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What’s Expected for Charles Schwab in Q2 2018?

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YoY growth in EPS

On July 17, Charles Schwab (SCHW) is expected to post its second-quarter earnings. Wall Street analysts expect it to report EPS of $0.58, which represents a substantial growth of 48.7% YoY (year-over-year). It also represents a marginal rise sequentially. Charles Schwab’s competitors (VFH) are expected to report their earnings on the following dates:

  • Interactive Brokers Group (IBKR): July 17
  • E*TRADE Financial (ETFC): July 19
  • TD Ameritrade Holding (AMTD): July 24

The sequential rise in Charles Schwab’s EPS would largely be driven by global economic parameters. President Trump’s decision to impose restrictions on Chinese investments in US technology companies resulted in a sharp fall for the Dow Jones Industrial Average (DIA). The announcement was made at the end of the second quarter, thus marginally benefiting brokerage companies since these global macro events infuse volatility in the equity markets.

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YoY rise in revenues

Wall Street analysts expect Charles Schwab to report revenues of $2.49 billion in the second quarter, which reflects a YoY growth of 16.9%. Of its total net revenues in the first quarter, net interest revenue accounted for 53%. Its interest revenue mainly depends on short-term interest rates as well as interest-earning assets. The Federal Reserve might announce two more hikes in 2018, which could result in the company’s net interest margin rising.

So in 2018, brokerage firms could be benefited mainly by rate hikes as well as volatility. Trade tensions could result in volatile markets.

In this series, we’ll see what’s expected of Charles Schwab in the second quarter. We’ll look at its net interest income, trading income, and asset management and administration fees.

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