Charles Schwab (NYSE:SCHW) has reported a strong rise in first-quarter revenue and earnings as it continued to attract new client investment inflows and benefitted from a rising interest-rate environment.
The company, which provides securities brokerage, banking and related financial services, grew 1Q revenue by 10% to $5.12 billion. Net income increased by 14% to $1.6 billion, resulting in adjusted earnings per share (EPS) of $0.93, up 21% and beating estimates for adjusted EPS of $0.90.
During a quarter that presented clients with a “mixed macroeconomic backdrop,” co-chairman and CEO Walt Bettinger said customers opened over 1 million new brokerage accounts, adding $132 billion of core net new assets - including over $53 billion in March alone.
While Investor Services gathered approximately $60 billion during the period, Bettinger noted that its Advisor Services segment posted a record first quarter with over $71 billion in net flows and attracted 70 transitioning advisor teams. Near-record inflows across both its primary businesses represented an annualized organic growth rate north of 7% and helped push total client assets to $7.58 trillion at quarter-end.
“Our first quarter revenue picture reflected the company’s sustained business momentum and the benefits of rising interest rates, partially offset by clients’ asset allocation decisions,” chief financial officer Peter Crawford added.
“Total revenue was up 10% year-over-year and exceeded $5 billion for the fourth consecutive quarter. While bank deposits shrank by 11% versus the prior year-end as clients realigned their allocations across our expansive selection of transaction and investment cash solutions, we observed a decline in the average daily pace of bank sweep movements from January to March – even when allowing for a temporary spike in activity at the onset of the banking system turmoil.”
After increasing its quarterly common dividend by 14% to $0.25 per share and returning capital via common and preferred stock repurchase, the company said it has decided to pause its active buyback program “in light of recent events within the US banking sector.”
“Ultimately, we believe the current headwinds will prove transitory and we remain well positioned to deliver long-term value to our stockholders,” Crawford concluded.
The company's shares gained about 1% high in pre-market trading.
Contact the author at stephen.gunnion@proactiveinvestors.com