(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.
Schwab also increased the amount of quarterly fees it waived on money-market accounts to $193 million from $182 million a year earlier.
Asset management firms have been waiving such fees for more than five years because returns on the funds are so low that fees would create losses on client holdings. Still, after five years of such large waivers and expectations of rising interest rates, analysts had hoped to see the fee waivers fall.
Reporting by Jed Horowitz; Editing by Bernadette Baum