Charles Schwab cleared the $4 trillion in assets mark, according to its latest earnings report. That puts it at the same asset level as the Bank of America Merrill Lynch wealth unit.
The feat was praised by some industry watchers, like Morningstar Research Services’ Michael Wong, who leads its financial services equity team. “Schwab … accelerated the pace of client asset growth,” he said in a note on Thursday.
The firm “took only around three years for the company to go from $3 trillion to $4 trillion in client assets while it took closer to four years for the company to go from $2 trillion to $3 trillion,” explained Wong, a CPA and chartered financial analyst.
About $2.13 trillion is on Schwab’s DIY investor platform, with $1.91 trillion tied to advisory services.
If its deal to buy TD Ameritrade goes through in 2020, the discount brokerage firm could reach $5 trillion, the two firms said when the deal was announced in late November.
Plus, Schwab posted “one of its best quarters for net new client assets” on record, he adds, bringing in $77 billion in the fourth quarter of 2019 “amidst the $0-commission announcement and increased advertising.”
Individual investors moved $43.1 billion to Schwab in Q4’19, while those working with advisors added $34.2 trillion.
The company had profits of $801 million, or $0.62 per share, on $2.6 billion of net revenue in Q4’19. Its net income dropped about 9.5% from last year. The firm also missed earnings estimates, and net revenue fell 2% year over year.
Trading revenue was cut roughly in half due to the firm’s zero-commission policies on most online trades, according to Wong. Its net interest margin weakened with Federal Reserve cuts to short-term interest rates.
“While fourth-quarter results were a step back for the firm, and the current macro environment with lower interest rates will make it tougher for the company to grow revenue organically in the near term, Schwab remains highly profitable and in a strong competitive position,” Won said.
It reported $3.5 billion of net income to shareholders in 2019 — “an annual record for the firm,” he adds.