A pedestrian passes in front of a Charles Schwab Corp bank branch. in downtown Chicago, Illinois.
Christopher Dilts | Bloomberg | Getty Images
Retail investor giant Charles Schwab surpassed Wall Street’s earnings and revenue expectations for the fourth quarter, the first earnings report after Schwab’s acquisition of rival TD Ameritrade for $ 26 billion.
Charles Schwab reported on Tuesday adjusted earnings of 74 cents per share, exceeding estimates of 71 cents per share, according to Refinitiv. Revenue stood at $ 4.18 billion, above the forecast of $ 4.108 billion.
Schwab said he now operates about 29.6 million brokerage accounts.
Schwab’s shares rose steadily after rising slightly after the opening bell on Tuesday.
Schwab’s total client assets skyrocketed to a record $ 6.69 trillion at the end of 2020, an increase of 66% year over year, reinforced by TD Ameritrade’s added assets.
Schwab added 15.77 million new customers in the fourth quarter, including 14.5 million new brokerage accounts from the merger with TD Ameritrade.
“Producing record operating performance and closing the largest brokerage acquisition in history during the fourth quarter of 2020 was an extraordinary milestone for an extraordinary year,” Walt Bettinger, CEO of Schwab, told clients.
The daily average of business rose to 5.8 million in the fourth quarter, the highest ever recorded. Schwab’s clients peaked at 7.8 million trades on 9 November.
Record customer trading activity and the addition of TD Ameritrade led to an 88% increase in trading revenue to $ 1.4 billion. This occurred despite the year-round impact of commission-free trading, which was implemented in late 2019.
Schwab and the other major brokers are coming out of a record year of retail investment in 2020. The unprecedented market volatility and Covid-19 blockages have created a unique opportunity for regular investors to play in the surprising but epic stock return.
“Against this backdrop, customer engagement with financial markets has reached record levels – combined pro forma families of newcomers to the company have increased by more than 175% compared to 2019, with the number of families doing business in more 50% in the year-year, “added Bettinger.
Schwab’s shares have risen almost 60% since its last earnings report in October 2020. In addition to the retail investment boom and the acquisition synergy of TD Ameritrade, Schwab is getting a boost from rising interest rates.
Schwab’s shares remain highly correlated with 10-year US yield, as the broker gains a spread of the client’s money held across all accounts, buying higher yielding instruments like mortgage-backed securities and making loans financed by those deposits .
Schwab’s fourth-quarter results pushed e-brokers’ adjusted earnings for the whole of 2020 to $ 2.45 per share and revenue to $ 11.7 billion.
Subscribe to CNBC PRO for exclusive insights and analysis, and live weekday scheduling around the world.