"Quite frankly, the whole merger has been a disappointment on several levels," said Matt Snowling, an analyst at Friedman Billings Ramsey & Co. "In, the fear of Schwab was that as their customers made money and their portfolios were headed to the moon, they'd lose those customers to Merrill Lynch or somebody who would give them advice and trust-related services."
But it turns out that customers chose the discount, self-directed brokerage for a reason. "If you chose Schwab because you liked a $30 trade, does it make sense that you're going to hand over 1 percent in annual fees and hundreds or thousands for other fees or services [to U.S. Trust]?" Snowling asked.
It's true that U.S. Trust will make $55 million or so before taxes, Snowling notes. But in recent years, the company has lost considerable talent, thanks in part to the changes imposed by Pottruck.
Therefore, if Schwab were to sell, "they'd probably only get half - $1.2 billion to $1.5 billion - of what they paid in ," he says.
That means Schwab would have to take a huge writedown on a sale, and it's unlikely that its shareholders have the tolerance for that.
"They just may wait to see if the market can continue to come back and the value of U.S. Trust increases and sell it on a high note," Snowling says.
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