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Schwab (SCHW) Q2 Earnings and Revenues Beat, Expenses Rise
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Charles Schwab’s (SCHW - Free Report) second-quarter 2023 adjusted earnings of 75 cents per share beat the Zacks Consensus Estimate of 73 cents. The bottom line, however, declined 25% from the prior-year quarter.
Results benefited from the solid performance of the asset management business. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter.
However, fall in revenues due to higher funding costs, lower volatility and softer investor sentiments posed a major headwind. The company also recorded a rise in expenses.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income (GAAP basis) was $1.3 billion or 64 cents per share, down from $1.8 billion or 87 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.6 billion.
Revenues Decline, Expenses Rise
Quarterly net revenues were $4.66 billion, which fell 9% year over year. The decrease was mainly due to a 50% plunge in bank deposit fees, a 10% fall in NII and a 9% slide in trading revenues. These were partly offset by a 12% increase in asset management and administration fees. The top line, however, beat the Zacks Consensus Estimate of $4.61 billion.
Total non-interest expenses (GAAP basis) increased 5% to $3 billion. We had projected this metric to be $2.6 billion. Excluding non-recurring items, expenses were $2.7 billion, up 5%.
The company recorded no fee waivers in the quarter compared with $3 million in the prior-year quarter.
Pre-tax profit margin decreased to 36.3% from 44.6% in the prior-year quarter.
At the end of the second quarter, Schwab’s average interest-earning assets decreased 22% year over year to $485.4 billion.
Annualized return on equity, as of Jun 30, 2023, was 17%, down from 19% in the prior-year quarter.
Other Business Metrics
As of Jun 30, 2023, Schwab had total client assets of $8.02 trillion (up 17% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $72 billion.
Schwab added 0.7 million new brokerage accounts during the quarter. As of Jun 30, 2023, the company had 34.4 million active brokerage accounts, 1.8 million banking accounts and 2.4 million corporate retirement plan participants.
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 but increasing deposit costs will weigh on it. Mounting expenses and expectations of an economic slowdown are major headwinds.
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 Jul 26.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 1.9% lower to $2.07, suggesting a 28.6% jump from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce second quarter 2023 numbers on Jul 27.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 4% lower to $3.88, implying a 73.2% jump from the prior-year reported number.
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Schwab (SCHW) Q2 Earnings and Revenues Beat, Expenses Rise
Charles Schwab’s (SCHW - Free Report) second-quarter 2023 adjusted earnings of 75 cents per share beat the Zacks Consensus Estimate of 73 cents. The bottom line, however, declined 25% from the prior-year quarter.
Results benefited from the solid performance of the asset management business. Also, the absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter.
However, fall in revenues due to higher funding costs, lower volatility and softer investor sentiments posed a major headwind. The company also recorded a rise in expenses.
Results excluded acquisition and integration-related costs and amortization of acquired intangibles. After considering these, net income (GAAP basis) was $1.3 billion or 64 cents per share, down from $1.8 billion or 87 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.6 billion.
Revenues Decline, Expenses Rise
Quarterly net revenues were $4.66 billion, which fell 9% year over year. The decrease was mainly due to a 50% plunge in bank deposit fees, a 10% fall in NII and a 9% slide in trading revenues. These were partly offset by a 12% increase in asset management and administration fees. The top line, however, beat the Zacks Consensus Estimate of $4.61 billion.
Total non-interest expenses (GAAP basis) increased 5% to $3 billion. We had projected this metric to be $2.6 billion. Excluding non-recurring items, expenses were $2.7 billion, up 5%.
The company recorded no fee waivers in the quarter compared with $3 million in the prior-year quarter.
Pre-tax profit margin decreased to 36.3% from 44.6% in the prior-year quarter.
At the end of the second quarter, Schwab’s average interest-earning assets decreased 22% year over year to $485.4 billion.
Annualized return on equity, as of Jun 30, 2023, was 17%, down from 19% in the prior-year quarter.
Other Business Metrics
As of Jun 30, 2023, Schwab had total client assets of $8.02 trillion (up 17% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $72 billion.
Schwab added 0.7 million new brokerage accounts during the quarter. As of Jun 30, 2023, the company had 34.4 million active brokerage accounts, 1.8 million banking accounts and 2.4 million corporate retirement plan participants.
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 but increasing deposit costs will weigh on it. Mounting expenses and expectations of an economic slowdown are major headwinds.
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 Jul 26.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been revised 1.9% lower to $2.07, suggesting a 28.6% jump from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce second quarter 2023 numbers on Jul 27.
Over the past 30 days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 4% lower to $3.88, implying a 73.2% jump from the prior-year reported number.