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In its monthly market activity report for October 2012, The Charles Schwab Corporation (SCHW - Analyst Report) reported almost flat Daily Average Revenue Trades (DARTs) compared with the prior month and declining 14% from the prior-year month to 439,700. This implies that the company witnessed insufficient trading activity. Further, the month was also impacted by weather-related market closures for two days.

Schwab’s net new assets bought by the new and existing clients totaled $24.7 billion, surging significantly both from October 2011 and September 2012. Also, this included a $15.7 billion inflow related to a mutual fund clearing services client. Further, total client assets stood at $1.90 trillion, improving 13% compared with October 2011 and at par compared with September 2012.

Schwab opened 74,000 brokerage accounts in the reported month, climbing 16% compared with both October 2011 and September 2012. The company’s active brokerage accounts totaled 8.73 million, up 2% year over year and almost at par compared with the prior-month.

Moreover, clients’ banking accounts augmented 10% year over year and 1% over the prior-month to 851,000. Similarly, the number of corporate retirement plan participants was 1,557 million, improving 6% from October 2011 and 1% from September 2012.

Peer Performances

Almost similar to Schwab, TD Ameritrade Holding Corporation (AMTD - Analyst Report) recorded DARTs of 330,000, down 19% year over year and 7% from the prior month. The dip largely resulted from the uncertain economic recovery and investors’ reluctance to invest in the equity markets. Moreover, the month under review excluded two trading days due to closed markets following Hurricane Sandy.

Likewise, E*TRADE Financial Corporation (ETFC - Analyst Report) also reported a fall in DARTs both from the prior-year month and prior month. DARTs for October were 124,246, declining 21% from October 2011 and 10% from September 2012.

Conclusion

Lower trading activities and fluctuating interest rates are expected to continuously impact the company’s financials in the near term. Further, we remain concerned about the company’s low capital intensity relative to its peers. However, its focus on low-cost capital structure will help it sustain better results in the upcoming quarters.

Schwab currently retains a Zacks # 3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we maintain a long-term ‘Neutral’ recommendation on the stock.
 

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