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Charles Schwab Reports Strong Numbers for May

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Strong second-quarter numbers?

Charles Schwab (SCHW) is expected to report strong numbers in the second quarter mainly due to supportive macro fundamentals and higher expected interest income sequentially. The Fed’s meeting, which ended on June 13, showed that it will increase interest rates faster than predicted. In 2018, the US might see four rate hikes.

The Fed’s hawkish stance would likely be beneficial for brokerages (VFH) like TD Ameritrade (AMTD), Interactive Brokers Group (IBKR), and E*TRADE Financial (ETFC). Higher rates would likely help them generate higher interest revenues. From the trading volumes perspective, the brokerages are would likely get hit in the June quarter because equity markets were less volatile.

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Charles Schwab in May

According to data released on June 14, Charles Schwab ended May with total client assets of $3.38 trillion—a month-over-month rise of 2% and the substantial YoY (year-over-year) rise of 13%. In May, the company witnessed a 7% YoY rise in active brokerage accounts, while the month-over-month rise was 1%. E*TRADE Financial saw a rise in its daily average revenue trades in May—compared to the previous month.

Of the total client assets in May, $19.4 billion was net new assets, while the net market gains were $46.6 billion. In May, Charles Schwab saw net buys of $953 million of large capitalization stock, which reflects an increase from the previous month. During the same period, the company saw $3.35 billion of net buying activity in ETFs.

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