Schwab-TD Ameritrade Deal ‘on Track’: CEO Bettinger

In the first quarter, Schwab’s net interest revenue fell 6% from a year ago to $1.57 billion; asset management and fee revenue grew 10% to $827 million (including Schwab Managed and Intelligent Portfolios, as well as other “advice solutions”); and trading revenue dropped 13% to $188 million.

As for assets, they now total $3.5 trillion, with about $1.85 trillion in investor accounts and $1.65 trillion in those linked to RIA clients.

Flows in Q1’20 were $73.2 billion, with nearly $39 billion moving into Advisor Services, up 68% year over year, and more than $35 billion being added to Investor Services, up 21% from a year ago.

Schwab’s Broader Outlook

Layoffs are not likely or anticipated due to the Covid-19 pandemic, according to Chief Financial Officer Peter Crawford, who gave an overview of the firm’s 2020 performance forecast. Schwab had 20,200 employees as of March 31.

Revenue — which was down 4% to about $2.6 billion in the first quarter — could decline between 4% and 7% this year vs. 2019, assuming that the federal funds rate stays at 0-0.25%, the CFO says. Meanwhile, expenses likely will rise about 5%.

During Tuesday’s update, Schwab said the expected net interest margin in 2020 should average 1.7% — down from 2.14% in Q1’20 and 2.46% in Q1’19.

This is likely to hit pretax profits (or margins), which it anticipates will be about 38% in 2020. Margins were 45.2% on average in 2019 and 40% in Q1’20. 

Other estimates shared by the firm include its outlook for the 10-year Treasury to have an average rate of 1.04% and for the S&P 500 to end the year up 6.5% from 2,846 (on April 15); that would put it at 3,030.  

It also expects its daily-average-trade figure to be up 45% from 2019. That daily figure was about 750,000 last year. The firm made $1.97 per trade in Q1’20 vs. $4.04 in 2019.  

“For our long-term strategy, nothing has really changed … ,” Bettinger said at the start of the call, “though the world likely has … forever.”