Charles Schwab: Great Performance in Fed Bank Stress Test, but Don't Expect Share Repurchases

The Federal Reserve has released the results of its annual stress tests for the banks. Similar to the 2022 stress test, Charles Schwab did exceptionally well. Schwab was one of the four banks whose minimum common equity tier 1, or CET1, capital ratio during the stress period increased amid an increase to 22.8% from 21.9% for the firm from its fourth-quarter ratio of 2022. Schwab often references an internal target for its Tier 1 leverage ratio of 6.5%-6.75%, and its projected minimum in the stress test is 7.4%. We are maintaining our $70 per share fair value estimate for wide moat-rated Charles Schwab.