The Charles Schwab Corporation (SCHW) released fourth quarter earnings for 2017 almost a month ago today and although the company beat estimates, investors are still unsteady about the near-term prospects.
Since coming out with earnings of 44 cents per share, the stock has declined nearly 7%. The poor performance has left a few analysts bewildered given the fact that the actual earnings release was a positive one relative to the expectations of analysts. At the time of the earnings release, the Zacks estimate for SCHW was 41%; the surprise actual 44 cents a share earnings was therefore considered to be the catalyst the stock would need for a upward lift. But that didn’t happen.
What’s even stranger is that SCHW saw strong numbers across other areas of its business. Actual earnings grew 22% over the same period of 2016 and quarterly net income attributable to shareholders was $550M. This latter figure represented a 14% year over year increase for SCHW.
The company also saw a lift in net revenues for the quarter. For quarter four 2017, SCHW reported net revenues of $2.24B or a 14% increase upon figures recorded for the same quarter in 2017. Getting more granular we see that SCHW saw a 8% climb in its administration fees; the company also saw a 26% increase in net interest revenues with other revenues rounding out the positive movement with a 26% increase.
Overall net revenue growth for 2017 was $8.62B, up 15% over 2016. This figure was more or less level with the Zacks estimate. The really unexpected jump came near the pre-tax profit margin. This increased to 42.5%, up from the 41.8% recorded for 2016.
The strong numbers also showed up in SCHW’s other business developments. The investment and asset management giant saw total client assets of $3.36T for the period ending December 31, 2017. This marked a 21% increase over the previous year’s figure. Net new assets, a very clear indicator of how SCHW has grown its base income over time, jumped 112%. This was a significant improvement upon the figure recorded in 2016 of $78.1B.
Under the other business segment SCHW added a further 386,000 new brokerage accounts which brought the total number of active brokerage accounts to 10.8M. In addition there are 1.2M banking accounts under management and SCHW also has 1.6M corporate retirement plan participants.
All of this brings the obvious question of the SCHW’s decline into sharp relief. Some analysts believe current tide of Fed movement to increase interest rates is to blame; others believe the downturn and enduring volatility of the markets is a clear reason. One thing is certain: SCHW is facing some headwinds as it looks to assure investors that its strong performance isn’t a fluke.