July 18, 2011

Q2 Earnings: Schwab's Net Income Meets Estimates on ‘Soft’ Trading

Net new assets in advisory accounts up year over year but down from previous quarter

Charles Schwab said it had net income of $238 million for the second quarter of 2011, or 20 cents a share, up roughly 17% from $205 million, or 17 cents a share, in the year-ago period. Net revenues were nearly $1.2 billion in the recent period, up about 10% from close to $1.1 billion a year earlier. Both results met analysts’ estimates.

For the six months ended June 30, 2011, the company’s net income was $481 million, 43% higher than the $337 million earned in the year-earlier period excluding certain charges relating to the Schwab YieldPlus Fund and the company’s affinity credit card program.

"While trading activity is relatively soft, our diverse suite of investment products and services is propelling our ongoing growth, as clients increasingly opt to enroll in our advisory solutions,” said CEO Walt Bettinger in a press release.

The total number of average daily trades declined 9% year over year and 16% quarter over quarter to about 397,000. The amount of revenue per trade, though, rose slightly to $12.23 over both time periods

Schwab says client assets in Schwab retail advisory offerings grew 20% year over year to $113 billion as of June 30.

“Adding in assets under the guidance of an independent fee-based advisor brings total advised assets at quarter-end to $811 billion, up 17%,” Bettinger explained. “Overall, we ended June serving 8.1 million active brokerage accounts, 745,000 banking accounts and 1.44 million retirement-plan participants.”

"Net new assets totaled $15.4 billion for the second quarter, up 10% from the second quarter of 2010, after adjusting for a large clearing outflow last year," Bettinger said, "and total client assets reached $1.66 trillion at quarter-end, up 22% from a year ago.”

In the second quarter, client assets held in advisory-services accounts totaled $697.8 billion, up 17% year over year and up slightly, 1%, from the first quarter. Net new assets in these accounts grew 4% year over year to $10.6 billion but declined 25% from the first quarter’s $14.2 billion.

“We are on the right course,” said Bettinger in a statement. “Consistent with our ongoing efforts to help clients manage their finances when and how they choose, we now offer a broad array of mobile investing, banking and deposit capabilities as part of the integrated brokerage and banking services available to iPhone and Android smartphone users.

For independent advisors, Schwab says it has enhanced its Business Consulting Services is developing an integrated technology platform to be unveiled at the upcoming IMPACT meeting in the fall. 

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