Schwab Jan DATs Rise, 2014 Guidance Up - Analyst Blog

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In its monthly market activity report for Jan 2014, The Charles Schwab Corporation ( SCHW ) reported Daily Average Trades (DATs) of 588,200. This marked an increase of 17% from both the prior month and the prior-year month.

Total client assets were $2.22 trillion, down 1% from Dec 2013 but up 10% from Jan 2013. Schwab's net new assets - bought by existing as well as new clients - were $11.9 billion, which was up 20% from the previous month but fell 2% from the year-ago month.

In the reported month, Schwab opened 90,000 brokerage accounts, down 6% from Dec 2013 but increasing 3% from Jan 2013. The company's active brokerage accounts totaled 9.1 million, almost flat with the prior month and up 3% year over year.

Clients' banking accounts were 923,000, up 1% from the prior month and 6% year over year. Moreover, Schwab had 1.33 million corporate retirement plan participants, up 2% from Dec 2013 but down 15% from Jan 2013.

Performance of Other Brokerage Firms

TD Ameritrade Holding Corp. ( AMTD ) reported a rise in average client trades per day in its Activity Report for January. Average client trades per day were 496,000, up 22% from the prior month and 28% year over year.

Online brokerage firm E*TRADE Financial Corp. ( ETFC ) is expected to report its Daily Average Revenue Trades (DARTs) for Jan 2014 earlier next week.

2014 Outlook

Management expects revenue growth to be in high single digits and pre-tax profit margin of nearly 34% based on the assumption that S&P will appreciate 6.5%, Fed Funds will remain at the current level of 0.00%-0.25% and DARTs will rise in the range of 5%-6% year over year.

Further, management anticipates net interest margin of nearly 160 basis points based on the assumption of a stable or an improved interest rate scenario.  Moreover, the pressure on money fund fees is expected to continue.  

Our Viewpoint

Amid a volatile operating environment, Schwab witnessed a rise in both client assets and trading volumes, which bode well going forward. Further, the company's low-cost capital structure should help it improve results in the coming quarters. However, a low interest rate environment and stringent regulations pose challenges.

Currently, Schwab carries a Zacks Rank #2 (Buy). A better-ranked investment broker is LPL Financial Holdings Inc. ( LPLA ), which has a Zacks Rank #1 (Strong Buy).



TD AMERITRADE (AMTD): Free Stock Analysis Report

E TRADE FINL CP (ETFC): Free Stock Analysis Report

LPL FINL HLDGS (LPLA): Free Stock Analysis Report

SCHWAB(CHAS) (SCHW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AMTD , ETFC , LPLA , SCHW

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