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Earnings preview: Clients to flock Charles Schwab Q1 results

Financial services firm The Charles Schwab Corp. (NYSE: SCHW) is scheduled to report its first-quarter 2019 earnings results on Monday before the market opens. The results will be benefited by higher client cash sweep balances and an increase in clients trading activity.

However, the company has experienced certain macroeconomic headwinds during the quarter. This included continued uncertainties from Brexit, US-China trade war, and global economic slowdown expectations. These headwinds have led to lower market volatility that dragged client activity down.

On the positive note, most of the investors who were interested to enter the market have ventured in January and February as Schwab has opened 131,000 and 115,000 new brokerage accounts during the two months. This reflected an improvement in the trading revenues for the first quarter.

Charles Schwab office building in Austin, TX.
Image Courtesy: Charles Schwab

Analysts expect earnings to jump by 20% to $0.66 per share and revenue to increase by 11.70% to $2.68 billion for the first quarter. In comparison, during the previous year quarter, the company reported a profit of $0.55 per share on revenue of $2.40 billion. The company had exceeded analysts expectations in three out of the last four quarters while one came in line with the projections.

For the fourth quarter, the company reported a 57% jump in earnings helped by an increase in client cash sweep balances, higher clients trading activity as well as balancing of near-term profitability with long-term investments for growth and efficiency. Revenues grew by 19% on its strengthened business momentum despite a volatile economic environment.

Clients opened 380,000 brokerage accounts in the fourth quarter, bringing its new accounts for the year to 1.6 million, up 9% from the previous year. For the fourth quarter, total client assets decreased by 3% to $3.25 trillion.

For the month-end January 2019, total client assets were $3.45 trillion, down 1% from January 2018 and up 6% compared to December 2018. For the month-end February 2019, total client assets were $3.53 trillion, up 6% from February 2018 and up 2% compared to January 2019.

Shares of Charles Schwab opened higher and is trading in the green territory on Friday. The stock has fallen over 10% in the past year while it has risen over 3% in the past three months.

 

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