Schwab Continues to Grow on the Back of Client-Focused Initiatives
Charles Schwab Corporation (NYSE:SCHW) recently released its results for the first quarter of 2011. Most notably, the company more than doubled its net income for the quarter from the value in the previous quarter. [1] We updated our analysis to incorporate the latest numbers, and consequently updated our price estimate for Charles Schwab to $19.64, largely in line with our prior estimate. Schwab competes with other online brokerage, banking and financial services firms like E-Trade (NASDAQ:ETFC), Ameritrade (NYSE:AMTD), Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC).
Schwab engages in securities brokerage, banking, and related financial services through its subsidiaries that manage a combined $1.65 trillion in client assets. The company had 8.1 million active brokerage accounts, 1.4 million corporate retirement plan participants, and 719,000 banking accounts at the end of the Q1 2011.
Results at a Glance
Schwab reported net revenues of $1.2 billion for the most recent quarter. This is 23% higher than the revenues of $978 million for the same quarter a year ago, and signifies a 7% growth over the revenues for the previous quarter ending December 2010. Net income for the quarter was $243 million, representing a 104% jump from the $119 million generated in the previous quarter. Interestingly, if we exclude the $124 million litigation charges related to the Schwab YieldPlus Fund that Schwab bore in the previous quarter, the net income figures for the two periods are exactly the same.
Schwab also added a total of $25.1 billion in net new assets, and recorded yields of 1.96% on its interest-bearing assets – up from 1.91% a year ago.
The Year Ahead
Schwab has been strengthening its position in the extremely competitive online brokerage industry by adding new features for its clients. The announcement to acquire optionsXpress was a part of this ongoing strategy for Schwab. You can read more about the impact of the acquisition on the company’s value in our article titled, ‘Chuck Adds optionsXpress to Schwab’s Portfolio‘. Schwab is also poised to enter the foreign exchange trading market very soon – something we discussed in detail in our article ‘Schwab Acquisition Gives Customers More Options‘.
The continued focus on clients is evident from the announcement to increase spending in 2011 on client-related initiatives by nearly 40% over the figures for 2010 – specifically in the areas of fixed-income, global investing, mobile and tablet solutions, and advisor-focused technology. [1]
See our complete analysis for Charles Schwab Corporation’s stock
Notes:- Schwab Reports First Quarter Revenues up 23% Year-over-Year, Schwab Press Releases, April 15 2011 [↩] [↩]