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Schwab (SCHW) Q4 Earnings & Revenues Lag Estimates, Costs Dip

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Charles Schwab’s (SCHW - Free Report) fourth-quarter 2021 adjusted earnings of 86 cents per share missed the Zacks Consensus Estimate of 88 cents. The bottom line, however, grew 16% from the prior-year quarter.

The stock lost almost 2% in pre-market trading, reflecting investors’ bearish sentiments over its lower-than-expected quarterly performance. The full-day trading session will display a clearer picture.

Results reflect solid client assets balance and a rise in new brokerage accounts. These were driven by solid client activity, which supported revenues during the quarter. A slight dip in operating expenses was a tailwind. However, fee waivers and lower interest rates were a drag.

Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.58 billion or 76 cents per share, up from $1.14 billion or 57 cents per share in the year-ago quarter.

For 2021, adjusted earnings per share of $3.25 lagged the consensus estimate of $3.27 but grew 33% year over year. Net income available to common shareholders (GAAP basis) was $5.86 billion or $2.83 per share, up from $3.30 billion or $2.12 per share in 2020.

Revenues Rise, Expenses Down

Net revenues in the quarter were $4.71 billion, rising 13% year over year. The rise was driven by improvement in all revenue components except bank deposit account fees and other revenues. The top line missed the Zacks Consensus Estimate of $4.84 billion.

In 2021, net revenues rose 58% from the prior year to $18.52 billion. The top line lagged the Zacks Consensus Estimate of $18.59 billion.

Total non-interest expenses (GAAP basis) declined 1% year over year to $2.69 billion. Excluding non-recurring items, expenses were $2.43 billion, up 7%.

The company recorded fee waivers of $80 million in the quarter compared with $68 million in the prior-year quarter.
 
Pre-tax profit margin rose to 43.0% from 35.3% in the prior-year quarter.

At the end of the fourth quarter, Schwab’s average interest-earning assets increased 27% year over year to $588.1 billion.

Annualized return on equity, as of Dec 31, 2021, was 12%, up from 11% in the prior-year quarter.

Other Business Metrics

As of Dec 31, 2021, Schwab had total client assets of $8.14 trillion (up 22% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $134.8 billion.

Schwab added 1.32 million new brokerage accounts during the quarter. As of Dec 31, 2021, the company had 33.2 million active brokerage accounts, 1.5 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 environment will remain a concern.

Currently, Schwab sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings Release Dates of Other Investment Brokers

Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Jan 26.

Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been unchanged at $1.77, suggesting an 18.8% increase from the prior-year reported number.

Robinhood Markets (HOOD - Free Report) is scheduled to announce fourth-quarter and full-year 2021 numbers on Jan 27.

Over the past 30 days, the Zacks Consensus Estimate for Robinhood has widened to a loss of 34 cents.

LPL Financial (LPLA - Free Report) is slated to announce fourth-quarter and full-year 2021 numbers on Feb 3.

Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 4.3% south to $1.54, implying an almost 1% rise from the prior-year reported number.