Schwab Sees Further Growth In Assets In January; Cut In Commissions Likely To Attract Greater Volumes
Charles Schwab (NYSE:SCHW) saw a positive start to the year, with a marked improvement across most of its key metrics in January. Interest earning assets, which generate over 45% of the company’s revenues, continued their strong growth (~ 20% year over year). The possibility of a series of hikes in the year ahead has been a major driver of the surge in these assets.
With the demand for tech-advanced products and expert advice on asset management having scaled over time, the brokerage’s assets under management have continued to grow at a notable rate ( 17% year over year in January). The company’s continued efforts in innovating new products – as well as its recent foray into low-cost and efficient digital advisory services – are likely to further boost these assets. Schwab is the among the top 5 ETF providers in the U.S. and, with the launch of the Schwab Intelligent Platform in 2015, was among the first of the established players to enter the robo-advisor industry.
Trading volumes saw a dip in January, after having a positive prior quarter. Amid tough competition from competing full-service and discount brokerages, the company decided to slash its commissions. Trading commissions generate only a small percentage of the company’s overall revenue, and we believe the price cut should help it to recapture market share, and shouldn’t have a major impact on revenue and EPS growth in the near term.
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