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Schwab Profits Up 36% in Q1 as Assets Flow Into ETF, Robo Platforms

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Charles Schwab (SCHW) said early Friday that its first-quarter profit grew 36% while revenues increased 16% from a year ago. Schwab’s RIA custody business–Advisor Services–had higher net new assets in the quarter compared to last year, while its Intelligent Portfolio robo-advisor platform ended the quarter with $6.6 billion total in its retail and advisor versions.

The firm’s Q1 2016 earnings were $412 million, or $0.29 per share, up from $302 million, or $0.22 per share, in Q1 ’15. The earnings net analysts’ expectations and represented the highest year-over-year jump in Schwab’s earnings history, the company said. Sales beat estimates at $1.76 billion, up 16% from Q1 2015.

The firm also reported that assets in its Intelligent Portfolios platform, or “digital advice,” as CEO Walt Bettinger called them, expanded 25% from 2015′s fourth quarter to the $6.6 billion level. Schwab Intelligent Portfolios was launched in March 2015; Schwab Institutional Intelligent Portfolios was launched in June 2015.

Total client assets for the firm as of March 31 were $2.56 trillion, up 2% from the prior quarter and 1% from a year ago. Advisor Services assets grew 2% from last year to $1.18 trillion, while retail assets grew 1%, to $1.38 trillion.

Furthermore, according to Bettinger, assets in Schwab ETF OneSource supermarket reached $52.3 billion, “growing at a 50% compound annual growth rate since inception [in February 2014].” The firm has added 14 ETFs to this program in 2016, including those with a strategic beta, currency-hedging and fixed income focus.

Schwab also it said its overall pretax profit margin was 37.1% in Q1 ’16, up from 31.7% in Q1 ’15 but down from 38.1% in Q4 ’15.

Advisor Services

In terms of net new assets, Advisor Services had inflows of $16.3 billion in Q1 ’16 vs. inflows of $21.3 billion in Q4 ’15 and $6 billion in Q1 ’15, when the firm reported an outflow of $11.6 billion tied to the ending of a cash management relationship.

As for asset management and administrative fees, Advisor Services had some $215 million in Q1 ’16 vs. $220 million a year ago. Across the company, though, these fees grew to $699 million for the period, up from $644 a year earlier.

“The ongoing effect of the Fed’s initial interest rate hike in December has provided a glimpse of Schwab’s earnings power as rates normalize, with our diversified revenue streams generating strong first quarter revenue growth and our steady expense discipline continuing,” CFO Joe Martinetto said in a statement.