Moody's affirmed Charles Schwab Corp.'s ratings and revised the outlook to stable from positive following its decision to stop charging trading commissions.
Schwab's expects a $100 million hit to revenue per quarter due to the decision.
Moody's said the effects of commission price cuts for Schwab will be more modest than its peers. These would also be partially offset by the company's ongoing expense cuts. However, the rating agency said the price cuts will likely lead to slightly lower profits and higher leverage if taken together with a lower interest environment and a flatter yield curve.
This would lead to Schwab's financial profile being more consistent with its current ratings. Moody's said the change in outlook reflects that expectation.
Moody's noted the company's "strong performance and stable leverage metrics" in affirming the ratings.
