Schwab quarterly profit grows on higher interest revenue

Fri Jan 16, 2015 11:25am EST
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(Reuters) - Charles Schwab Corp reported earnings of $350 million in the last quarter of 2014 as higher interest income and $33 billion of new client assets supplemented modest gains in client trading revenue during a bullish quarter for stocks.

The emphasis on collecting fee-based assets reflects Schwab's shift from pure discount brokerage to offering advice to its clients. Trading revenue from commissions and bond markups grew 6 percent to $297 million from a year earlier, while trades generating fees in advisory accounts surged 27 percent to $63 million.

Shares of the San Francisco-based company were down 0.2 percent at $26.60 in late morning trading, after earlier dropping more than 2 percent.

Excluding a $28-million litigation gain related to a mortgage-backed securities lawsuit and an $8-million loss on securities sales, Schwab's profit translated to 24 cents a share, meeting forecasts of analysts compiled by Thomson Reuters I/B/E/S.

Net revenue of $1.55 billion, up 8 percent from the fourth quarter of 2013, topped the consensus analyst estimate of $1.53 billion.

Chief Financial Officer Joe Martinetto warned that profitability - measured by Schwab's pre-tax profit margin of 34.9 percent that grew 3.5 percentage points for 2014 - may not continue at the same pace as the company invests in more projects and services.

Schwab ended 2014 with 9.4 million active brokerage accounts, up 3 percent from the end of 2013.

Including Schwab's one-time litigation and sales actions in the quarter, profit rose 9 percent from $321 million in the fourth quarter of 2013.

Despite higher-than-expected interest revenue of $584 million that Schwab collected at the end of 2014, analysts were disappointed by a 6 percent gain in expenses to $997 million and by flat growth in Schwab's Mutual Fund OneSource program.   Continued...

A man walks past a Charles Schwab Investment branch in Washington, in this file photo taken January 19, 2010.  REUTERS/Jim Young/Files