Charles Schwab keeps raking in new clients and assets.
Justin Sullivan/Getty Images
Brokerage firm Charles Schwab issued second-quarter results that beat expectations for revenues but fell slightly short of Wall Street earnings forecasts.
Perhaps more concerning, the firm saw trading revenue decelerate sharply from the first quarter—a sign that the retail trading surge may be winding down.
Schwab ‘s (ticker: SCHW) results overall looked healthy. The firm reported $4.53 billion in revenue, ahead of consensus forecasts for $4.46 billion, according to FactSet. Net income came in 5% ahead of consensus at $1.27 billion. And return on equity was a healthy 10%.
Schwab also continues to rake in new clients and assets. The company opened 1.7 million new retail accounts, its third straight month of more than 1 million openings. New assets totaled $109 billion, taking its total client assets, including those custodied for advisors, to a record $7.6 trillion, up 7% from the prior quarter.
Schwab completed its merger with TD Ameritrade in October, sharply increasing its asset base and client accounts.
The company also managed to offset pressure on interest-bearing assets, reporting that net interest revenue grew 2% from the first quarter, reaching $1.95 billion, or nearly half its total revenue of $4.5 billion.
One concern for bulls, however, may be that Schwab is seeing a slowdown in trading volume and revenue. Daily trades averaged 6 million in the quarter, down 28% from the first quarter. Trading revenue fell 21% from the first quarter to $955 million.
Shwab’s bottom line also took a hit from a $200 million charge to settle a “regulatory matter.” The charge helped drag down EPS to $0.59 a share, missing consensus estimates for $0.62. On an adjusted basis, Schwab earned $0.70 a share, missing forecasts by a penny.
The results appear to have underwhelmed investors. The stock was off 3% to $68.35 in morning trading. That selloff may reflect some profit-taking, though. Schwab stock is up 30% this year versus a 16.1% gain for the S&P 500, through yesterday’s close. It has also beaten the S&P Financial Select Sector, ahead 24% on the year.
Write to Daren Fonda at [email protected]
