Schwab Reports Record Income
We missed their release last week, but Charles Schwab & Co. reported record earnings, and it appears money fund fees were a big driver. CFO Joe Martinetto commented in their release, "Schwab's strong first quarter financial performance was driven by ongoing success in building our client base, sustained improvement in the economic environment, and the Federal Reserve's actions to lift interest rates, along with focused expense management. Net interest revenue grew 30% to $1 billion as a result of larger client cash sweep balances and the subsequent increase in interest-earning assets, as well as higher interest rates across the yield curve. Asset management and administration fees increased 18% to $823 million largely due to continued improvement in net money fund revenue from rising rates and growing balances in advisory solutions, mutual funds, and ETFs. Trading revenue declined 17% to $192 million, primarily reflecting the impact of lower trade pricing. In total, first quarter revenue grew 18%, surpassing the $2 billion mark, and once again demonstrating the Schwab formula of solid asset growth driving solid revenue growth.... In addition, Other expense rose mainly due to deposit insurance assessments driven by larger balances and surcharges." He added, "We also transferred approximately $1.1 billion of Schwab One balances to Schwab Bank, which has greater flexibility than the broker dealer in investing client cash sweep balances. Our current plans call for transferring approximately $500 million to $1 billion in sweep money fund balances to the Bank during the second quarter." Note: Federated Investors reports earnings late Thursday and hosts its quarterly earnings conference call on Friday a.m.
