Here’s what Charles Schwab’s Q2 earnings report tells us

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jul 16, 2021
  • Charles Schwab's quarterly profit comes shy of Wall Street estimates.
  • Revenue beats expectations on 1.7 million new brokerage accounts.
  • Shares of the company were about 3% down in premarket trading.

The Charles Schwab Corp (NYSE: SCHW) said on Friday its profit in the fiscal second quarter came in lower than expected. The financial services firm added 1.7 million new brokerage accounts in Q2 that helped push revenue above estimates. Shares of the company slid roughly 3% on Friday morning.

Financial performance

Charles Schwab reported $1.265 billion of net income in the second quarter that translates to 59 cents per share. In the comparable quarter of last year, its net income was capped at a much lower $671 million or 48 cents per share.

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On an adjusted basis, the Westlake-based company earned 70 cents per share in the recent quarter. Charles Schwab generated $4.527 billion of revenue in Q2 that represents an annualised growth of 85%.

According to FactSet, experts had forecast the company to post $4.459 billion of revenue and a slightly higher 71 cents of adjusted EPS. The earnings report accounted for Charles Schwab’s TD Ameritrade acquisition completed last October.

Other notable figures

By the end of June, Charles Schwab’s core net new assets climbed to $257 billion – an over 100% increase from H1 of 2020.  Trading revenue in the second quarter declined 21% sequentially as the average daily trade volume tanked 28%, but remained strong compared to the year-ago period. Net interest revenue climbed by 2%.

At 44.6%, Charles Schwab’s pre-tax profit margin remained above 35% for the 25th consecutive quarter.

CEO Walt Bettinger’s remarks

The NYSE-listed company did not guide for the future but said signs of normalcy were evident in Q2.

“During the second quarter, signs of normalcy took root across the U.S. as vaccinations accelerated, social activities largely resumed, and people started returning to corporate offices,” CEO Walt Bettinger said.

The quarterly results also accounted for a $200 million charge related to the SEC investigation into the firm’s robo advisor.  

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