Schwab’s Monthly Metrics Improve Significantly; Rate Hike To Propel Asset Growth

by Trefis Team
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Charles Schwab
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Charles Schwab‘s (NYSE:SCHW) positive start to the year continued as the brokerage saw significant improvement across its key metrics in February. Despite a fairly volatile trading period in February last year due to an economic slowdown and oil price rally, the brokerage’s daily trading volumes grew marginally. The company’s price cut has also likely contributed to the growth in trading volumes (+4% sequentially). Since trading commissions generate only a small percentage of the company’s overall revenue, 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.

Interest earning assets, which generate over 45% of Schwab’s revenues, continued their strong growth (~ 21% year over year) in February. With the confirmation of the recent interest rate hike and the Fed’s guidance for more hikes in 2017, these trends will likely continue, sustaining the upward trend in both assets and the revenues from them.

Assets under management (AUM) have also continued to grow, and the brokerage’s digital advisory business and focus on newer investment products are likely to drive further AUM growth and consequently, higher investment product fees.

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