A pedestrian passes in front of a subsidiary of Charles Schwab Corp. from downtown Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images
Charles Schwab, a retail investor, exceeded Wall Street’s earnings and revenue expectations for the fourth quarter, the first earnings report since Schwab’s $ 26 billion acquisition of rival TD Ameritrade.
Charles Schwab reported adjusted earnings of 74 cents a share on Tuesday, exceeding estimates of 71 cents a share, according to Refinitiv. Revenue was $ 4.18 billion, higher than the $ 4.108 billion forecast.
Schwab said it now operates nearly 29.6 million brokerage accounts.
Shares of Schwab rose to a low level after rising slightly after Tuesday’s opening bell.
Total customer assets for Schwab increased to a record $ 6.69 trillion at the end of 2020, a 66% year-on-year increase, supported by TD Ameritrade’s added assets.
Schwab added 15.77 million new customers in the fourth quarter, which includes 14.5 million new brokerage accounts from the TD Ameritrade merger.
“The record-breaking performance of the operation and the closing of the largest brokerage acquisition in history in the fourth quarter of 2020 was a milestone for an extraordinary year,” Schwab CEO Walt Bettinger told clients.
Average daily transactions rose to 5.8 million in the fourth quarter, the highest on record. Schwab customers reached a peak of 7.8 million transactions on November 9th.
The record trading activity of customers and the addition of TD Ameritrade led to an 88% increase in trading revenues, up to $ 1.4 billion. This came despite the year-round impact of commission-free trading, which was implemented at the end of 2019.
Schwab and other large brokers are coming off the record year for retail investment in 2020. Unprecedented market volatility and the Covid-19 blockchain have created a unique opportunity for ordinary investors to play the surprising but epic return of equities.
“In this context, customer involvement with financial markets has increased to record levels – pro-forma combined households between us and companies have increased by more than 175% compared to 2019, with the number of households placing transactions by more than 50% over a year”, added Bettinger.
Shares of Schwab shares have risen by almost 60% since the last earnings report in October 2020. In addition to the retail investment boom and the synergy of TD Ameritrade acquisitions, Schwab is receiving a boost from rising interest rates.
Schwab shares remain strongly correlated with the 10-year US return, as the broker earns a breakdown of the client’s cash held in each account by purchasing higher-yield instruments such as mortgage-backed securities and lending financed from these deposits.
Schwab’s fourth-quarter results led e-brokers to adjust their 2020 revenue to $ 2.45 per share and $ 11.7 billion in revenue.
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