Schwab's January DARTs Climb

In its monthly market activity report for Jan 2013, The Charles Schwab Corporation ( SCHW - Analyst Report ) reported Daily Average Revenue Trades (DARTs) of 504,700. This was up 5% from 480,200 in the prior month and 8% from 468,400 in the year-ago month.

Schwab’s net new assets bought by the new and existing clients totaled $12.1 billion, plunging 49% from Dec 2012, but surging 70% from Jan 2012. Also, this included a $2.2 billion inflow related to a mutual fund clearing services client. Further, total client assets stood at $2.01 trillion, improving 3% from Dec 2012 and 16% from Jan 2012.

Schwab opened 87,000 new brokerage accounts in the reported month, 10% less than Dec 2012 level, but it climbed 18% from Jan 2012. The company’s active brokerage accounts totaled 8.82 million, almost flat compared with the prior-month and up 3% year over year.

Moreover, clients’ banking accounts inched up 1% over the prior-month and elevated 11% year over year to 874,000. Moreover, the number of corporate retirement plan participants was 1,554 million, declining 1% from Dec 2012 but improving 3% from Jan 2012.

Peer Performances

Earlier this week, TD Ameritrade Holding Corporation ( AMTD - Analyst Report ) reported 17% monthly and 3% yearly increases in average U.S. trades in its Activity Report for the month of Jan 2013. For the reported month, DARTs reached 387,000, up from 331,000 recorded in the prior month. The rise mainly resulted from the improvement in the equity markets.

Similarly, E*TRADE Financial Corporation ( ETFC - Analyst Report ) also reported a rise in its DARTs for Jan 2013. The company’s DARTs stood at 153,580, improving 18% from Dec 2012 and 6% from Jan 2012, on the back of increased investments by investors.

Conclusion

Amid the challenging economy, rising DARTs and new brokerage accounts will be beneficial for Schwab. Yet, 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 Rank #3 (Hold). However, one of its peers, Evercore Partners Inc. ( EVR - Snapshot Report ) is more favorably placed and carries a Zacks Rank #1 (Strong Buy).