Schwab Q3 Results Surprise Analysts; Citi Fails to Hit Estimates

Charles Schwab (SCHW) reported a 17% jump in third-quarter profits to $290 million on Tuesday, while its earnings of $0.22 per share topped Wall Street estimates by $0.02.

Its revenue jump of 15% to nearly $1.4 billion represented a 13-year record for the firm. Plus, the firm says it anticipates sales growth to outpace costs by 3%-5% next year.

The company’s client results “supported double-digit percentage increases in all three of our main revenue sources and 15% overall revenue growth versus the year-ago quarter,” according to CEO Walt Bettinger.

“Even with the continued headwind created by an interest rate environment that remains at historic lows, our third-quarter revenues surpassed all our prior quarterly results save the extraordinary spike we experienced at the height of the Internet bubble,” Bettinger said in a statement.

In the second quarter, the brokerage group saw its sales rise just 4% to $1.34 billion, while expenses jumped 9% in the period.

Schwab has more than $2 trillion in client assets, the CEO notes, and they have been growing at a compound annual rate of 10% over the past five years. Clients that own about half of these assets are enrolled in Schwab programs that include “some form of ongoing advice, reflecting a decades-long evolution at Schwab beyond our discount-brokerage roots,” he added.

Of the $1 trillion, some $890 billion are client assets tied to accounts with independent advisors. The rest are enrolled in one of Schwab’s eight retail advisory offerings.

These two groups of assets each had 17% year-over-year increases.

“Our work on this front continues, as we provide an alternative to the traditional Wall Street model by offering sophisticated, needs-based approaches designed to enable today’s investors to get the help that’s right for them,” the CEO said.

Net new assets in Q3 were close to $43 billion, up 97% from the year-ago period and, Bettinger says, “the highest in Schwab history for a summer quarter.”