Raymond James Financial(RJF) Seeking Alpha·2024-07-29 13:15Charles Schwab's Challenges - Charles Schwab's shares fell nearly 9% to 14 4 billion in unrealized losses [2][13] - Schwab plans to shrink its bank operations and rely more on third-party banks to manage capital and funding risks, signaling a significant shift in its business model [5][7] Raymond James' Strengths - Raymond James' shares have risen ~18% over the last 9 months, supported by strong balance sheet management and low exposure to high-volatility commercial real estate [3][7] - The company reported a 18 19% return on equity (ROE), outperforming Charles Schwab's 14 40% ROE, and trades at a more attractive forward multiple [8][29] - Raymond James' assets under management (AUM) increased, with private client assets and fee-based accounts growing to 229 billion [27][28] Financial Sector Pressures - The financial sector faces challenges from rising interest rates and deteriorating loan quality, with many banks increasing reserves to cover potential losses on commercial office loans [12] - Charles Schwab's reliance on expensive funding sources to address deposit outflows and operational shortfalls has impacted its performance [13] - Raymond James, however, has demonstrated resilience, with a 11% YoY revenue growth rate and a strong capital markets division poised for recovery [15][17] Raymond James' Strategic Positioning - Raymond James' forward PEG ratio of 0 80 is significantly below the sector median of 1 27, indicating potential undervaluation and upside potential [29] - The company's capital markets division, despite a pre-tax loss of 16 5 billion in the quarter, representing a 5 2% annualized growth rate [27] - The company's diversified revenue streams and conservative investment strategy position it well for continued growth, even in volatile market conditions [32] - Charles Schwab, in contrast, is losing market share to competitors like Robinhood, impacting its ability to attract new brokerage accounts [13]