Taking forward its commitment to provide better services to customers, The Charles Schwab Corporation (SCHW) recently extended its agreement with JPMorgan Chase & Co. (JPM) related to fixed income securities. The company had entered into the said agreement in 2010.
As per the extension, Schwab’s clients will continue to access JPMorgan’s fixed income securities that include new issue as well as secondary municipal bonds and corporate debt securities.
Since 2011, 800 new corporate issues through JPMorgan were accessible for Schwab’s clients. The demand for corporate new issues have been growing over the last few quarters as reflected in the year-over-year increase of 70% in total orders by Schwab’s clients in 2013.
Going forward, we expect this trend to continue with further improvement in the overall economy. Large corporate houses are expected to raise more funds to invest in their business.
Moreover, irrespective of the economic growth rate, the demand for fixed income securities is usually high. Government-secured municipal bonds minimize risks and offer fixed, assured returns to investors.
Schwab’s clients have been part of almost 1,200 negotiated and competitive municipal deals since 2010. Total orders exceeding 12,300 entailed investments of more than $1.9 billion in new issues of municipal securities offered by JPMorgan.
Therefore, we expect Schwab to continue benefiting from its association with JPMorgan, which is one of the leading debt underwriters in the U.S.
Currently, while JPMorgan carries a Zacks Rank #3 (Hold), Schwab has a Zacks Rank #2 (Buy). Some better-ranked financial organizations include E*TRADE Financial Corporation (ETFC) and Investment Technology Group Inc. (ITG). Both these stocks sport a Zacks Rank #1 (Strong Buy).