Schwab’s Q4 Revenues To Grow Under The Influence Of Rate Hike And Improving Market Conditions

+1.00%
Upside
72.21
Market
72.93
Trefis
SCHW: Charles Schwab logo
SCHW
Charles Schwab

Charles Schwab’s (NYSE:SCHW)  performance during the first nine months of 2016 has been strong and we expect this trend to continue when the company reports its fourth quarter earnings on January 18th. The consensus estimates suggest nearly 17% growth year to year in the brokerage’s revenue and 50% growth in its EPS. We believe that growth will be visible in all its business lines including trading, asset management and interest on assets. Trading volumes saw a surge in November and we believe that the growth continued in the December quarter due to increased volatility in the stock market resulting from the recently concluded U.S. presidential elections and improved macro factors such as GDP and employment rate. Additionally, with the brokerage generating around 40% of its revenues from interest earning assets, we believe the recent interest rate hike by the Fed boosted its earnings.

Revenue From Interest Earning Assets Has Grown Under The Likelihood Of A Rate Hike 

The interest earning assets continued to grow at a very strong rate throughout the year until November, with over 30% growth in these assets and related revenue. We believe this is partially due to the Fed rate hikes,  both those in last December and in 2015 and rate hike expected in the year ahead. Consequently, revenues from this segment, which contribute around 40% to the company’s overall revenues, are expected to have gone up in the quarter.

Trading Revenues To Grow Due To Presidential Election And Improving Market Conditions

Although the month of October registered a decline in trading volumes, November saw a significant surge of 16%. We believe the growth momentum spilled over in December as well because of the highly volatile market conditions resulting from the presidential election results and improvement in the U.S. economy. Consequently, trading commissions are expected to propel the brokerage’s top-line.

Effective Advisory and Technologically-Advanced Platform To Propel Growth In Assets Under Management

Relevant Articles
  1. Charles Schwab Stock To Top The Consensus In Q3
  2. What To Expect From Charles Schwab Stock?
  3. Charles Schwab Stock To Post Mixed Result In Q2
  4. Charles Schwab Stock Has An 84% Upside Potential To Its Pre-Inflation Peak
  5. Charles Schwab Stock Is Undervalued
  6. What To Expect From Charles Schwab Stock In Q4?

The brokerage has continuously provided effective and actionable insights to its clients in order to accomplish financial goals. The brokerage has steadily attracted clients and assets with a combination of financial products, service and value. With its robo-advisor service, the Schwab Intelligent Platform, assets under management have also grown at a notable pace through the year, thereby crossing $10 billion from this segment. With over $ 2.7 trillion in total client assets through November 2016, we expect the growth to have continued in December. Being another major driver of the brokerage’s revenue, growth in these assets is likely to boost the asset management fees and hence the overall revenues.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research