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Charles Schwab’s (SCHW - Free Report) second-quarter 2024 adjusted earnings of 73 cents per share met the Zacks Consensus Estimate. The bottom line, however, declined 3% from the prior-year quarter.
Shares of the company tanked almost 5% in pre-market trading on weakness in interest income and trading revenues.
Results benefited from the solid performance of the asset management business, which drove the revenues. The absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher funding costs posed a major headwind. The company also recorded a rise in adjusted expenses.
Results excluded acquisition and integration-related costs, amortization of acquired intangibles and restructuring costs. After considering these, net income (GAAP basis) was $1.33 billion or 66 cents per share, up from $1.29 billion or 64 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.44 billion.
Revenues Up, GAAP Expenses Fall
Quarterly net revenues were $4.69 billion, which rose 1% year over year. The increase was mainly due to an 18% jump in asset management and administration fees. This was partly offset by a 6% fall in net interest income and a 3% slide in trading revenues. The top line matched the Zacks Consensus Estimate.
Total non-interest expenses (GAAP basis) decreased 1% to $2.94 billion. We had projected this metric to be $2.93 billion. Excluding non-recurring items, adjusted total expenses were $2.77 billion, up 2%.
Pre-tax profit margin increased to 37.2% from 36.3% in the prior-year quarter.
At the end of the second quarter, Schwab’s average interest-earning assets decreased 14% to $419 billion.
As of Jun 30, 2024, the annualized return on equity was 14%, down from 17% in the prior-year quarter.
Other Business Metrics
As of Jun 30, 2024, Schwab had total client assets of $9.41 trillion (up 17% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $74.2 billion.
Schwab added almost 1 million new brokerage accounts during the quarter. As of Jun 30, 2024, the company had 35.6 million active brokerage accounts, 1.93 million banking accounts and 5.4 million corporate retirement plan participants.
Our Take
Schwab’s inorganic expansion efforts continue to strengthen its position as a leading brokerage player. Higher interest rates are supporting top-line growth but increasing deposit costs will weigh on it. Mounting expenses and expectations of an economic slowdown are major headwinds.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
Earnings Dates & Expectations of Other Investment Brokers
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Jul 24.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been marginally revised lower to $2.30, suggesting a 24.3% rise from the prior-year reported number.
LPL Financial (LPLA - Free Report) is set to announce second-quarter 2024 numbers on Jul 25.
Over the past month, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 1.1% lower to $3.71, implying a 5.8% decrease from the prior-year quarter.
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Schwab's (SCHW) Q2 Earnings & Revenues Meet, Shares Slide
Charles Schwab’s (SCHW - Free Report) second-quarter 2024 adjusted earnings of 73 cents per share met the Zacks Consensus Estimate. The bottom line, however, declined 3% from the prior-year quarter.
Shares of the company tanked almost 5% in pre-market trading on weakness in interest income and trading revenues.
Results benefited from the solid performance of the asset management business, which drove the revenues. The absence of fee waivers and solid brokerage account numbers acted as tailwinds during the quarter. However, higher funding costs posed a major headwind. The company also recorded a rise in adjusted expenses.
Results excluded acquisition and integration-related costs, amortization of acquired intangibles and restructuring costs. After considering these, net income (GAAP basis) was $1.33 billion or 66 cents per share, up from $1.29 billion or 64 cents per share in the year-ago quarter. We had projected net income (GAAP) of $1.44 billion.
Revenues Up, GAAP Expenses Fall
Quarterly net revenues were $4.69 billion, which rose 1% year over year. The increase was mainly due to an 18% jump in asset management and administration fees. This was partly offset by a 6% fall in net interest income and a 3% slide in trading revenues. The top line matched the Zacks Consensus Estimate.
Total non-interest expenses (GAAP basis) decreased 1% to $2.94 billion. We had projected this metric to be $2.93 billion. Excluding non-recurring items, adjusted total expenses were $2.77 billion, up 2%.
Pre-tax profit margin increased to 37.2% from 36.3% in the prior-year quarter.
At the end of the second quarter, Schwab’s average interest-earning assets decreased 14% to $419 billion.
As of Jun 30, 2024, the annualized return on equity was 14%, down from 17% in the prior-year quarter.
Other Business Metrics
As of Jun 30, 2024, Schwab had total client assets of $9.41 trillion (up 17% year over year). During the reported quarter, net new assets — brought by new and existing clients — were $74.2 billion.
Schwab added almost 1 million new brokerage accounts during the quarter. As of Jun 30, 2024, the company had 35.6 million active brokerage accounts, 1.93 million banking accounts and 5.4 million corporate retirement plan participants.
Our Take
Schwab’s inorganic expansion efforts continue to strengthen its position as a leading brokerage player. Higher interest rates are supporting top-line growth but increasing deposit costs will weigh on it. Mounting expenses and expectations of an economic slowdown are major headwinds.
The Charles Schwab Corporation Price, Consensus and EPS Surprise
The Charles Schwab Corporation price-consensus-eps-surprise-chart | The Charles Schwab Corporation Quote
Currently, Schwab carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Dates & Expectations of Other Investment Brokers
Raymond James (RJF - Free Report) is scheduled to announce quarterly numbers on Jul 24.
Over the past 30 days, the Zacks Consensus Estimate for Raymond James’ quarterly earnings has been marginally revised lower to $2.30, suggesting a 24.3% rise from the prior-year reported number.
LPL Financial (LPLA - Free Report) is set to announce second-quarter 2024 numbers on Jul 25.
Over the past month, the Zacks Consensus Estimate for LPL Financial’s quarterly earnings has moved 1.1% lower to $3.71, implying a 5.8% decrease from the prior-year quarter.