Charles Schwab Beats Estimates Amid Strong New Account Openings

April 16, 2018 — 11:10 AM EDT

Charles Schwab reported fiscal first quarter results that surpassed Wall Street views on both the earnings and revenue front along with new account openings that were the highest on a quarterly basis in 18 years. The San Francisco-based discount brokerage, the first of the group to release quarterly earnings, reported net income of $783 million, up 39% year over year. Adjusted earnings per share came in at $0.55, while revenue for the first three months of the year was $2.4 billion. Wall Street was looking for EPS of $0.53 and revenue of $2.36 billion.

Heading into The Charles Schwab Corporation's (SCHW) earnings report, concerns were mounting that the volatility in the stock market could move investors to sit on the sidelines, but Schwab said that engagement remained strong during the quarter, even with the February correction. Trading activity in the first quarter jumped 40% year over year, while new accounts totaled 443,000, the highest quarterly level in 18 years. New customers for its retail business jumped 42% year over year. Schwab also reported net new assets of $65.6 billion, which the company says implied an annualized growth rate of 7.8%, a level it hasn't seen since 2008.

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"Amidst the volatility, client interactions surged as we offered the insight and assistance they expect – call volumes and web logins from both our retail and independent advisor clients were up nearly 20% and 50% from their respective quarterly averages," said Walt Bettinger, chief executive of the brokerage, in prepared remarks. "Strength in asset gathering spanned our largest businesses, as Advisor Services and Retail both set new records, with inflows up 27% and 64%, respectively, from last year." Schwab ended the quarter with $3.31 trillion in client assets, which is a 13% increase from a year ago. As it stands, the company has 11 million active brokerage accounts, 1.2 million banking accounts and 1.6 million retirement plan participants.

Peter Crawford, chief financial officer at Charles Schwab, said that interest revenue increased 26% to a record $1.3 billion. That increase was due to larger client cash sweep balances and the impact of the Federal Reserve's interest rate hikes in 2017 and in March 2018. The company's net interest margin expanded to 2.12% from 1.87%. Meanwhile, asset management and administration fees increased 3% to $851 million as a result of increased balance in advised solutions, equity and bond funds, and exchange-traded funds. "Our clients' record trading activity boosted Trading revenue 5% to $201 million, more than offsetting the commission pricing reductions announced in February of last year," said Crawford in prepared remarks. Shares of Schwab were recently trading up 2.5%, or $1.27, to $52.31. The stock is up around 2% in 2018 so far.