $17.1 billion in external debt facilities and $6.05 billion in retail brokered CDs through the end of 2022, while through the end of the year to February, it had borrowed an additional $16.4 billion in external debt facilities and $9.4 billion in additional brokered CDs The company assured that these moves were temporary, Citi said. cut the price target from $84 to $75 per share, which still trades at a multiple of 14 times their 2024 earnings per share. Citi analysts said they still prefer brokers that have low levels of client cash/sorting deposit risk, such as Interactive Brokers Group [s: ibkr] and LPL Financial Holdings [s: lpla],