Why Charles Schwab’s Net Revenues Rose



Rising revenues

Charles Schwab’s (SCHW) total net revenues in 9M17 (the first nine months of 2017) stood at $6.4 billion compared to $5.5 billion in 9M16 primarily due to the contribution from the net interest revenues. The difference between interest revenue and interest expense equates to net interest revenues, which in 9M17, stood at $3.1 billion compared to $2.4 billion in 9M16.

Charles Schwab operates in two divisions: Investor Services and Advisor Services. Out of the total 9M17 net interest revenues, the company’s investor services division contributed $2.3 billion, and the adviser services division contributed $769 million. In 9M17, the company garnered total net revenues from the investor services division of $4.5 billion, while the adviser services division contributed $1.7 billion.

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Net interest revenues 

Charles Schwab’s net interest revenues rose $720 million in 9M17 compared to 9M16 on the back of a rise in interest-earning assets and interest rates. The company generated total interest revenue of $3.3 billion in 9M17 compared to $2.5 billion in 9M16.

Out of the total interest revenue in 9M17, other interest revenue stood at $96 million, while in 9M16, it stood at $121 million. In 9M17, the company reported an average balance of total interest-earning assets of $215.6 billion, while in 9M16 the average balance was at $186.4 billion.

Charles Schwab has a beta value of 2.0, and peers (XLF) LPL Financial Holdings (LPLA), Bank of New York Mellon (BK), and Wells Fargo (WFC) have beta values of 2.5, 1.2, and 1.0, respectively.


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