Charles Schwab Q2 Profit Declines, Misses View; But Revenues Top

(RTTNews) - Brokerage and investment manager Charles Schwab Corp. (SCHW) on Tuesday reported an 11 percent decline in profit for the second quarter as higher expenses more than offset an increase in revenues and growth in new brokerage accounts. In addition, the prior-year quarter's results include a one-time gain.

Earnings per share for the latest quarter missed analysts' expectations by a penny, while revenues topped their estimates.

The San Francisco, California-based company's net interest revenue for the quarter increased 3 percent from last year to $473 million, despite short-term interest rates being below prior-year levels.

Asset management and administration fees grew 15 percent to $572 million, reflecting strength in asset gathering and advice enrollments. However, money market fund fee waivers rose 8 percent to $157 million. Trading revenue rose 7 percent to $235 million on a modest rebound in client activity.

Clients' daily average revenue trades in the quarter rose 6 percent last year, while average revenue per revenue trade edged up by $0.04 to $12.19. Charles Schwab ended the second quarter with $2.05 trillion in total client assets, up 14 percent year-over-year.

New brokerage accounts at the end of the second quarter increased 10 percent from the year-ago period to 243,000. The company's client base grew 3 percent to 9 million active brokerage accounts, while banking accounts increased 11 percent to 910,000 and corporate retirement plan participants rose 5 percent to 1.6 million.

Charles Schwab's net income available to common stockholders for the second quarter was $233 million or $0.18 per share, down from $261 million or $0.20 per share in the prior-year quarter. The prior-year quarter's results include an after-tax gain of $44 million, relating to the resolution of a vendor dispute.

On average, 22 analysts polled by Thomson Reuters expected the company to report earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

Total net revenues for the quarter grew 4 percent to $1.34 billion from $1.28 billion in the same quarter last year and topped analysts' consensus estimate of $1.32 billion.

Total expenses excluding interest rose 9 percent from the same period last year to $925 million.

Looking ahead, Joe Martinetto, CFO of Charles Schwab said, "With the economic recovery and overall rate environment currently pointing towards continued easing of headwinds for the company, the healthy balance sheet and solid capital base we've built keep us well positioned to drive growth going forward."

In Tuesday's regular session, SCHW is trading at $20.91, down $0.80 or 3.68 percent on a volume of 2.39 million shares.