Charles Schwab Corporation
) first-quarter 2013 earnings of 15 cents per share missed the
Zacks Consensus Estimate by a penny. This was in line with the
year-ago quarter earnings.
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Marginally lower-than-expected results were attributable to
higher operating expenses and a rise in provision for loan
losses, partially offset by growth in the top-line. However,
improvement in client assets and rise in new brokerage accounts
were the tailwinds for the quarter.
Net income available to common shareholders in the first quarter
totaled $198 million, up 2% from $195 million in the prior-year
Net revenues were $1,290 million, up 8% from $1,189 million in
the prior-year quarter. Moreover, this was higher than the Zacks
Consensus Estimate of $1,260 million.
The increase in net revenues was largely driven by the higher
asset management and administration fees (up 14%) and net
interest revenue (up 8%). However, these were partially offset by
lower trading revenue (down 8%).
As of Mar 31, 2013, Schwab's average interest-earning assets
augmented nearly 21% year over year to $126.3 billion.
Total non-interest expense grew 9% year over year to $959
million. The increase was primarily due to higher compensation
and benefit expenses. Further, provision for loan losses was $6
million compared with nil in the previous-year quarter.
Pre-tax profit margin improved from 25.7% in the prior-year
quarter to 26.3% in the reported quarter.
Annualized return on equity (ROE) as of Mar 31, 2013, came in at
9%, down from 10% as of Mar 31, 2012.
Other Business Developments
As of Mar 31, 2013, Schwab had total client assets of $2.08
trillion (up 14% year over year). Core net new assets were $43.4
billion in 2012, up 9% from the prior year.
Further, Schwab added 244,000 new brokerage accounts in the first
quarter. As of Mar 31, 2013, the company had a total of 8.9
million active brokerage accounts, 888,000 banking accounts and
1.6 million corporate retirement plan participants.
Given its diversified revenue streams and ongoing expense
discipline, Schwab anticipates pre-tax profit margin of 30% and
earnings in the range of mid-70 cents per share in 2013.
While focusing on low-cost capital structure will help improve
results in the upcoming quarters, Schwab's financials will
continue to be hampered by lower trading activities, weaker
equity markets and reduced interest rate yields.
Moreover, we remain concerned about Schwab's low capital
intensity relative to its peers. Nevertheless, we believe that
the synergies from the acquisitions and stable capital position
will boost the company's financials to some extent.
Schwab currently retains a Zacks Rank #3 (Hold).
Among other investment brokers,
TD Ameritrade Holding Corporation
Interactive Brokers Group, Inc.
) are scheduled to report on Apr 16 and
E*TRADE Financial Corporation
) on Apr 18.