Charles Schwab (SCHW) reported second quarter earnings that came in at 18 cents per share. Analysts were looking for a profit of 19 cents per share from the online broker. Net income for the quarter was $256 million. That figure marks a 24% increase from the first quarter of 2013, but it is down 7% from the second quarter a year ago. It is important to note that the 2012 figure included a one-time gain from the resolution of a vendor dispute. Excluding that gain, net income rose by 11% on a year-over-year basis in the second quarter of 2013.
Expenses rose 9 percent from a year ago, and those rising expenses were the main reason Schwab missed by a penny on the bottom line. Schwab CFO Joe Martinetto said that the company is spending more money on advertisements aimed at encouraging people to buy Schwab-managed mutual funds, ETFs, and other “advice” products. Asset management and administration fees grew 15% from a year ago, and this is an area that Schwab continues to place a high level of importance.
Schwab’s pre-tax profit margin was 30.8% in the second quarter, down from 33.7% a year ago. Trading revenue rose 7% from a year ago, but it still makes up only about 18 percent of the company’s total revenue. Only a decade ago, trading revenue accounted for 60 percent of the total revenue at Schwab. Net new accounts totaled 47,000 in the second quarter, which is 18% higher than a year ago.
Schwab executives pointed to recent increases in longer-term interest rates as a positive for the company. Higher long-term rates likely would help alleviate some of the pressure on Schwab’s net interest margin. Shares of SCHW fell 3.27% in Tuesday’s trading after these earnings were announced.
For the full earnings report press release click here.