Schwab Earnings Hold Up Despite Plunging Trading Revenue, Ambivalent Account Numbers

Tuesday, July 19, 2011 07:18
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Schwab Earnings Hold Up Despite Plunging Trading Revenue, Ambivalent Account Numbers

Charles Schwab reported decent bottom line numbers yesterday, but drilling down into the revenue and asset mix reveals that the second quarter was kind of slow for the massive discount brokerage and custody firm.

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While Schwab boosted its overall client assets 22% to a whopping $1.6 trillion in the quarter, its profit growth lagged significantly, up only 17%.

 

The root of the problem: while more investors were parking their money on the Schwab platform, fewer were trading. In terms of account activity, last May was 23% worse for the firm than it was in the previous year, while April and June were flat at best.

 

In all, trading revenue sank 12% on an annualized basis and 14% quarter over quarter.

 

They did manage to capture about 80,000 new brokerage accounts, but lost 28,000 retirement plan participants.

 

And on the advisory side -- the firm's crowning glory, to some analysts -- new assets were hard for affiliated RIAs to come by. Overall advisory AUM surged a healthy 17% year over year, but only edged up 1% from the first quarter.

 

New advisory assets are still up 4% over last year, but down a disturbing 25% over last quarter. 

 

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