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Charles Schwab’s Zero-Fee Plan Pushes Assets to Record $4 Trillion

John Gittelsohn and Annie Massa
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Charles Schwab’s Zero-Fee Plan Pushes Assets to Record $4 Trillion

(Bloomberg) -- Charles Schwab Corp.’s plan to eliminate trading fees pushed client assets to a record, surpassing $4 trillion and sending shares higher, even as the firm faced a decline in trading revenue.

Customers opened 433,000 new brokerage accounts in fourth quarter, bringing the total to 12.3 million, according to a statement issued Thursday. Trading revenue plunged 58% to $86 million in the period after the company introduced zero-commission trades.

The results are the first view of how the largest discount broker’s fee change, which was followed by rivals, is impacting Schwab’s bottom line. And it comes after the company’s $26 billion agreement to buy rival TD Ameritrade Holding Corp.

The shares rose more than 4% to $49 in New York trading, the biggest gain since Nov. 21 when news of the Ameritrade deal first broke.

Schwab incurred $17 million in pretax acquisition-related expenses in the quarter, which weighed on profit. Schwab reported earnings of 62 cents per share, compared with the average estimate of 64 cents.

While earnings missed estimates, the growth in assets, new accounts and client cash pointed in a positive direction, said to Devin Ryan, an analyst with JMP Securities.

“There’s reason for optimism on the underlying outlook for the business,” Ryan said in an interview.

Other highlights

Fourth quarter net interest revenue -- the money Schwab makes from client cash and the largest source of profits -- fell about 2%Total quarterly revenue declined to $2.6 billionSchwab plans a business update conference call with investors on Feb. 4 at 11:30 a.m. New York time.

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To contact the reporters on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net;Annie Massa in New York at amassa12@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Alan Mirabella, Melissa Karsh

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