Downgrading to Market Perform; Cash Monetization Overhang Likely Durable

Research evidence excerpt

Downgrading to Market Perform; Cash Monetization Overhang Likely Durable

July 19, 2026 | 20:20 ET~

Charles Schwab Corp

SCHW-NYSE Rating ↓ Price: Jul-17 Target Total Rtn Wealth Managers

Market Perform $101.56 $105.00 5%

Brennan Hawken Analyst

brennan.hawken@bmo.com (646) 648-2408

David Giunta Associate

Downgrading to Market Perform; Cash Monetization david.giunta@bmo.com (332) 257-0570

Marc Palucci VP AssociateOverhang Likely Durable

marc.palucci@bmo.com (347) 640-1044

Bottom Line: Josh Brechtel, CFA Associate

We are downgrading SCHW to Neutral from Market Perform. Fundamentals remain josh.brechtel@bmo.com (332) 274-9887

strong, but after a roughly 20% rally and outperformance vs. SPX and XLF, we feel the Legal Entity: BMO Capital Markets Corp.

risk/reward is more balanced. Importantly, there is no evidence that AI-enabled cash

2YR Price Volume Chart

optimization is impacting current results, so our downgrade isn't about NT earnings 120

power. However, we don't believe the overhang from cash monetization fears will 110

ease anytime soon. Revenue diversification provides credible offsets, but benefits will 90

take time and success is not assured, which is why we believe the risk/reward more 80 7060

balanced. 70 5040

60 20

Key Points 50 Jan Jul Jan Jul 0

LHS: Price ($) / RHS: Volume (mm) Source: FactSet

Fundamentals remain strong, but upside is harder to see. After SCHW's recent rally, Company Data in $

we believe upside is more limited as we don't see the AI/cash optimization fears fully

Dividend $1.28 Shares O/S (mm) 1,739.1

dissipating. The issue is not NT earnings power, but whether sweep-derived earnings

deserve a lower multiple given both the difficulty modeling those earnings and the Yield 1.3% Market Cap (mm) $176,627

longer term questions around their durability.