Charles Schwab tops Q2 earnings estimates; revenues come in line

The Charles Schwab Corporation (NYSE: SCHW) beat earnings estimates for the second quarter of 2019 while revenue matched expectations. Shares were up 3.8% in morning hours on Tuesday.  

Net revenues of $2.7 billion were up 8% from the same period last year. Net income rose 8% to $937 million and diluted EPS rose 10% to $0.66. The consensus estimate was for EPS of $0.65.

CEO Walt Bettinger said, “Clients opened nearly 400,000 new brokerage accounts during the second quarter, bringing year-to-date new accounts to 772,000, helping push active accounts to the 12 million mark by quarter-end, up 7% year-over-year. This includes 3.5 million accounts under the guidance of the 7,500+ independent advisors who custody with us; those accounts are up 8% as advisors successfully build their businesses with our assistance.”

During the quarter, net interest revenue rose 14% year-over-year to $1.6 billion, driven mainly by higher interest-earning assets relating to the transfer of sweep money market fund balances to bank and broker-dealer sweep. Net interest margin rose 10 basis points to 2.40%, reflecting the Fed’s 2018 rate hikes.

Asset management and administration fees saw a drop of 3% year-over-year to $786 million due to lower money market fund revenue and declines in Mutual Fund OneSource balances. Trading revenue fell 3% to $174 million due to a decrease in average revenue per trade.

Other revenue increased 32%, driven mainly by a gain on the sale of PortfolioCenter, a portfolio management and reporting software solution for advisors, to Tamarac Inc.

Charles Schwab repurchased 29.1 million shares for $1.2 billion during the quarter and now has an outstanding authorization of $2.8 billion. The company’s preliminary Tier 1 Leverage ratio at quarter-end was 7.3%.

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