Schwab’s Net New Assets Surge 140% Y/Y in October

Zacks

The Charles Schwab Corporation (SCHW) recorded net new assets – bought by existing as well as new clients – of $7.9 billion for Oct 2014. This reflected a robust increase of 140% from the prior-year month, while being down 23% from the preceding month.

Further, total client assets summed $2.44 trillion, up 12% from Oct 2013 and 2% from Sep 2014. As of Oct 31, 2014, average interest-earning assets were $141.5 billion, up 5% from Oct 2013 and 1% from Sep 2014.

Schwab opened 76,000 new brokerage accounts, down 6% from Oct 2013, while remaining at par with the Sep 2014 level. The company’s active brokerage accounts amounted to 9.3 million, up 3% year over year but almost in line with the previous month.

Clients’ banking accounts totaled 974,000, growing 5% year over year but remaining at par with the prior-month level. Moreover, Schwab had 1.42 million corporate retirement plan participants, up 9% year over and 1% from the prior month.

Among other investment brokers, TD Ameritrade Holding Corporation (AMTD) reported $663.5 billion in total client assets as of Oct 31, 2014, up 16% year over year and 2% from the prior month. Further, over the same time frame, E*TRADE Financial Corporation (ETFC) recorded $247.8 billion as total customer assets, also increasing 16% from Oct 2013 and 2% from Sep 2014.

With gradually improving investors’ confidence, firms like Schwab are expected to benefit. Further, broader trends in the investment brokerage industry will likely aid growth, going forward.

We believe that synergies from acquisitions and a stable capital position will continue to boost the company’s financials to some extent in the upcoming quarters. At the same time, despite several initiatives undertaken to reduce dependency on interest rates, Schwab’s financials will likely remain pressurized due to a persistent low interest rate environment and sluggish economic recovery.

Currently, Schwab carries a Zacks Rank #3 (Hold). A better-ranked investment manager is Piper Jaffrey Companies (PJC), sporting a Zacks Rank #1 (Strong Buy).

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