Charles Schwab reported second-quarter earnings Tuesday that were a penny shy of Wall Street's expectations, but chief financial officer Christopher V. Dodds said "the company is functioning as strongly [as] or stronger than we ever have in our history."
The San Francisco brokerage said it earned 19 cents per share, up from 14 cents a year earlier. Net revenue of $1.31 billion was up 21%, and net income of $251 million rose 35% from a year earlier.
In mid-June the company said it expected to earn 19 cents or 20 cents in the quarter and the difference would depend on trading activity in the remaining two weeks of the quarter.
In an interview, Dodds said, "Trade counts weakened pretty significantly in the second half of June versus the first half." Daily average revenue trades fell to slightly below 200,000 in the second half of June from more than 250,000 in the first half.
The decline was not a concern because trading generates just 16% of Schwab's revenue, he said.
"It is certainly not anything that is a worry out here or should raise anybody's eyebrows around the underlying health and vitality of Schwab," Dodds said, "because from our perspective -- both from the client perspective and the financial perspective -- the company is functioning as strongly [as] or stronger than we ever have in our history."
Net new assets in the quarter totaled $22 billion, up 93% from the year earlier, and net new accounts rose 20%, to 173,000. Client assets at quarter's end of $1.28 trillion were up 16% from a year earlier.
Having earned 38 cents in the first half of the year, Dodds said, the company expects to surpass easily its initial 2006 earnings guidance of 70 cents per share.
Charles Schwab Bank's assets of $9.1 billion were up 75% from a year earlier. Outstanding mortgages and home equity loans of $2.1 billion were up 31%, and first mortgage originations in the quarter of $323 million were up 12% from a year earlier.