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Schwab's (SCHW) Q1 Earnings Top Estimates, Revenues Down Y/Y
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Charles Schwab’s (SCHW - Free Report) first-quarter 2024 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, declined 20% from the prior-year quarter.
Shares of the company lost almost 2% in pre-market trading on top-line weakness.
Results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, lower revenues due to higher funding costs posed a major headwind. The company also recorded a rise in adjusted expenses.
Results excluded acquisition and integration-related costs, amortization of acquired intangibles and restructuring costs. After considering these, net income (GAAP basis) was $1.36 billion or 68 cents per share, down from $1.6 billion or 83 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.3 billion.
Revenues Decline, GAAP Expenses Fall
Quarterly net revenues were $4.74 billion, which fell 7% year over year. The decrease was mainly due to a 19% fall in net interest income and an 8% slide in trading revenues. These were partly offset by a 21% jump in asset management and administration fees. The top line surpassed the Zacks Consensus Estimate of $4.72 billion.
Total non-interest expenses (GAAP basis) decreased 2% to $2.94 billion and included restructuring charges related to additional cost-saving efforts. Excluding non-recurring items, expenses were $2.8 billion, up 1%. We had projected this metric to be $3 billion.
Pre-tax profit margin decreased to 37.9% from 41.2% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets decreased 13% year over year to $436.7 billion.
Annualized return on equity, as of Mar 31, 2024, was 15%, down from 23% in the prior-year quarter.
Other Business Metrics
As of Mar 31, 2024, Schwab had total client assets of $9.12 trillion (up 20% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $88.2 billion.
Schwab added 1.09 million new brokerage accounts during the quarter. As of Mar 31, 2024, the company had 35.3 million active brokerage accounts, 1.89 million banking accounts and 5.3 million corporate retirement plan participants.
Our Take
Schwab’s inorganic expansion efforts continue to strengthen its position as a leading brokerage player. 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 Dates & Expectations of Other Investment Brokers
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Apr 24.
Over the past week, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been marginally revised north to $2.28, suggesting a 12.3% rise from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce first-quarter 2024 numbers on Apr 30.
Over the past seven days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved almost 1.3% lower to $3.77, implying a 16% decrease from the prior-year reported number.
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Schwab's (SCHW) Q1 Earnings Top Estimates, Revenues Down Y/Y
Charles Schwab’s (SCHW - Free Report) first-quarter 2024 adjusted earnings of 74 cents per share beat the Zacks Consensus Estimate by a penny. The bottom line, however, declined 20% from the prior-year quarter.
Shares of the company lost almost 2% in pre-market trading on top-line weakness.
Results benefited from the solid performance of the asset management business. The absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, lower revenues due to higher funding costs posed a major headwind. The company also recorded a rise in adjusted expenses.
Results excluded acquisition and integration-related costs, amortization of acquired intangibles and restructuring costs. After considering these, net income (GAAP basis) was $1.36 billion or 68 cents per share, down from $1.6 billion or 83 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.3 billion.
Revenues Decline, GAAP Expenses Fall
Quarterly net revenues were $4.74 billion, which fell 7% year over year. The decrease was mainly due to a 19% fall in net interest income and an 8% slide in trading revenues. These were partly offset by a 21% jump in asset management and administration fees. The top line surpassed the Zacks Consensus Estimate of $4.72 billion.
Total non-interest expenses (GAAP basis) decreased 2% to $2.94 billion and included restructuring charges related to additional cost-saving efforts. Excluding non-recurring items, expenses were $2.8 billion, up 1%. We had projected this metric to be $3 billion.
Pre-tax profit margin decreased to 37.9% from 41.2% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets decreased 13% year over year to $436.7 billion.
Annualized return on equity, as of Mar 31, 2024, was 15%, down from 23% in the prior-year quarter.
Other Business Metrics
As of Mar 31, 2024, Schwab had total client assets of $9.12 trillion (up 20% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $88.2 billion.
Schwab added 1.09 million new brokerage accounts during the quarter. As of Mar 31, 2024, the company had 35.3 million active brokerage accounts, 1.89 million banking accounts and 5.3 million corporate retirement plan participants.
Our Take
Schwab’s inorganic expansion efforts continue to strengthen its position as a leading brokerage player. 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 Dates & Expectations of Other Investment Brokers
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Apr 24.
Over the past week, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been marginally revised north to $2.28, suggesting a 12.3% rise from the prior-year reported number.
LPL Financial (LPLA - Free Report) is slated to announce first-quarter 2024 numbers on Apr 30.
Over the past seven days, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved almost 1.3% lower to $3.77, implying a 16% decrease from the prior-year reported number.