We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Schwab (SCHW) Q1 Earnings Lag on Lower Revenues, Expenses Up
Read MoreHide Full Article
Charles Schwab’s (SCHW - Free Report) first-quarter 2020 adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 64 cents. Also, the bottom line decreased 10% from the prior-year quarter.
Results for the reported quarter excluded $37 million expenses relating to the three pending acquisitions and $27 million charges for certain actions taken in response to the coronavirus pandemic.
Schwab’s shares are down more than 4% in early market trading. A full day’s session will reflect a better picture.
Lower revenues and a rise in operating expenses hurt the results. However, increase in net new assets and higher new brokerage accounts — driven by solid client activity in coronavirus-induced volatile markets — acted as tailwinds.
Net income available to common shareholders was $757 million, down 18% year over year.
Revenues Down, Expenses Rise
Net revenues were $2.62 billion, down 4% year over year. The fall was due to decline in trading revenues (down 13%), net interest revenues (down 6%), and other revenues (down 57%) partially offset by a 10% rise in asset management and administration fees. The reported figure was on par with the Zacks Consensus Estimate.
Total non-interest expenses rose 8% year over year to $1.57 billion. All expense components, except advertising and market development costs, increased from a year ago.
Pre-tax profit margin declined to 40.0% from 46.4% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets grew 7% year over year to $292.4 billion.
Annualized return on equity as of Mar 31, 2020 came in at 14%, down from 20% at the end of the prior-year quarter.
Other Business Developments
As of Mar 31, 2020, Schwab had total client assets of $3.5 trillion (down 2% year over year). Net new assets — brought by new and existing clients — were $73.2 billion, up 42% from the year-ago quarter.
Schwab added 609,000 new brokerage accounts in the reported quarter, reflecting a jump of 58% from the year-ago period. As of Mar 31, 2020, the company had 12.7 million active brokerage accounts, 1.4 million banking accounts and 1.7 million corporate retirement plan participants.
Our Take
Schwab’s planned acquisitions of TD Ameritrade (AMTD - Free Report) , USAA’s Investment Management Company and Wasmer Schroeder are likely to enhance its profitability over time. The company intends to strengthen the trading business by offering commission free trading, which will likely result in higher client assets and brokerage accounts.
However, continuous rise in expenses is expected to hurt the bottom line. Moreover, a dismal interest rate scenario might hurt margins.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
Earnings Release Dates of Other Investment Brokers
We now look forward to the upcoming quarterly results of Interactive Brokers Group, Inc. (IBKR - Free Report) , TD Ameritrade and E*TRADE Financial that are slated to release on Apr 21, Apr 22 and Apr 23, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Schwab (SCHW) Q1 Earnings Lag on Lower Revenues, Expenses Up
Charles Schwab’s (SCHW - Free Report) first-quarter 2020 adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 64 cents. Also, the bottom line decreased 10% from the prior-year quarter.
Results for the reported quarter excluded $37 million expenses relating to the three pending acquisitions and $27 million charges for certain actions taken in response to the coronavirus pandemic.
Schwab’s shares are down more than 4% in early market trading. A full day’s session will reflect a better picture.
Lower revenues and a rise in operating expenses hurt the results. However, increase in net new assets and higher new brokerage accounts — driven by solid client activity in coronavirus-induced volatile markets — acted as tailwinds.
Net income available to common shareholders was $757 million, down 18% year over year.
Revenues Down, Expenses Rise
Net revenues were $2.62 billion, down 4% year over year. The fall was due to decline in trading revenues (down 13%), net interest revenues (down 6%), and other revenues (down 57%) partially offset by a 10% rise in asset management and administration fees. The reported figure was on par with the Zacks Consensus Estimate.
Total non-interest expenses rose 8% year over year to $1.57 billion. All expense components, except advertising and market development costs, increased from a year ago.
Pre-tax profit margin declined to 40.0% from 46.4% in the prior-year quarter.
At the end of the first quarter, Schwab’s average interest-earning assets grew 7% year over year to $292.4 billion.
Annualized return on equity as of Mar 31, 2020 came in at 14%, down from 20% at the end of the prior-year quarter.
Other Business Developments
As of Mar 31, 2020, Schwab had total client assets of $3.5 trillion (down 2% year over year). Net new assets — brought by new and existing clients — were $73.2 billion, up 42% from the year-ago quarter.
Schwab added 609,000 new brokerage accounts in the reported quarter, reflecting a jump of 58% from the year-ago period. As of Mar 31, 2020, the company had 12.7 million active brokerage accounts, 1.4 million banking accounts and 1.7 million corporate retirement plan participants.
Our Take
Schwab’s planned acquisitions of TD Ameritrade (AMTD - Free Report) , USAA’s Investment Management Company and Wasmer Schroeder are likely to enhance its profitability over time. The company intends to strengthen the trading business by offering commission free trading, which will likely result in higher client assets and brokerage accounts.
However, continuous rise in expenses is expected to hurt the bottom line. Moreover, a dismal interest rate scenario might hurt margins.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Release Dates of Other Investment Brokers
We now look forward to the upcoming quarterly results of Interactive Brokers Group, Inc. (IBKR - Free Report) , TD Ameritrade and E*TRADE Financial that are slated to release on Apr 21, Apr 22 and Apr 23, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>