The Charles Schwab Corp.’s (SCHW – Analyst Report) third-quarter earnings of 24 cents per share missed the Zacks Consensus Estimate by a penny owing to a rise in expenses. However, this was up 9% from 22 cents earned in the year-ago quarter.
Notably, Schwab’s results included a net insurance recovery of around $45 million and a charge amounting to $68 million related to future changes in the company’s geographic footprint. These two items lowered the pre-tax income by nearly $23 million or 1 cent per share. Hence, after-tax impact of these two items will be immaterial.
Lower-than-expected results reflected the impact of higher operating expenses. However, this was partially offset by strong revenue growth and lower provision for loan losses. A rise in total client assets as well as new brokerage accounts acted as tailwinds.
Net income available to common shareholders totaled $312 million, up 11% year over year.
Performance in Detail
Net revenue was $1,551 million, up 13% from the prior-year quarter. The increase was largely attributable to asset management and administration fees (up 11%) and net interest revenues (up 13%). Also, other revenues increased significantly owing to the inclusion of the above-mentioned net insurance recovery. These were, however, partially offset by a 7% fall in trading income. Moreover, the reported figure came ahead of the Zacks Consensus Estimate of $1,491 million.
Total non-interest expense increased 14% from the year-ago quarter to $1,033 million and included the afore-mentioned charge of $68 million. All expense components except depreciation and amortization, and other costs, witnessed a year over year rise.
Further, provision for loan losses was $1 million, down 75% from the year-ago quarter.
Adjusted pre-tax profit margin improved to 35.9% from 33.8% recorded in the prior-year quarter.
As of Sep 30, 2014, Schwab’s average interest-earning assets rose nearly 7% year over year to $138.9 billion.
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