The Charles Schwab Corp.’s (SCHW - Free Report) fourth-quarter 2017 adjusted earnings of 44 cents per share surpassed the Zacks Consensus Estimate of 41 cents. Results exclude one-time tax expense of 3 cents per share related to the tax act. Also, earnings increased 22% from the prior-year quarter.
However, Schwab’s shares were down nearly 1.3% in early market trading. Persistent fall in trading revenues remains a major concern for Schwab. Notably, the 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), absence of fee waivers and provisions were among the positives. Further, there was an impressive rise in total client assets and new brokerage accounts. However, higher expenses and a decrease in trading revenues remained the headwinds.
After considering tax act related charge, quarterly net income available to common shareholders was $550 million, up 14% year over year. For 2017, it was $2.18 billion, up from $1.75 billion in the prior year.
Revenue Improvement Offset by Expense Rise
Net revenues were $2.24 billion for the reported quarter, climbing 14% year over year, supported by asset management and administration fees (up 8%) and net interest revenues (up 26%) and other revenues (up 26%). These were partly offset by a 24% fall in trading revenues. The reported figure was in line with the Zacks Consensus Estimate.
For 2017, net revenues grew 15% from the prior year to $8.62 billion. The figure was on par with the Zacks Consensus Estimate.
Total non-interest expenses rose 12% year over year to $1.30 billion. All expense components increased on a year-over-year basis.
Provision for loan losses and fee waivers were nil.
Pre-tax profit margin improved to 42.5% from 41.8% recorded last year.
At the end of the fourth quarter, Schwab’s average interest-earning assets grew 8% year over year to $228.5 billion.
Annualized return on equity as of Dec 31, 2017, came in at 14%, on par with the year-ago level.
Other Business Developments
As of Dec 31, 2017, Schwab had total client assets of $3.36 trillion (up 21% year over year). Also, net new assets — brought by new and existing clients —surged 112% from the prior-year quarter to $78.1 billion.
In addition, Schwab added 386,000 new brokerage accounts in the reported quarter. As of Dec 31, 2017, the company had a total of 10.8 million active brokerage accounts, 1.2 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.
Schwab carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Investment Brokers
Among other investment brokers, we now look forward to TD Ameritrade Holding Corp. (AMTD - Free Report) , Raymond James Financial, Inc. (RJF - Free Report) and E*TRADE Financial Corp. , which are expected to report results on Jan 22, Jan 24 and Jan 25, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
The Charles Schwab Corp.’s (SCHW - Free Report) fourth-quarter 2017 adjusted earnings of 44 cents per share surpassed the Zacks Consensus Estimate of 41 cents. Results exclude one-time tax expense of 3 cents per share related to the tax act. Also, earnings increased 22% from the prior-year quarter.
However, Schwab’s shares were down nearly 1.3% in early market trading. Persistent fall in trading revenues remains a major concern for Schwab. Notably, the 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), absence of fee waivers and provisions were among the positives. Further, there was an impressive rise in total client assets and new brokerage accounts. However, higher expenses and a decrease in trading revenues remained the headwinds.
After considering tax act related charge, quarterly net income available to common shareholders was $550 million, up 14% year over year. For 2017, it was $2.18 billion, up from $1.75 billion in the prior year.
Revenue Improvement Offset by Expense Rise
Net revenues were $2.24 billion for the reported quarter, climbing 14% year over year, supported by asset management and administration fees (up 8%) and net interest revenues (up 26%) and other revenues (up 26%). These were partly offset by a 24% fall in trading revenues. The reported figure was in line with the Zacks Consensus Estimate.
For 2017, net revenues grew 15% from the prior year to $8.62 billion. The figure was on par with the Zacks Consensus Estimate.
Total non-interest expenses rose 12% year over year to $1.30 billion. All expense components increased on a year-over-year basis.
Provision for loan losses and fee waivers were nil.
Pre-tax profit margin improved to 42.5% from 41.8% recorded last year.
At the end of the fourth quarter, Schwab’s average interest-earning assets grew 8% year over year to $228.5 billion.
Annualized return on equity as of Dec 31, 2017, came in at 14%, on par with the year-ago level.
Other Business Developments
As of Dec 31, 2017, Schwab had total client assets of $3.36 trillion (up 21% year over year). Also, net new assets — brought by new and existing clients —surged 112% from the prior-year quarter to $78.1 billion.
In addition, Schwab added 386,000 new brokerage accounts in the reported quarter. As of Dec 31, 2017, the company had a total of 10.8 million active brokerage accounts, 1.2 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.
Schwab carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Investment Brokers
Among other investment brokers, we now look forward to TD Ameritrade Holding Corp. (AMTD - Free Report) , Raymond James Financial, Inc. (RJF - Free Report) and E*TRADE Financial Corp. , which are expected to report results on Jan 22, Jan 24 and Jan 25, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
Get the latest research report on SCHW - FREE
Get the latest research report on AMTD - FREE
Get the latest research report on RJF - FREE