What to look for when Charles Schwab (SCHW) reports Q3 2024 results

Financial services company The Charles Schwab Corporation (NYSE: SCHW) is preparing to report third-quarter results on October 14, with experts predicting a mixed outcome. As part of its long-term succession plan announced earlier this year, the company is headed for a CEO change by the end of the year.

The Westlake-headquartered bank’s stock has gone through a series of highs and lows after hitting a record high in early 2022. The overall performance has been lackluster since then as the stock failed to stabilize. Meanwhile, the shares are yet to recover from the post-earnings selloff they suffered in mid-July. SCHW has lost about 6% so far in 2024.

Estimates

When the company releases its third-quarter report on October 14, before the opening bell, the market will be looking for earnings of $0.75 per share, excluding one-off items. In the prior-year quarter, it earned $0.77 per share. The consensus revenue estimate is $4.75 billion for Q3, compared to $4.60 billion in the corresponding period of 2023. The top line is likely to benefit from an uptick in net interest income and better trading volumes. In the previous quarter, daily average trades increased 4% year-over-year.

Charles Schwab serves customers by providing an array of financial services under one roof, and its open-architecture platform allows clients to access multiple investment options. The company has around $10 trillion in assets under management and nearly 40 million clients, which makes it one of the biggest and most well-known brokerages globally. Of late, its banking business has been facing headwinds like shrinking deposits and intense competition.

From Charles Schwab’s Q2 2024 earnings call:

“Our ability to increase our scale while also continuously driving efficiency in our operations remains one of our key competitive advantages. The Ameritrade integration is a clear example of how we have vastly increased our scale while cutting costs. And by the end of this year, we’ll realize the remaining 10% of run-rate expense synergies from the acquisition. Over time, our growing client base, our cost discipline, and our ongoing investments in technology will continue to help us reduce our cost to serve our clients…”

Q2 Results Miss

In the second quarter, revenue edged up 1% year-over-year to $4.69 billion. The top line was broadly in line with analysts’ estimates. Revenues benefitted from an increase in total client assets amid sustained equity market strength and organic asset gathering. Asset Management & Administration Fee, which accounts for nearly 30% of total revenue, has been the main growth driver lately.

Net income available to common stockholders was $1.21 billion or $0.66 per share in Q2, compared to $1.17 billion or $0.64 per share in the prior-year quarter. Adjusted profit declined to $0.73 per share from $0.75 per share last year. Earnings surpassed Wall Street’s projections, marking the sixth beat in a row.

CEO Change

Recently, the Charles Schwab leadership said that Walter Bettinger will retire as chief executive officer by the end of 2024. Bettinger will be succeeded by the company’s president and asset management veteran Richard Wurster, taking over the role in early 2025. The transition, which is part of a long-term succession plan, is expected to ensure continuity for clients, employees, and shareholders.

Over the past two months, shares of Charles Schwab have traded mostly below their 52-week average. On Friday, the stock opened slightly above $63 and traded higher in the early hours.