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Schwab (SCHW) Q1 Earnings Beat Estimates, Revenues Surge Y/Y

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Charles Schwab’s (SCHW - Free Report) first-quarter 2021 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate of 82 cents. Also, the bottom line grew 38% from the prior-year quarter.

Results reflect solid client assets balance and a rise in new brokerage accounts. These were driven by solid client activity, which supported revenues in the quarter. However, fee waivers and an increase in expenses acted as headwinds.

Results excluded acquisition and integration-related costs as well as the amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.39 billion or 73 cents per share compared with $757 million or 58 cents per share in the year-ago quarter.

Revenues & Expenses Jump on TD Ameritrade Deal

Net revenues were $4.72 billion, soaring 80% year over year. The rise was driven by improvement in all revenue components. Also, the top line surpassed the Zacks Consensus Estimate of $4.57 billion.

Total non-interest expenses (GAAP basis) surged 75% year over year to $2.76 billion. Excluding non-recurring items, expenses were $2.48 billion, up 63%.

Additionally, the company recorded fee waivers of $78 million in the reported quarter.

Pre-tax profit margin rose to 41.6% from 40.0% in the prior-year quarter.

At the end of the first quarter, Schwab’s average interest-earning assets jumped 77% year over year to $517.5 billion.

Annualized return on equity as of Mar 31, 2021, was 12%, down from 14% at the end of the prior-year quarter.

Other Business Metrics

As of Mar 31, 2021, Schwab had total client assets of $7.1 trillion (up 102% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $133.8 billion.

Schwab added 3.15 million new brokerage accounts during the quarter. As of Mar 31, 2021, the company had 31.9 million active brokerage accounts, 1.6 million banking accounts and 2.1 million corporate retirement plan participants.

Our Viewpoint

Schwab’s inorganic expansion efforts (including the acquisitions of TD Ameritrade, USAA's Investment Management Company, Wasmer Schroeder and certain assets of Motif) are expected to strengthen its position as a leading brokerage player. However, a dismal interest rate scenario will continue to hurt financials.

Currently, 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

We now look forward to the upcoming quarterly results of Interactive Brokers Group, Inc. (IBKR - Free Report) , Raymond James (RJF - Free Report) and LPL Financial (LPLA - Free Report) . Interactive Brokers is scheduled to announce quarterly numbers on Apr 20, while Raymond James and LPL Financial will release quarterly numbers on Apr 28 and Apr 29, respectively.

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