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Schwab (SCHW) Up as Q3 Earnings Top Estimates, Revenues Jump
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Charles Schwab’s (SCHW - Free Report) third-quarter 2022 adjusted earnings of $1.10 per share handily beat the Zacks Consensus Estimate of $1.05. The bottom line also soared 31% from the prior-year quarter. Our estimate for adjusted earnings was $1.02 per share.
The stock jumped 3.4% in pre-market trading, reflecting investors’ bullish sentiments over its better-than-expected quarterly performance. The full-day trading session will display a clearer picture.
Results benefited from higher rates, which led to a rise in net interest income (NII). Thus, revenues witnessed an improvement despite higher volatility hurting trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher expenses were a headwind.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.88 billion or 99 cents per share, up from $1.41 billion or 74 cents per share in the year-ago quarter. We had projected earnings per share (GAAP basis) of 91 cents.
Revenues & Expenses Rise
Net revenues were $5.5 billion, which grew 20% year over year. The increase was mainly driven by a 44% surge in NII and a 28% rise in bank deposit fees. The top line also surpassed the Zacks Consensus Estimate of $5.40 billion. Our estimate for the metric was $5.38 billion.
Total non-interest expenses (GAAP basis) increased 10% to $2.82 billion. We had projected this metric to be $2.97 billion. Excluding non-recurring items, expenses were $2.57 billion, up 12%.
The company recorded no fee waivers in the quarter compared with $83 million in the prior-year quarter.
Pre-tax profit margin increased to 48.7% from 44% in the prior-year quarter. Our estimate for the metric was 44.7%.
At the end of the third quarter, Schwab’s average interest-earning assets increased 6% year over year to $586.7 billion.
Annualized return on equity, as of Sep 30, 2022, was 25%, up from 12% in the prior-year quarter number.
Other Business Metrics
As of Sep 30, 2022, Schwab had total client assets of $6.64 trillion (down 13% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $114.6 billion. Our estimate for net new assets was $125.5 billion.
Schwab added 0.9 million new brokerage accounts during the quarter. As of Sep 30, 2022, the company had 33.9 million active brokerage accounts, 1.7 million banking accounts and 2.3 million corporate retirement plan participants.
Share Repurchase Update
During the reported quarter, Schwab repurchased 21.9 million shares for $1.5 billion. In July, the company announced a $15 billion stock repurchase authorization.
Our Take
Schwab’s inorganic expansion efforts are expected to strengthen its position as a leading brokerage player. Also, higher interest rates are supporting top-line growth. 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 Oct 25.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 1.5% lower to $2.03, suggesting a 1.5% decrease from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce second-quarter 2022 numbers on Oct 27.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 2.5% north to $2.84, implying a 60.5% rise from the prior-year reported number.
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Schwab (SCHW) Up as Q3 Earnings Top Estimates, Revenues Jump
Charles Schwab’s (SCHW - Free Report) third-quarter 2022 adjusted earnings of $1.10 per share handily beat the Zacks Consensus Estimate of $1.05. The bottom line also soared 31% from the prior-year quarter. Our estimate for adjusted earnings was $1.02 per share.
The stock jumped 3.4% in pre-market trading, reflecting investors’ bullish sentiments over its better-than-expected quarterly performance. The full-day trading session will display a clearer picture.
Results benefited from higher rates, which led to a rise in net interest income (NII). Thus, revenues witnessed an improvement despite higher volatility hurting trading income. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher expenses were a headwind.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income available to common shareholders (GAAP basis) was $1.88 billion or 99 cents per share, up from $1.41 billion or 74 cents per share in the year-ago quarter. We had projected earnings per share (GAAP basis) of 91 cents.
Revenues & Expenses Rise
Net revenues were $5.5 billion, which grew 20% year over year. The increase was mainly driven by a 44% surge in NII and a 28% rise in bank deposit fees. The top line also surpassed the Zacks Consensus Estimate of $5.40 billion. Our estimate for the metric was $5.38 billion.
Total non-interest expenses (GAAP basis) increased 10% to $2.82 billion. We had projected this metric to be $2.97 billion. Excluding non-recurring items, expenses were $2.57 billion, up 12%.
The company recorded no fee waivers in the quarter compared with $83 million in the prior-year quarter.
Pre-tax profit margin increased to 48.7% from 44% in the prior-year quarter. Our estimate for the metric was 44.7%.
At the end of the third quarter, Schwab’s average interest-earning assets increased 6% year over year to $586.7 billion.
Annualized return on equity, as of Sep 30, 2022, was 25%, up from 12% in the prior-year quarter number.
Other Business Metrics
As of Sep 30, 2022, Schwab had total client assets of $6.64 trillion (down 13% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $114.6 billion. Our estimate for net new assets was $125.5 billion.
Schwab added 0.9 million new brokerage accounts during the quarter. As of Sep 30, 2022, the company had 33.9 million active brokerage accounts, 1.7 million banking accounts and 2.3 million corporate retirement plan participants.
Share Repurchase Update
During the reported quarter, Schwab repurchased 21.9 million shares for $1.5 billion. In July, the company announced a $15 billion stock repurchase authorization.
Our Take
Schwab’s inorganic expansion efforts are expected to strengthen its position as a leading brokerage player. Also, higher interest rates are supporting top-line growth. 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 #3 (Hold). 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 Oct 25.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 1.5% lower to $2.03, suggesting a 1.5% decrease from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce second-quarter 2022 numbers on Oct 27.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 2.5% north to $2.84, implying a 60.5% rise from the prior-year reported number.