J.P Morgan Comments On Charles Schwab's Solid Quarter

Charles Schwab SCHW reported 4Q10 EPS of $0.10, in line with estimates. The results were better than expected, based largely on a higher than expected NIM and better than modeled net sales, which rose to $11bn in 12/10. J.P Morgan maintains its OW rating, but is concerned about the near-term outlook due to the potential declines in NIM and an increase in money market fee waivers. JPM lowers its 2012 and 2013 estimates as expectations of a rate hike have been pushed beyond 2012. It continues to see significant upside for those who can hold until interest rates normalize. Schwab had strong net sales at $26.2 billion, which was the best quarter since 1Q2008. We model quarterly sales at a robust $25B level next quarter, as stronger retail sales trends emerge. The bank also grew meaningfully this quarter, with assets up 6% sequentially to $86 billion. JPM raises its 2011 estimates but lowers 2012 and 2013 estimates as expectations for a rate hike have been pushed beyond 2012. Schwab continues to be an interest rate sensitive name. JPM has a $20.50 PT and OW rating on SCHW SCHW is trading lower at $18.79