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Schwab (SCHW) Beats Q2 Earnings on Higher Interest Income
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Charles Schwab’s (SCHW - Free Report) second-quarter 2018 earnings of 60 cents per share surpassed the Zacks Consensus Estimate of 58 cents. Also, earnings surged 54% from the prior-year quarter.
Schwab’s shares were up nearly 2.5% in pre-market trading. Notably, price reaction during the full trading session will provide a better idea about how investors accepted the results.
Revenue growth (driven by a rise in interest income and trading revenues) and absence of fee waivers supported the results. Further, the quarter witnessed an impressive rise in total client assets and new brokerage accounts. However, higher expenses remained the undermining factor.
Net income available to common shareholders was $813 million, jumping 53% year over year.
Revenue Growth Offset by Expense Rise
Net revenues were $2.49 billion, climbing 17% year over year. The rise was supported by net interest revenues (up 34%), trading revenues (up 15%) and other revenues (up 13%), partially offset by 4% decline in asset management and administration fees. The reported figure marginally topped the Zacks Consensus Estimate of $2.48 billion.
Total non-interest expenses increased 11% year over year to $1.36 billion. All expense components increased on a year-over-year basis.
Fee waivers were nil in the reported quarter against $1 million recorded a year ago.
Pre-tax profit margin improved to 45.5% from 42.7% recorded last year.
At the end of the second quarter, Schwab’s average interest-earning assets grew 13% year over year to $243.8 billion.
Annualized return on equity as of Jun 30, 2018, came in at 19%, up from 15% in the year-ago quarter.
Other Business Developments
As of Jun 30, 2018, Schwab had total client assets of $3.34 trillion (up 12% year over year). Also, net new assets — brought by new and existing clients — were inflows of $43.9 billion, down 32% from the prior-year quarter.
In addition, Schwab added 384,000 new brokerage accounts in the reported quarter. As of Jun 30, 2018, the company had a total of 11.2 million active brokerage accounts, 1.3 million banking accounts and 1.6 million corporate retirement plan participants.
Our Take
Focus on low-cost capital structure will continue supporting Schwab’s performance in the quarters ahead. Also, initiatives to strengthen market share will likely support its profitability over the long term, despite the expectation of near-term reduction in trading revenues. However, continuous rise in expenses (due to rise in compensation costs) are expected to hurt bottom-line growth.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
Earnings Release Dates of Other Investment Brokers
We now look forward to E*TRADE Financial Corp. , TD Ameritrade Holding Corp. (AMTD - Free Report) and Raymond James Financial, Inc. (RJF - Free Report) , scheduled to report results on Jul 19, Jul 23 and Jul 25, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Schwab (SCHW) Beats Q2 Earnings on Higher Interest Income
Charles Schwab’s (SCHW - Free Report) second-quarter 2018 earnings of 60 cents per share surpassed the Zacks Consensus Estimate of 58 cents. Also, earnings surged 54% from the prior-year quarter.
Schwab’s shares were up nearly 2.5% in pre-market trading. Notably, price reaction during the full trading session will provide a better idea about how investors accepted the results.
Revenue growth (driven by a rise in interest income and trading revenues) and absence of fee waivers supported the results. Further, the quarter witnessed an impressive rise in total client assets and new brokerage accounts. However, higher expenses remained the undermining factor.
Net income available to common shareholders was $813 million, jumping 53% year over year.
Revenue Growth Offset by Expense Rise
Net revenues were $2.49 billion, climbing 17% year over year. The rise was supported by net interest revenues (up 34%), trading revenues (up 15%) and other revenues (up 13%), partially offset by 4% decline in asset management and administration fees. The reported figure marginally topped the Zacks Consensus Estimate of $2.48 billion.
Total non-interest expenses increased 11% year over year to $1.36 billion. All expense components increased on a year-over-year basis.
Fee waivers were nil in the reported quarter against $1 million recorded a year ago.
Pre-tax profit margin improved to 45.5% from 42.7% recorded last year.
At the end of the second quarter, Schwab’s average interest-earning assets grew 13% year over year to $243.8 billion.
Annualized return on equity as of Jun 30, 2018, came in at 19%, up from 15% in the year-ago quarter.
Other Business Developments
As of Jun 30, 2018, Schwab had total client assets of $3.34 trillion (up 12% year over year). Also, net new assets — brought by new and existing clients — were inflows of $43.9 billion, down 32% from the prior-year quarter.
In addition, Schwab added 384,000 new brokerage accounts in the reported quarter. As of Jun 30, 2018, the company had a total of 11.2 million active brokerage accounts, 1.3 million banking accounts and 1.6 million corporate retirement plan participants.
Our Take
Focus on low-cost capital structure will continue supporting Schwab’s performance in the quarters ahead. Also, initiatives to strengthen market share will likely support its profitability over the long term, despite the expectation of near-term reduction in trading revenues. However, continuous rise in expenses (due to rise in compensation costs) are expected to hurt bottom-line growth.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
The Charles Schwab Corporation Price, Consensus and EPS Surprise | The Charles Schwab Corporation Quote
Currently, Schwab carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Investment Brokers
We now look forward to E*TRADE Financial Corp. , TD Ameritrade Holding Corp. (AMTD - Free Report) and Raymond James Financial, Inc. (RJF - Free Report) , scheduled to report results on Jul 19, Jul 23 and Jul 25, respectively.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>