Charles Schwab misses estimates, gains client assets for the quarter

April 20, 2022 5:11 PM

Charles Schwab’s wealth management business saw highs and lows to start the year during a quarter of lower profits and missed targets.

The Westlake, Texas-headquartered financial services company reported $1.4 billion in net income for the first quarter on revenue of $4.7 billion, down from the $1.6 billion recorded in the fourth quarter of 2021 and $1.5 billion in the first quarter of 2021.

Adjusted earnings per share came in at 77 cents, short of the 84-cent estimate of analysts surveyed by Bloomberg, and the $4.7 billion in net revenue came in slightly below consensus estimates of $4.8 billion.

FBI office in Washington, Bloomberg News

Regulation and compliance

Charles Schwab is owed $968K under financial advisor’s fraud sentence

March 31, 2022 4:06 PM

The firm also reported a slowdown in daily trade volume as customers placed 6.58 million daily average trades in the first quarter, a decline of 22% from the year-ago period.

“Our first quarter 2022 financial results reflected our ongoing success with clients while contending with the effects of a challenging environment,” Chief Financial Officer Peter Crawford said in quarterly earnings statements. “Total revenues of $4.7 billion were just under the record level set in the year-ago quarter amidst that extraordinary surge in client activity, with increases in net interest revenue and asset management and administration fees essentially offsetting the effects of trading activity returning to more moderate levels.”

Focusing on the wins

Despite a collection of annual declines, CEO Walt Bettinger said that the company's business momentum remained “quite strong” throughout the first quarter. He noted year-over-year growth in total client assets, core net new assets and active brokerage accounts as contributors to that continued momentum.

Bettinger also cited the announcement of Schwab Personalized Indexing, its proprietary direct indexing solution, and the introduction of Schwab’s thematic stock lists as two significant steps the company’s taken in the area of personalized investing.

“We see SPI and our thematic lists as initial steps in giving clients more power in personalizing their investments to reflect their unique circumstances and perspectives. Similarly, simplifying the research experience for clients when selecting mutual funds gives them more power to build their financial futures with investments that make sense for them,” Bettinger said in a statement. “Schwab’s strong growth reflects the enduring appeal of that strategy for millions of investors as well as the independent advisors who serve them.”

Asset ups and downs

Schwab generated $120 billion in net new assets in the first quarter, down about 10% when compared to both the final three months of 2021 and one year ago. The RIA custody business, Schwab Advisor Services, brought in $54.6 billion, and the retail Investor Services unit brought in $65.9 billion.

Total client assets reached $7.86 trillion, up 11% year over year but down 3% when compared to last quarter. Investor Services saw $4.23 trillion in client assets while Advisor Services recorded $3.63 trillion.

New accounts far from record levels

Schwab opened 1.2 million new brokerage accounts in the first quarter of 2022, down 62% from the record 3.2 million new brokerage accounts in the first quarter of 2021. The brokerage has opened more than 1 million new brokerage accounts for the six consecutive quarters.

The quarter ended with 33.6 million active brokerage accounts at Schwab, up 5% year over year and up 1% for the quarter.

Remarks on Q1 2022

“We helped clients face a complex set of crosscurrents, which included an ongoing economic recovery supported by continued progress against the COVID pandemic, rising inflation, geopolitical turmoil driven by the Russian invasion of Ukraine, the Fed initiating its first tightening cycle since late 2015 and more volatile equity markets that remained below year-end 2021 levels for the vast majority of the period,” Bettinger said in a statement.