J.P Morgan Lowers PT on Charles Schwab But Still Sees Upside

The theme of Charles Schwab's SCHW latest meeting was increased investment in new business opportunities which show positive outlook and confidence by the management team. With the depressed NIM, and increasing fee waivers, however, investors are disappointed that they will likely need to wait longer to see normalized earnings from SCHW. J.P Morgan lowered its estimates but continues to see significant upside for those who can hold until interest rates normalize. Schwab introduced multiple exciting business opportunities ranging from a new approach to servicing 401-K accounts to opening of independent advisor run branches, and technology initiatives for the investor segment. These initiatives mean higher spending, which it thinks will likely lead to an 8% increase in the expense base for 2011. J.P Morgan lowers its estimates as expectations for a rate hike have been pushed beyond 2012 and expenses increase. Schwab continues to be an interest rate sensitive name but it sees encouraging signs for Schwab as inflows to domestic equity funds have been rising. J.P Morgan has a $19.50 PT and Overweight rating on SCHW SCHW is trading lower at $17. 70