Charles Schwab Corp (NYSE:SCHW)’s third-quarter earnings set a positive tone for the fourth quarter by exceeding analyst expectations fueled by robust trading revenue, asset management fees, and net interest income.
The US brokerage and wealth management firm posted adjusted earnings per share of $1.31 for the third quarter, above the $1.26 forecast by Deutsche Bank and the $1.24 consensus estimate.
Core adjusted EPS stood at $1.28, benefiting from a lower-than-expected adjusted tax rate of 22%, compared with the anticipated 23.5%.
Schwab delivered gains across multiple business lines. Asset management and administrative fees, trading revenue, and net interest income all outperformed expectations, with the net interest margin rising to 286 basis points, above the 282 basis points forecast. The company’s adjusted operating margin reached 51.3%, slightly ahead of analyst projections.
Client transactional cash balances surged by $19.7 billion in September, far exceeding estimates of a $2.3 billion decline, while the firm repaid nearly all Federal Home Loan Bank balances and repurchased $2.7 billion of its own stock during the quarter.
Analysts at Deutsche Bank highlighted broad strength in Schwab’s operations.
“We view the Q3 results as being very good overall, with beats in nearly all areas, including a slight beat in September's core net new assets, good results in asset management and admin fees as well as in trading revenue, and strong NII driven by better-than-expected average earnings assets,” Deutsche Bank wrote.
Analysts have a price target of $119 to $120 on the Buy-rated shares.