Goldman Sachs signals Charles Schwab Corp. is out of the woods with huge rating upgrade based on less debt, more cash and 'durable' organic growth

Goldman Sachs & Co. may not love Charles Schwab Corp. but its senior brokerage analyst just gave the rising wealth management rival an ‘A’ grade.

Alex Blostein sees much to like, again, about the Westlake, Texas, brokerage after it showed during 2025's first three months that its shaky post-bank crisis balance sheet is solidifying, and its wobbly organic growth is starting to hum again. 

Goldman sees Schwab rising to $100 a share after starting the week at about $75. 

Schwab shares finished today (Apr. 25) at $79.94 – virtually the same as its Feb. 20, 2023, close before bad news hit.  

The company was caught in an interest rate squeeze that sent Silicon Valley Bank, First Republic, and Signature Bank into bankruptcy.

Schwab shares hit an all-time high of $95.53 on Jan. 10, 2022.

TDA progress

Goldman's analyst sees Schwab's cash buildup as a bonus, despite reducing debt. His report projects Schwab could hit $20 billion of cash on hand by 2027 – something that could portend share buybacks.

Blostein was on the Schwab earnings call last Thursday, April 17, when Schwab executives made a series of comments to reassure analysts about both the balance sheet and organic growth, particularly concerning TD Ameritrade (TDA).

Much of the impetus for Schwab's TDA acquisition was that TDA investors – never before availed of Schwab's offerings - would generate pent-up demand.

Schwab CEO Rick Wurster underscored progress toward that objective during the call.  

“We saw retail NNA [net new assets] grow year-over-year by 50% as we're now further removed from the final Ameritrade integration,” he said on the call.

“That's us deepening relationships with our legacy Ameritrade clients. That's those legacy Ameritrade clients learning a new platform and becoming comfortable with it, and sharing not only they have become comfortable with it, that they like it better than what they had before.”

Net new asset growth

Specifically, Blostein cited a return to Schwab's 5% to 7% organic growth rate as a harbinger of upgrade-worthy things to come. 

Wurster alluded to that range as he acknowledged TD Ameritrade clients are not contributing NNA at the rate of legacy Schwab clients.

"If you look at most of last year, Ameritrade retail clients, legacy retail clients, were roughly flat in terms of their NNA contribution. 

“In the first quarter, we saw really robust NNA growth, not quite at the 5% level, plus level that we see from our Schwab retail clients, but they got roughly halfway there, and that's terrific progress, and we're excited to see that.”

Targeted marketing

Schwab's net new assets for the first quarter were $132.4 billion, including $62.9 billion through RIAs and $69.5 billion through the retail unit now known as “investor services.”

Former TD Ameritrade managed accounts product manager Seth Adam Stuart doubts that TD Ameritrade clients will invest at Schwab client rates anytime soon, despite getting “halfway there.”

TD Ameritrade marketed against Schwab using its open architecture and embrace of best-of-breed third-party managers, precisely for clients who preferred not to buy in-house products, adds the Chicago-based ex-manager, who worked for TDA from 2009 to 2021.

“We sold [TDA investors] open architecture using Morningstar [research and ratings,]” he says. “When you have clients of 30 years who were using open architecture and outside due diligence, it's hard to switch them over to proprietary products.”

Share of wallet

But there's another promising wrinkle with TDA investors, Wurster added.

“At Ameritrade, our share-of-wallet remains with legacy Ameritrade clients still at around 30%," he said. "At Schwab, it's well into the 50%-plus range. And so those clients have money elsewhere.”

As for the balance sheet, Ben Rubin, UBS analyst, voiced satisfaction with Schwab's progress in doing away with loans it needed to stay compliant with bank regulations in the post-2023 bank crisis.

“You paid down nearly $30 billion in supplemental funding over the past two quarters alone, which is encouraging to see,” Rubin said as a preamble before asking for the take of Mike Verdeschi, Schwab's chief financial officer.

The CFO responded in part: "With the bank, yes, good progress in paying down that bank supplemental funding. And we're going to continue to make progress there."

Making a transition

Meanwhile, Wurster acknowledged the challenges of making TD Ameritrade investors feel at home behind the dashboard of their new Schwab website – in terms a German car enthusiast might understand.

“The analogy that I like to use for where we are with Ameritrade clients is it's like if you had been driving a BMW your whole life and one day, you went down in your garage and there was a Mercedes there; that first day, you would feel a bit of confusion,” Wurster said.

"You wouldn't know how to turn on the radio. If it was raining, you'd have to figure out how to get the wipers on. And you'd have a little bit of angst about that transition, about the car being in there. 

"And then, of course, over time, you get really comfortable with the new car and realize how much it can do for you. And that's where we are with our clients. 

“They've made the transition. They're getting more and more comfortable with our platform. We are building relationships with them and we are winning their hearts and their wallets and supporting them in their financial journeys.”

Stuart says he disagrees that it's all a "wiper" issue, but mostly looks dimly at Wurster's knowledge of what represents the ultimate driving machine.

“BMWs are better cars,” Stuart says.