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Schwab Shares Up on Y/Y Rise in DATs

Zacks Equity Research

Shares of The Charles Schwab Corporation (SCHW) were up nearly 1.8% on Monday following a rise in Daily Average Trades (DATs) for Feb 2014. In its monthly market activity report, the company reported DATs of 556,400, marking an increase of 10% from the prior-year month but down 5% from the previous month.

Total client assets were $2.29 trillion, up 13% from Feb 2013 and 3% from Jan 2014. Schwab’s net new assets – bought by existing as well as new clients – were $10.9 billion, a decrease of 40% from the year-ago month and 8% from the prior month.

In the reported month, Schwab opened 78,000 brokerage accounts, up 4% from Feb 2013 but decreasing 13% from Jan 2014. The company’s active brokerage accounts totaled 9.1 million, up 3% year over year and almost flat compared with the prior month.

Clients’ banking accounts were 928,000, up 5% year over year and 1% from the prior month. Moreover, Schwab had 1.33 million corporate retirement plan participants, down 15% from Feb 2013 but almost in line with Jan 2014 level.

Performance of Other Brokerage Firms

TD Ameritrade Holding Corp. (AMTD) reported a rise in average client trades per day in its Activity Report for February. Average client trades per day were 501,000, up 30% year over year and 1% from the prior month.

Further, E*TRADE Financial Corp. (ETFC) reported an increase in its Daily Average Revenue Trades (DARTs) for Feb 2014. According to the monthly market activity report for February, DARTs were 201,223, up 32% from Feb 2013 and 3% from Jan 2014.

Our Take

Amid a volatile operating environment, Schwab witnessed a rise in both client assets and trading volumes, which bode well going forward. Further, the company’s low-cost capital structure should help it improve results in the coming quarters. However, a low interest rate environment and stringent regulations pose challenges.

Currently, Schwab carries a Zacks Rank #2 (Buy). A better-ranked investment broker is Investment Technology Group Inc. (ITG), which has a Zacks Rank #1 (Strong Buy).

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