In 1Q18, brokerages (XLF) such as Interactive Brokers (IBKR), Charles Schwab (SCHW), E*TRADE Financial (ETFC), and TD Ameritrade (AMTD) benefited from higher volatility in equity markets due to trade war tensions and rate hike expectations.
Charles Schwab’s 1Q18 earnings per share and revenue exceeded analysts’ estimates, and the company is in the process of deploying capital to maintain its growth momentum. Market participants, faced with increased volatility, were prompted to trade, benefiting Charles Schwab. Additionally, the company’s new brokerage accounts rose year-over-year in 1Q18.
Benefits from rate hikes
Interest income forms a crucial part of brokerages’ total revenue. Charles Schwab management expressed positive views on its 1Q18 results. The company benefited from lower tax in 1Q18 due to the Tax Cuts and Jobs Act.
Moving forward, Charles Schwab’s performance could be affected by global economic factors, and its interest revenue may be supported by the Fed’s expected rate hikes this year.