In line with its own worst-case-scenario forecast, Charles Schwab Corp. reported a significant decline in first-quarter earnings due in part to a 19% decline in trading revenue. The San Francisco-based discount brokerage company announced Thursday that profits declined 45% to $119 million, or 10 cents per share, from $218 million, or 19 cents per share, a year earlier. Revenue declined 12% to $978 million.
Analysts had expected earnings of 11 cents on $982 million of revenue, according to Thomson Reuters, although Schwab warned last month that earnings could be as low as 10 cents per share as trading volume has declined. During the first quarter, Schwab’s [SCHW] average daily trading declined 6% from a year earlier.
The company has increased its marketing expenses over the past few months in an effort to gather more customers. "We believe that the worst of the environmental pressure on our revenues is now behind us, and that our strong business momentum will help us achieve improving financial performance in the coming months," Charles Schwab, the company’s chairman, said in a statement.
Net new accounts for the quarter increased 20% from a year earlier to 52,000. Total accounts rose 3% to 5.4 million as of March 31. “As the economy and financial markets begin to recover following the credit crisis of recent years, we are seeing clear evidence that our client-focused strategy is resonating with both prospects and existing clients,” said Walt Bettinger, Schwab’s chief executive officer. “Our investments in improved pricing, client solutions, service and our brand are yielding continued strength in our key metrics.”
He said total client assets under management increased 36% to $1.49 trillion from a year earlier and new brokerage accounts increased to 230,000, the highest since the first quarter of 2008 and up 11% from a year earlier.
Analysts said the surge in assets under management can be attributed to improved market conditions. Despite the increase in asset, fees that Schwab generated from asset management and administration fell 16% to $420 million from a year earlier.
As of March 31, Schwab had 7.8 million total brokerage accounts, 768,000 banking accounts, and 1.5 million retirement plan participants. Schwab said that this year the company plans to continue adding and improving its products and services. In January, it reduced commissions on online equity and non-Schwab ETF trades to $8.95, introduced an ETF-based advisory program that has already attracted over $500 million in assets, and expanded its fixed income products with a series of municipal bond “ladders” managed by PIMCO.