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Schwab (SCHW) Q3 Earnings & Revenues Beat Estimates, Costs Up

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Charles Schwab’s (SCHW - Free Report) third-quarter 2021 adjusted earnings of 84 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The bottom line jumped 65% from the prior-year quarter.

The stock gained 1.6% in pre-market trading, reflecting investors’ bullish sentiments over its robust quarterly performance. The full-day trading session will display a clearer picture.

Results reflect solid client assets balance and rise in new brokerage accounts. These were driven by solid client activity, which, along with the TD Ameritrade acquisition, supported revenues during the quarter. Fee waivers and a surge in expenses were the undermining factors.

Results excluded acquisition and integration-related costs, and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.41 billion or 74 cents per share, up significantly from $615 million or 48 cents per share in the year-ago quarter.

Revenues & Expenses Jump on TD Ameritrade Deal

Net revenues were $4.57 billion, soaring 87% year over year on the back of the TD Ameritrade acquisition. The rise was driven by improvement in all revenue components. The top line beat the Zacks Consensus Estimate of $4.52 billion.

Total non-interest expenses (GAAP basis) surged 64% year over year to $2.56 billion. Excluding non-recurring items, expenses were $2.3 billion, up 54%.

The company recorded fee waivers of $83 million in the quarter compared with $44 million in the prior-year quarter.

Pre-tax profit margin rose to 44.0% from 36.3% in the prior-year quarter.

At the end of the third quarter, Schwab’s average interest-earning assets jumped 44% year over year to $554.7 billion.

Annualized return on equity, as of Sep 30, 2021, was 12%, up from 10% in the prior-year quarter.

Other Business Metrics

As of Sep 30, 2021, Schwab had total client assets of $7.6 trillion (up 73% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $139 billion.

Schwab added 1.18 million new brokerage accounts during the quarter. As of Sep 30, 2021, the company had 32.8 million active brokerage accounts, 1.6 million banking accounts and 2.2 million corporate retirement plan participants.

Our Take

Schwab’s inorganic expansion efforts are expected to strengthen its position as a leading brokerage player. However, the low interest rate scenario will remain concern.

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 Oct 19, while Raymond James and LPL Financial will release quarterly numbers on Oct 27 and Oct 28, respectively.