Higher revenues as well as prudent expense management drove
) first-quarter earnings of 24 cents per share, which surpassed
the Zacks Consensus Estimate of 22 cents. Moreover, this was up
60% from 15 cents earned in the year-ago quarter.
Shares of Schwab rose more than 2% in the pre-market session,
reflecting investors' bullish stance following the results. The
stock's price movement during the trading session will give a
better idea as to whether Schwab has been able to meet
Our quantitative model had conclusively projected that Schwab
would beat the Zacks Consensus Estimate, as it had the right
combination of two key components - a positive
and a Zacks Rank #3 (Hold).
Better-than-expected results were driven by top-line growth and
almost flat operating expenses, partially offset by decline in
benefit from provisions. Further, rise in total client assets as
well as new brokerage accounts were the other tailwinds.
Net income available to common shareholders in the reported
quarter totaled $318 million, up 61% year over year.
Net revenue was $1,478 million, up 15% from $1,290 million in the
prior-year quarter. The rise was largely driven by higher asset
management and administration fees (up 11%), net interest
revenues (up 18%), trading revenues (up 11%) and other revenues
(up 21%). The reported figure also came ahead of the Zacks
Consensus Estimate of $1,466 million.
As of Mar 31, 2014, Schwab's average interest-earning assets rose
nearly 9% year over year to $137.1 billion.
Total non-interest expense was almost flat on a year-over-year
basis and stood at $956 million. Rise in professional services,
occupancy and equipment, communications costs and other expenses
was offset by a fall in compensation and benefit, advertising and
market development as well as depreciation and amortization
Further, provision for loan losses was a benefit of $1 million,
down from a benefit of $6 million in the previous-year quarter.
Pre-tax profit margin improved to 35.3% in the reported quarter
from 25.7% in the prior-year quarter.
Annualized return on equity (ROE) as of Mar 31, 2014, came in at
13%, up from 9% as of Mar 31, 2013.
Other Business Developments
As of Mar 31, 2014, Schwab had total client assets of $2.31
trillion (up 11% year over year). Net new assets - bought by new
and existing clients - were $34.2 billion, down 21% from $43.1
billion reported in the year-ago quarter.
Further, Schwab added 258,000 new brokerage accounts in the first
quarter. As of Mar 31, 2014, the company had a total of 9.18
million active brokerage accounts, 933,000 banking accounts and
1.34 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 a low interest rate environment. However, the
company has undertaken several initiatives to become less
dependent on interest rates. Further, we believe that synergies
from the acquisitions and a stable capital position will boost
the company's financials to some extent.
Among other investment brokers,
Evercore Partners Inc.
) are scheduled to announce first-quarter results on Apr 23 while
Raymond James Financial, Inc.
) will release second-quarter fiscal earnings on the same date as
that of the above-mentioned companies.
E TRADE FINL CP (ETFC): Free Stock Analysis
EVERCORE PARTNR (EVR): Free Stock Analysis
RAYMOND JAS FIN (RJF): Free Stock Analysis
SCHWAB(CHAS) (SCHW): Free Stock Analysis
To read this article on Zacks.com click here.