2Q26 Initial Look - "Adjusted" Beat; Strong Exit Velocity

Research evidence excerpt

2Q26 Initial Look - "Adjusted" Beat; Strong Exit Velocity

TD Cowen Charles Schwab Corp

Global Research July 21, 2026

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

Retail Broker Dealers:

We value the sector primarily on SOTP valuation framework. Within this framework, we apply

a target P/E multiple to our ’26E EPS to arrive at a base business value. To arrive at the target

P/E, we leverage TD Cowen’s proprietary regression work that contrasts forward interest rate

curve expectations against relative market (SPX) multiples. We then use the equation from the

regression and forward interest rate curve expectations to deduce absolute P/E multiples. For

retail brokers with banks, we dividend excess capital at 12/31/26, using the most constraining

capital ratio. For retail brokers without banks, we deploy excess cash into M&A. We discount

our target using the firm’s cost of equity, the latter using capital asset pricing model, including

company specific beta, 7% normalized equity return and risk-free rate as defined by the 10-

year US Treasury Yield. We make investment recommendations on certain early stage, pre-

revenue companies based upon an assessment of their business model, technology, probability

of market success, and the potential market opportunity, balanced by an assessment of

applicable risks. Such companies may not be assigned a price target.

Investment Risks

Key investment risks include: 1) rising/falling interest rates; 2) shifting client cash monetization

economics; 3) major decline in capital markets; and 4) changes in the regulatory backdrop.

Rising interest rates could reignite adverse client cash sorting while falling interest rates are

likely to reduce Net Interest Income and cash sweep revenues, significant revenue/earnings

contributors.