Shares of Charles Schwab (NYSE: SCHW), the brokerage powerhouse that recently surpassed Vanguard to become the largest brokerage firm by assets under management, were moving higher today after the company posted better-than-expected results in its third-quarter earnings report.
As of 1:44 p.m. ET, the stock was up 6.8% on the news.
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Schwab shines in Q3
Like the rest of its industry, Charles Schwab seemed to benefit from the ongoing bull market as it reported steady growth across the board.
Total client assets reached $9.92 trillion, and active brokerage accounts rose 4% from a year ago to $36 million.
As a result, revenue in the quarter rose 5% to $4.85 billion, beating estimates for $4.78 billion. Net interest margin rose modestly to 2.08%, and net interest revenue, the biggest source of revenue, was down 0.7% to $2.22 billion. However, the company delivered strong growth in asset management and administration fees, which were up 21% to $1.48 billion.
On the cost side, the company benefited from a round of layoffs earlier in the year as compensation expenses fell 12.3% to $1.52 billion. Adjusted earnings per share was flat at $0.77, though that beat estimates at $0.75. Pre-tax profit margin remained strong at 41.2%.
CEO Walt Bettinger said, "Our momentum with clients continues to build following the successful completion of the Ameritrade conversion earlier this year." He also noted the company brought in $95.3 billion of net new core assets in the quarter.
What's next for Schwab
Falling interest rates can present a challenge for financial companies like Schwab, but the company gave solid guidance. It sees full-year revenue up 2% to 3%, essentially forecasting Q4 revenue growth around 10% as it expects net interest margin to rise to around 2.2% as interest rates on its loans fall.
It also called for adjusted earnings per share in the upper $0.80 range, which compares to the consensus at $0.83.
With the stock market continuing to set all-time highs and interest rates falling, Schwab looks well positioned for future growth, especially as it's streamlined its expenses.
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Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab. The Motley Fool has a disclosure policy.
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