Financial services company Charles Schwab (NYSE:SCHW) revealed in a recent SEC filing that it plans to cut jobs and is downsizing its real estate footprint. The move is part of the company’s actions to streamline its operations as it prepares for the post-integration of its operations with TD Ameritrade.
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Charles Schwab announced the acquisition of TD Ameritrade Holding Corporation in 2019 and completed the transaction in 2020. However, the company said integrating Schwab’s and TD Ameritrade’s operations will likely take 18 to 36 months. Moreover, Schwab and TD Ameritrade continued to operate as separate broker-dealers until the integration of their operations.
During its Summer Business Update conference call in July, its CEO, Walt Bettinger, said that the company transitioned millions of Ameritrade’s clients over to Schwab in the first half of 2023.
As Charles Schwab prepares for post-integration, it plans to lower its operating costs by reducing its headcount and closing certain corporate offices, resulting in cost savings of at least $500 million annually. Nevertheless, the company would also incur employee compensation and facility exit costs of approximately $400 to $500 million related to its planned action. Additionally, it anticipates incurring most of these costs in the second half of 2023 and in 2024 as well.
Is Charles Schwab a Good Stock to Buy Now?
Integrating TD Ameritrade’s operations will enhance SCHW’s scale and portfolio and support its revenue growth. In addition, it would drive efficiency and automation and generate expense savings, which would cushion its earnings. However, the ongoing deposit outflows are keeping analysts cautious.
With 12 Buy, two Hold, and one Sell recommendations, Charles Schwab stock has a Moderate Buy consensus rating. The stock is down about 28% year-to-date. However, analysts’ average price target of $73.80 implies 24.24% upside potential from current levels.
