Schwab stock is up almost 30% year-to-date.
Volatile markets made for a strong quarter for brokerage and advisory giant Charles Schwab (NASDAQ:SCHW).
The financial services company had record earnings and revenue in the second quarter, and topped analysts’ estimates.
Revenue soared 21% in the quarter year-over-year to a record $5.85 billion. This topped Wall Street estimates of $5.7 billion.
Net income skyrocketed 50% to $2.13 billion, while earnings spiked 54% to $1.08 per share and $1.14 per share on an adjusted basis. This was also a record and beat estimates of $1.09 adjusted earnings per share.
Schwab stock jumped nearly 6% on Friday to over $98 per share, although it settled back down to around $95 per share as the day wore on – up 3%.
Year-to-date Schwab stock has returned 28% and over the past 12 months it has risen 53%.
Trading activity rose by 38%
The numbers were pretty staggering, as tariff-induced volatility, followed by surging technology stocks in May and June led to heightened trading and higher asset levels. Specifically, asset management fees jumped 14% to $1.6 billion while trading revenue climbed 23% to $952 million.
Trading revenue was boosted by a 38% increase in the number of daily average trades in the quarter to more than 7.5 million.
Also, net interest revenue skyrocketed 30% to $2.8 billion. Schwab is not often thought of as a bank, but it is a lender, and it also generates interest on sweep accounts and uninvested cash in client accounts.
In addition, Schwab added 1.1 million new brokerage accounts in the quarter, which was an 11% increase compared to the same quarter a year ago. It resulted in $80.3 billion in new net assets, a 31% increase year-over-year. Through the first half of the year, Schwab has generated $218 billion in net new assets – a 39% increase year-over-year.
Also, flows into its managed investing solutions grew 37%.
It all added up to a 14% increase in total client assets to a record $10.76 trillion.
“Schwab delivered growth on all fronts during the second quarter,” Schwab President and CWEO Rick Wurster said. “The firm’s diversified revenue model, coupled with our best-in-class scale and efficiency, produced quarterly records for both revenue and earnings per share.”
Outlook for second half
It has been a tremendous year for Schwab and the company sees that continuing. The success in the second half of the year will largely depend on interest rates, market asset levels, and investor behavior.
In its summer business update, released Friday, Schwab sees conditions for the rest of the year slightly better than it did in its winter update. It now expects rate to end the year at 4.00%, down from the previous prediction of 4.25%.
It sees the S&P 500 finishing the year up more than 9%, which is up from its previous projection of 6.5%.
And in terms of daily average trades (DATs), it is targeting 7.2 million, which is slightly down from Q2, but higher than expectations last winter of 6.3 million.
Schwab stock has a median price target of $102 per share, which would indicate roughly 8% growth, on top of the 28% it has already returned this year. At a pretty fair valuation of 27 times earnings, Schwab still looks like it has room to run.
