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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