Zacks Investment Research downgraded shares of Charles Schwab Corporation (SCHW) from OUTPERFORM to NEUTRAL on June 18, 2012, with a target price of $13.50.
We are downgrading our recommendation on Charles Schwab to Neutral based on weaker equity markets, reduced interest rate yields and legal troubles. The company's first-quarter earnings were in line with the Zacks Consensus Estimate. Benefits from improved trading revenue and no provision for loan losses were offset by lower net interest revenue, reduced asset management and administration fees, along with higher operating expenses. We believe that the recent acquisitions will boost the company's top line to some extent, leading to overall growth. While its focus on low-cost capital structure will help sustain better results in the upcoming quarters, the company's financials will continue to be impacted by lower trading activities. Moreover, we remain concerned about the company's low capital intensity relative to its peers.
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