(Adds analyst comment, updates shares)
July 16 Charles Schwab Corp 's
second-quarter revenue and profit grew at double-digit rates,
slightly exceeding Wall Street expectations.
Once known as a pioneering discount broker for self-directed
investors, the San Francisco-based company now emphasizes its
full-service and advisory capabilities for investors offered
through branches and independent investment advisers.
The shift helped Schwab amass $2.4 trillion of client assets
as of June 30, the highest in its history and up 17 percent from
a year ago. The total surpassed the record $2 trillion of assets
that Merrill Lynch Wealth Management, once the world's biggest
retail broker, said it reached during the second quarter.
"Many of our clients are at a stage where they have
accumulated significant asset levels, they are increasingly
looking for professional help and they expect Schwab to be just
as proficient in serving their current needs as we are in
serving clients at other points in their investing lives," Chief
Executive Walt Bettinger said in a statement.
Schwab's second-quarter net income of $324 million was up 27
percent from a year ago, or up 28 percent on a per-share basis
to 23 cents. Its revenue of $1.48 billion climbed 11 percent.
Analysts had forecast earnings per share of 22 cents and
revenue of $1.47 billion, according to Thomson Reuters I/B/E/S.
They credited the higher results to a jump in profitable
margin lending, declines in low-yielding cash balances and
better expense control.
"Relative to our expectations, (Schwab) reported higher
revenues and lower expenses," Alex Kramm, an analyst at UBS,
wrote in a note to investors.
Schwab additionally transferred $7 million from a reserve
for potential loan losses at its bank unit to its bottom line, a
positive signal, and earned more from investing client cash for
its own benefit than it had forecast. Its 1.65 percent interest
margin in the quarter, the difference between what it pays for
client deposits and earns on the cash, beat the company's own
forecast of 1.6 percent.
New accounts opened during the second quarter fell 6 percent
from the first quarter to 242,000, but total active brokerage
accounts rose 3 percent to 9.3 million.
Schwab's return on equity rose to 12 percent from 10 percent
a year ago, and its pretax profit margin - a measure of how its
expense growth contrasts with revenue growth - hit 35.3 percent,
up from 30.8 percent a year ago. The profit margin was Schwab's
best since 2008, according to BMO Capital Markets analyst David
Shares of Schwab were down 1 cent to $27.42 in afternoon
trading. Some investors are concerned the company's
better-than-expected profit margin might induce the company to
ramp up spending in coming quarters, said one analyst who spoke
on condition of anonymity.
(Reporting by Jed Horowitz in New York; Editing by Nick