(Bloomberg News) Charles Schwab Corp., the largest independent U.S. brokerage by client assets, reported second-quarter profit that matched the average analyst estimate as interest income offset a decline in trading.
Net income rose 16 percent to $238 million, or 20 cents a share, from $205 million, or 17 cents, a year earlier, the San Francisco-based company said in a statement yesterday. Analysts estimated profit of 20 cents a share, according to the average in a Bloomberg survey. Net revenue climbed 10 percent to $1.19 billion, beating the average analyst projection by 0.7 percent.
The brokerage, which has been weathering a near-zero interest rate environment since December 2008, exceeded analyst estimates last quarter, doubling profit on interest revenue and higher fees for managing assets. Net new assets for Charles Schwab totaled $15.4 billion last quarter, compared with $14.6 billion in the same period a year ago, according to today's statement.
"Overall, a solid headline result," Ed Ditmire, a New York-based analyst with Macquarie Group Ltd., wrote in a report today. He said the stock will likely have a "muted response."
The shares fell 0.3 percent to $14.97 at 4 p.m. in New York today. They have lost 13 percent in 2011, compared with a 3.8 percent gain in the Standard & Poor's 500 Index and a 17 percent drop for the NYSE Arca Securities Broker/Dealer Index.
Charles Schwab's daily average revenue-generating trades declined 13 percent last quarter from a year earlier, while the average revenue per trade increased 1 percent, according to today's statement. Trading revenue, which now accounts for about 17 percent of the company's total, fell 12 percent. Fees from managing assets rose 15 percent and net interest revenue increased 18 percent.
"With trading down to less than 20 percent of total revenues here, we're moving more and more toward that asset- management fees number as a metric of what really drives outcomes here from a financial perspective," Chief Financial Officer Joe Martinetto said in a telephone interview today. "Those kinds of offerings become a more important part of our story going forward."