Schwab profit up 49%, fueled by new brokerage accounts

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Charles Schwab can boast another record quarter as it sets pace to surpass its 2017 profits.

Third-quarter net income rose to $923 million up 7% from the prior quarter and up 49% from the same period a year ago.

For the nine months of 2018, Schwab’s net income reached $2.6 billion, an increase of 46% from the same period last year.

A surge in new brokerage accounts fueled gains, according to CEO Walt Bettinger. In the third quarter alone, 369,000 new accounts were opened and 1.2 million have been started this year. That’s the highest nine-month total in the company’s history, according to Schwab’s news release.

New account growth came from both the retail channel and the RIAs who custody on Schwab’s platform, which together pushed the company’s net new assets to $53.5 billion, another third-quarter record for the company, Bettinger said. In the first nine months of 2018, Schwab has generated $172.5 billion in core net new assets, beating all of the company’s previous full-year totals, except for 2017’s.

“Since 2008, we have increased brokerage accounts over 50% and tripled our client asset base, all while driving down our ratio of expenses to client assets by a third — a notable accomplishment for a U.S. investment services firm of our size, especially without any substantial acquisitions,” Bettinger said in a statement. He also noted that the firm is “not letting up,” having attracted at least two dollars in inflows for every dollar lost to a competitor for past six quarters.

Schwab’s CFO Peter Crawford also added that “a generally favorable economic environment helped drive the thirteenth consecutive quarter of record revenues.”

Revenue rose to $2.6 billion in the third quarter, a 19% increase from the same time period last year.

Schwab’s advisor services has also added 173 new RIA teams this year, an acquisition pace that surpasses all prior year annual totals, excluding 2017.

Bettinger said the company will reinvest in the company in three areas: application modernization, business process transformation and digital accelerator. This “should all help to improve our cost structure advantage versus others in our industry, along with our ability to attract and serve an increasing share of the $45 trillion in U.S. investable wealth.”

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Earnings Walt Bettinger Charles Schwab