Charles Schwab (SCHW) earnings preview: Two areas of focus in Q3 results

Financial service providers are set to kick off this earnings season in this week. Banking giants JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS) and few other fintech companies will report their recently ended quarterly results starting from Tuesday, October 15.

Investment services firm Charles Schwab (NYSE: SCHW) will be publishing its third quarter 2019 earnings and revenue results on Tuesday, October 15, before market opens.

Lowered interest rates and the recent market volatility will be the focus areas of the investors for Schwab’s recently ended quarter. The Federal Reserve cut the interest rates in September, after lowering the interest rates in July.

Despite the volatility in the recent months, equity markets performed well in the third quarter. While the rate cut is likely to affect the company’s performance, the positive performance in the equity markets is expected to offset that.

On average, analysts expect Charles Schwab to post earnings of $0.65 per share on revenue of $2.65 billion for the third quarter. This compares to prior-year third quarter’s earnings of $0.65 per share on revenue of $2.58 billion.

For the second quarter of 2019, Charles Schwab surpassed earnings estimates while revenue came in line with the analysts’ views. Asset management and administration fees declined 3% annually to $786 million. Trading revenue decreased 3% to $174 million.

As of August 31, 2019, Schwab’s client assets under management totaled $3.72 trillion. The San Francisco, California-based firm has active brokerage accounts of 12.1 million and banking accounts of 1.4 million.

Following Interactive Brokers Group’s (NASDAQ: IBKR) decision to cut down its trade commissions to $0, Charles Schwab, TD Ameritrade Holding (NASDAQ: AMTD) and Fidelity were forced to reduce their trade commissions to zero. A day after Charles Schwab started the zero commissioning, its stock price plunged to a new 52-week low ($34.58) on October 8.

Charles Schwab stock had given a negative return in both year-to-date and past 52 weeks, declining 10% and 23%, respectively.

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