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Higher Net Interest Income Drove Charles Schwab’s Net Revenues

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Net revenues

Charles Schwab’s (SCHW) second-quarter net revenues came in at $2.5 billion, which implies a YoY rise of 17% and a sequential rise of 4%. Rises in net interest revenues and other revenues were the reasons for sequential growth in total net revenues. The company’s second-quarter net interest revenues were $1.4 billion, reflecting a YoY increase of 34% thanks to the cash sweep balances of the company’s customers as well as elevated interest rates. During the same period, the company posted a net interest margin of 2.30%, which reflects an increase of 18 basis points sequentially. The company’s net interest margin has been increasing for the past few quarters primarily due to interest rate hikes by the Federal Reserve.

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In the second half of 2018, the brokerages’ (VFH) performances will likely be sensitive to the US-China trade conflict. An escalation in the battle could lead to substantial fluctuations in the markets, and it could reduce investors’ confidence. In March 2018, TD Ameritrade Holding (AMTD) saw daily average revenue trades (or DARTs) of 943,058.

Trading revenues fell sequentially

Charles Schwab’s trading revenues in the second quarter were $180 million, which reflects a 10% fall on a sequential basis. The primary reason for the sequential decline was the weakness in the broad markets and the lower investor sentiment. In the second quarter, Interactive Brokers Group (IBKR) also saw lower commissions sequentially. Additionally, E*TRADE Financial’s (ETFC) second-quarter DARTs fell on a sequential basis.

As of June 30, 2018, Charles Schwab had $3.4 trillion in client assets, which reflects an increase of 1% month-over-month and 12% on a YoY basis. In June 2018, the company saw $24.1 billion of net new assets, while it witnessed net market losses of $5.2 billion.

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