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Schwab (SCHW) Down as Q1 Earnings Miss Estimates, Costs Rise
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Charles Schwab’s (SCHW - Free Report) first-quarter 2022 adjusted earnings of 77 cents per share missed the Zacks Consensus Estimate of 85 cents. The bottom line also declined 8% from the prior-year quarter.
The stock tanked 5% 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 were hurt by increased market volatility, thereby affecting trading income. Also, higher expenses were a headwind. However, lower fee waivers and growth in brokerage account number acted as tailwinds during the quarter.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.28 billion or 67 cents per share, down from $1.39 billion or 73 cents per share in the year-ago quarter.
Revenues Down, Expenses Rise
Net revenues were $4.67 billion, which declined 1% year over year. The fall was mainly due to lower trading revenues (down 21%). The top line missed the Zacks Consensus Estimate of $4.84 billion.
Total non-interest expenses (GAAP basis) increased 3% to $2.83 billion. Excluding non-recurring items, expenses were $2.58 billion, up 4%.
The company recorded fee waivers of $54 million in the quarter compared with $78 million in the prior-year quarter.
Pre-tax profit margin fell to 39.4% from 41.6% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets increased 22% year over year to $632.4 billion.
Annualized return on equity, as of Mar 31, 2022, was 12%, on par with the prior-year quarter number.
Other Business Metrics
As of Mar 31, 2022, Schwab had total client assets of $7.86 trillion (up 11% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $120.5 billion.
Schwab added 1.2 million new brokerage accounts during the quarter. As of Mar 31, 2022, the company had 33.6 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, mounting expenses remain a concern.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
Earnings Release Dates of Other Investment Brokers
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Apr 27.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 4.7% lower to $1.62, suggesting a 2% decrease from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce first-quarter 2022 numbers on Apr 28.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 3.6% south to $1.90, implying a 7.3% rise from the prior-year reported number.
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Schwab (SCHW) Down as Q1 Earnings Miss Estimates, Costs Rise
Charles Schwab’s (SCHW - Free Report) first-quarter 2022 adjusted earnings of 77 cents per share missed the Zacks Consensus Estimate of 85 cents. The bottom line also declined 8% from the prior-year quarter.
The stock tanked 5% 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 were hurt by increased market volatility, thereby affecting trading income. Also, higher expenses were a headwind. However, lower fee waivers and growth in brokerage account number acted as tailwinds during the quarter.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.28 billion or 67 cents per share, down from $1.39 billion or 73 cents per share in the year-ago quarter.
Revenues Down, Expenses Rise
Net revenues were $4.67 billion, which declined 1% year over year. The fall was mainly due to lower trading revenues (down 21%). The top line missed the Zacks Consensus Estimate of $4.84 billion.
Total non-interest expenses (GAAP basis) increased 3% to $2.83 billion. Excluding non-recurring items, expenses were $2.58 billion, up 4%.
The company recorded fee waivers of $54 million in the quarter compared with $78 million in the prior-year quarter.
Pre-tax profit margin fell to 39.4% from 41.6% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets increased 22% year over year to $632.4 billion.
Annualized return on equity, as of Mar 31, 2022, was 12%, on par with the prior-year quarter number.
Other Business Metrics
As of Mar 31, 2022, Schwab had total client assets of $7.86 trillion (up 11% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $120.5 billion.
Schwab added 1.2 million new brokerage accounts during the quarter. As of Mar 31, 2022, the company had 33.6 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, mounting expenses remain a concern.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
The Charles Schwab Corporation price-consensus-eps-surprise-chart | The Charles Schwab Corporation Quote
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
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Apr 27.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 4.7% lower to $1.62, suggesting a 2% decrease from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce first-quarter 2022 numbers on Apr 28.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 3.6% south to $1.90, implying a 7.3% rise from the prior-year reported number.