The Charles Schwab Corp.’s (SCHW - Free Report) fourth-quarter 2017 adjusted earnings of 44 cents per share surpassed the Zacks Consensus Estimate of 41 cents. Results exclude one-time tax expense of 3 cents per share related to the tax act. Also, earnings increased 22% from the prior-year quarter.
However, Schwab’s shares were down nearly 1.3% in early market trading. Persistent fall in trading revenues remains a major concern for Schwab. Notably, the price reaction during the full trading session will provide a better idea about how investors accepted the results.
Revenue growth (driven by a rise in interest income), absence of fee waivers and provisions were among the positives. Further, there was an impressive rise in total client assets and new brokerage accounts. However, higher expenses and a decrease in trading revenues remained the headwinds.
After considering tax act related charge, quarterly net income available to common shareholders was $550 million, up 14% year over year. For 2017, it was $2.18 billion, up from $1.75 billion in the prior year.
Revenue Improvement Offset by Expense Rise
Net revenues were $2.24 billion for the reported quarter, climbing 14% year over year, supported by asset management and administration fees (up 8%) and net interest revenues (up 26%) and other revenues (up 26%). These were partly offset by a 24% fall in trading revenues. The reported figure was in line with the Zacks Consensus Estimate.
For 2017, net revenues grew 15% from the prior year to $8.62 billion. The figure was on par with the Zacks Consensus Estimate.
Total non-interest expenses rose 12% year over year to $1.30 billion. All expense components increased on a year-over-year basis.
Provision for loan losses and fee waivers were nil.
Pre-tax profit margin improved to 42.5% from 41.8% recorded last year.
At the end of the fourth quarter, Schwab’s average interest-earning assets grew 8% year over year to $228.5 billion.
