Charles Schwab Client Assets Fell $1.4 Trillion to $6.6 trillion in the Third Quarter

Stockbroker Charles Schwab reported better than expected third quarter earnings before the open Monday. However, the source of the beat was record quarterly revenues from a 44% jump in interest revenue to $2.9 billion. The same high interest rates that have cruelled the stock market. This is what concerns investors. $SCHW stock went from up 3% on the initial headlines when Schwab management said the results were “strongest quarterly performance in company history,”

A deep dive into the report sent the stock to be down 4%, total client assets fell 13% to $6.6 trillion, a $1.4 trillion impact from lower market valuations on client portfolios over the last year. Interactive Brokers (IBKR) report Tuesday.

The increased volatility and higher Fed Funds rate mean higher commission and interest income IF you keep your clients, and they keep trading.

Charles Schwab Q3 22 Earnings

Q3 2022 earnings release at 7 a.m. ET; conference call at 8:30 a.m. ET

  • Adj EPS: $1.10 (exp $1.05)
  • Revenue: $5.5B (exp $5.41B)
  • Driving record quarterly revenues was a 44% jump in interest revenue to $2.9 billion.
  • Total active brokerage accounts rose 4% year-over-year to 34 million.
  • Total client assets fell 13% to $6.6 trillion, a $1.4 trillion impact from lower market valuations on client portfolios over the last year.
  • $66.56 -2.42 (-3.51%) Pre-Market. For the year -14.45 (-17.86%)

Looking through analyst reports, what sums up the realization of risk and loss in this current climate is Citi analyst Christopher Allen. He said in a note he prefers brokerages with less exposure to client cash sorting and capital markets. Cash sorting being when customers move their uninvested cash into money market funds or higher-yield alternatives.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 33.9 million active brokerage accounts, 2.3 million corporate retirement plan participants, 1.7 million banking accounts, and $6.64 trillion in client assets. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors.

Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade
Clearing, Inc., (members SIPC, https://www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products.

TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are separate but affiliated companies and subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The TorontoDominion Bank.

Source: Schwab

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