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Charles Schwab’s Net Revenues Rose in 1Q18

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What’s behind the rise in net revenues

Charles Schwab (SCHW) generated total net revenues amounting to $2.39 billion in 1Q18 compared to $2.08 billion in 1Q17. However, in 4Q17, total net revenues were $2.24 billion. The company’s asset management and administration fees amounted to $851 million in 1Q18, a rise of 3% year-over-year thanks to the increased balances in equity and bond funds as well as advised solutions. However, ETFs also saw higher balances, which also contributed to the higher total net revenues in 1Q18.

Charles Schwab saw a rise in the total advice solutions’ average client assets from $234.4 billion in 1Q17 to $284.5 billion in 1Q18.

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Trading revenues

In 1Q18, equity markets were highly volatile mainly because market participants were eyeing the Federal Reserve meeting. As expected, the Fed hiked rates, which negatively impacted the equity markets. Another concern that made markets volatile were trade war fears as President Trump announced tariffs.

When volatility increases, trading activity increases, which generally has a positive impact on brokerage companies (XLF) like E*TRADE Financial (ETFC), TD Ameritrade (AMTD), and Interactive Brokers Group (IBKR).

Charles Schwab’s trading revenues amounted to $201 million in 1Q18, an increase of 5% YoY and 31% sequentially.

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