Schwab Meets Expectations: Q4 Earnings 2012

Its Advisor Services unit now has close to $790 billion in client assets as of December 2012

Schwab CEO Walt Bettinger at Schwab Impact. Schwab CEO Walt Bettinger at Schwab Impact.

Charles Schwab (SCHW) said early Wednesday that its fourth-quarter 2012 net income was $211 million, up 29% from a year ago but down 15% from the previous quarter. Earnings per share in the period were $0.15, a jump of 15% from last year and a decline of 21% from the third quarter.

Sales rose 9% year over year to $1.215 billion from $1.113 billion and 2% from last quarter’s $1.196.

Equity analysts had expected the firm’s fourth-quarter EPS to be $0.15 and its sales to be $1.21 billion.

Net income for the twelve months ended Dec. 31 was $928 million, up 7% from 2011. (Schwab’s 2012 results include an after-tax gain of about $44 million relating to the resolution of a vendor dispute and a non-recurring state tax benefit of some $20 million, which were recorded in the second and third quarters, respectively.)

“Our individual client loyalty scores reached new highs during the year, and our client metrics ended strongly, with December core net new assets totaling a record $22.6 billion, 28% higher than the previous record set in March 2008,” said CEO and President Walt Bettinger, in a press release.

“Core net new assets totaled $112.4 billion for 2012, up 37% over the prior year. We ended the year with a record $1.95 trillion in total client assets, up 16% over December 2011. We added 900,000 new brokerage accounts to our client base during 2012, and active brokerage accounts reached a record 8.8 million at year-end, up 3% year over year. In addition, we served 865,000 banking accounts and 1.6 million corporate retirement plan participants as of month-end December 2012, up 11% and 5%, respectively.”

The level of clients’ daily trading was 450,000 in the fourth quarter, down 2% year over year but up 12% from the third quarter. The average revenue per revenue trade rose 2% year over year to $12.49 million in the most-recent period.

Net new assets were $64.4 billion in the fourth quarter vs. $20.4 in the third quarter and $21.5 billion a year ago. Asset inflows for the Advisor Services unit were $24.4 billion vs. $9.5 billion and $9.2 billion respectively.

On a monthly basis, Schwab’s overall net new assets were $24.7 billion in October, $16.23 billion in November and $23.5 billion in December, a 45% jump over the flows in December 2011. For the full year, net new assets increased 124% and total client assets were nearly $1.952 trillion—an increase of 2% from November 2012 and 16% from December 2011.

Advisor Services’ level of client assets was $788.5 billion as of Dec. 31, up from $762.3 billion in the prior quarter and $679.0 billion a year before.

Asset management and administrative fees companywide were $539 million in the fourth quarter of 2012 vs. $458 last year. They totaled $2.04 billion for the full year vs. $1.93 billion in 2011.

Schwab notes that its December 2012 net inflows included $900 million from its acquisition of Thomas Partners. Some $4.5 billion of November 2012 flows were from a mutual fund clearing services client, and October 2012 flows encompassed inflows of $15.7 billion from a mutual fund clearing-services client.

“By continuing to challenge the status quo in investing services we believe that both our clients and the company win,” Bettinger added. “Our progress in completing and delivering a number of significant innovations in our client service capabilities remained on track throughout 2012. For example, our new index-based 401(k) offering has 41 companies committed to participate and more than 200 actively considering enrollment; our new independent branches were open in 12 locations by year-end; and our expanded mobile and tablet solutions are already being utilized by over half a million clients.”

Check out the Fourth Quarter 2012 Earnings Calendar at AdvisorOne.

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