Schwab shares slip, despite higher 4Q earnings

Charles Schwab shares slip as decline in trading revenue offsets asset-management gain

Associated Press

SAN FRANCISCO (AP) -- Charles Schwab Corp. said Wednesday that its fourth-quarter net income rose 16 percent, helped by higher asset management and administration fees. But trading revenue declined, and shares of the discount broker and retirement plan provider slipped.

After the payment of preferred dividends, the San Francisco-based company earned $189 million, or 15 cents per share, in the three months through Dec. 31. That's up from $163 million, or 13 cents per share, in the same quarter last year.

Revenue rose 9 percent to $1.22 billion from $1.11 billion.

The results matched Wall Street predictions. Analysts, on average, expected a profit of 15 cents per share on $1.21 billion in revenue, according to a FactSet poll.

Revenue from asset management and administration fees jumped 18 percent to $539 million, while interest revenue rose 7 percent to $467 million. Trading revenue fell 13 percent to $202 million.

On a lot of the trades the broker is handling for its clients, it's not charging commission fees, Citi Research analyst William Katz said in a note to investors. Schwab, like several other brokerages, is offering its clients commission-free trades on products such as exchange-traded funds. ETFs, which are increasingly popular with investors, hold baskets of stocks and can be traded just like stocks, unlike mutual funds.

Schwab ended 2012 with $1.95 billion in total client assets, up 16 percent from the end of 2011, and total accounts rose 7 percent to 6.1 million. But that asset volume growth, and the company's growth in daily average trades, has "yet to translate into meaningful earnings per share growth" for Schwab, said Katz. He has a "Neutral" rating on the stock.

For all of 2012, net income rose to $883 million from $864 million in 2011. On a per-share basis, earnings fell to 69 cents from 70 cents, because Charles Schwab had more shares outstanding in 2012.

Revenue rose to $4.88 billion in 2012 from $4.69 billion.

Shares of Schwab fell 24 cents, or 1.5 percent, to $15.06 in midday trading. The stock remained near the upper end of its 52-week range of $11.34 to $15.57.

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