Strong revenue growth drove
Charles Schwab Corp.
) fourth-quarter 2013 earnings of 23 cents per share, which beat
the Zacks Consensus Estimate of 21 cents. Moreover, this was 53%
above 15 cents earned in the year-ago quarter.
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Despite negative market sentiment, shares of Schwab gained over
2% in the opening trade, indicating investors' positive response
on the release. The stock's price movement through the remainder
of the trading session will give a better idea about whether
Schwab has been able to meet expectations.
Better-than-expected results were driven by top-line growth and a
benefit from provision, partially offset by higher expenses.
Further, improvements in total client assets as well as new
brokerage accounts were the tailwinds.
Net income available to common shareholders in the reported
quarter totaled $297 million, up 57% year over year.
For the full year 2013, earnings per share were 78 cents, up 13%
year over year. This also outpaced the Zacks Consensus Estimate
of 76 cents.
Net revenue was $1,435 million, up 18% from $1,215 million in the
prior-year quarter. The increase was largely driven by a rise in
asset management and administration fees (up 13%), net interest
revenues (up 23%), trading revenues (up 14%) and other revenues
(up 36%). Moreover, the reported figure came ahead of the Zacks
Consensus Estimate of $1,402 million.
As of Dec 31, 2013, Schwab's average interest-earning assets rose
nearly 17% year over year to $135.4 billion.
Total non-interest expense increased 8% year over year to $937
million. This was primarily due to a rise in compensation and
Further, provision for loan losses was a benefit of $2 million,
compared with an expense of $2 million in the previous-year
Pre-tax profit margin improved to 34.7% in the reported quarter
from 28.3% in the prior-year quarter.
Annualized return on equity (ROE) as of Dec 31, 2013, came in at
13%, up from 9% as of Dec 31, 2012.
Other Business Developments
As of Dec 31, 2013, Schwab had total client assets of $2.24
trillion (up 15% year over year). Net new assets - bought by new
and existing clients - were $1.8 billion, down significantly from
$64.4 billion reported in the year-ago quarter.
Further, Schwab added 250,000 new brokerage accounts in the
fourth quarter. As of Dec 31, 2013, the company had a total of
9.09 million active brokerage accounts, 916,000 banking accounts
and 1.31 million corporate retirement plan participants.
While the focus on low-cost capital structure will improve
results in the coming quarters, Schwab's financials will likely
suffer due to decrease in both trading activities and interest
rate yields. Nevertheless, we believe that synergies from the
acquisitions and a stable capital position will boost the
company's financials to some extent.
Schwab currently carries a Zacks Rank #3 (Hold).
Among other investment brokers,
E*TRADE Financial Corp.
Evercore Partners Inc.
) are scheduled to announce fourth-quarter results on Jan 23 and
Jan 29, respectively, while
Raymond James Financial, Inc.
) will release fiscal first-quarter earnings on Jan 22.