A pedestrian passes in front of a Charles Schwab Corp. bank branch. in downtown Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images
Retail investment giant Charles Schwab exceeded Wall Street’s fourth-quarter earnings and revenue expectations, the first earnings report following Schwab’s acquisition of rival TD Ameritrade for $ 26 billion.
Charles Schwab reported adjusted earnings of 74 cents a share on Tuesday, above the estimates of 71 cents a share, according to Refinitiv. Sales reached $ 4.18 billion, higher than the predicted $ 4.18 billion.
Schwab said it now manages nearly 29.6 million brokerage accounts.
Stocks of Schwab Rose were flat after a slight rise after the opening bell on Tuesday.
Schwab’s total customer equity rose to a record $ 6.69 trillion at the end of 2020, up 66% year-over-year, supported by added assets from TD Ameritrade.
Schwab added 15.77 million new clients in the fourth quarter, including 14.5 million new brokerage accounts from the merger with TD Ameritrade.
“A record performance and the completion of the largest brokerage acquisition in history in the fourth quarter of 2020 was an extraordinary culmination of an extraordinary year,” Walt Bettinger, Schwab CEO, told clients.
Average daily transactions rose to 5.8 million in the fourth quarter, the highest ever. Schwab customers peaked at 7.8 million transactions on Nov. 9.
Record client trading activity and the addition of TD Ameritrade led to an 88% increase in trading revenue to $ 1.4 billion. This was despite the impact of full year commission-free trading, which was implemented in late 2019.
Schwab and the other major brokers are off of a record year for retail investing in 2020. Unprecedented market volatility and Covid-19 lockdowns created a unique opportunity for mainstream investors to play in the surprising yet epic comeback of stocks.
“ Against this backdrop, customer engagement in the financial markets soared to record levels – the pro-forma combined households from new to business increased by more than 175% compared to 2019, with the number of households placing transactions by more than 50% year-over-year, ”added Bettinger.
Schwab shares are up nearly 60% since the last earnings report in October 2020. In addition to the retail investment boom and the synergy of TD Ameritrade acquisition, Schwab is getting a boost from the rise in interest rates.
Schwab’s stock remains highly correlated with US 10-year returns as the broker earns a spread of the client’s money held in each account by purchasing higher yielding instruments such as mortgage-backed securities and by lending financed by those deposits.
Schwab’s fourth-quarter results pushed full-year 2020 adjusted earnings from e-brokers to $ 2.45 per share and revenue to $ 11.7 billion.
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