Schwab revenue tops estimates following last year’s tumult

CHARLES Schwab’s first-quarter net revenue topped estimates as the retail brokerage tries to put 2023’s turbulence behind it.

The Westlake, Texas-based firm reported US$4.74 billion in net revenue for the three months to March, down 7.3 per cent from a year earlier but topping analysts’ estimates of US$4.71 billion. Schwab expects its net interest margin to expand till 2024 and approach 3 per cent before the end of next year as the firm prioritises paying down costlier debt, according to a company presentation.

“Against an improved macroeconomic backdrop, clients entrusted us with US$96 billion in core net new assets – including US$45 billion in March alone,” chief executive officer Walt Bettinger said. “At the same time, solid investor engagement contributed to over one million new brokerage account openings during the quarter.”

Schwab shares climbed 4.6 per cent to US$73.25 at 9.44 am in New York. They have gained 6.3 per cent this year.

The firm plans to resume opportunistic stock repurchases as “temporary headwinds continue to subside”, Schwab said.

“Capital return is a very, very important part of our financial formula,” chief financial officer Peter Crawford said.

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The firm reported US$269.5 billion in total deposits, slightly below estimates of US$270.5 billion for the period. Schwab’s deposits have been watched closely as consumers sought higher-yielding alternatives amid escalated interest rates. That shuffling of money, coupled with Schwab’s association with last year’s regional banking chaos, marked 2023 as one of the firm’s most challenging years in decades, Bettinger had said.

Net new assets totalled US$88.2 billion in the first quarter, down 41 per cent from a year earlier. The first-quarter figure is still up from the last three months of 2023, when Schwab reported US$66.3 billion in total net new assets.

Bettinger attributed some of the decline to attrition associated with the acquisition and integration of rival TD Ameritrade Holding. Still, he said on the call, the decline continues to moderate and remains better than anticipated. The last 10 per cent of TD Ameritrade clients and their accounts will be converted to Schwab in May, he said. BLOOMBERG