The Wall Street Journal-20080117-Earnings Digest -- Financial Services- Schwab Net Slides- Revenue Jumps
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Earnings Digest -- Financial Services: Schwab Net Slides, Revenue Jumps
Charles Schwab Corp. reported a 34% drop in fourth-quarter net income, largely because the year-earlier quarter included a big tax gain related to the sale of U.S. Trust. But revenue rose 23%, and the company saw high trading volume during the turbulent period.
The San Francisco brokerage company posted revenue of $1.35 billion, above the mean forecast by analysts surveyed by Thomson Financial of $1.32 billion.
Schwab said year-earlier results included a $205 million tax benefit related to the sale of U.S. Trust to Bank of America Corp., which was completed July 1.
Net income from continuing operations, which excludes U.S. Trust's results and the related tax gain, was $305 million, or 26 cents a share, a 36% jump from a year earlier.
The company had a 35% return on equity, an important measure of profitability, compared with 39% in the year-earlier quarter. The pretax-profit margin was 39.1%, versus 33.9%.
Total assets increased 17% to $1.4 trillion in 2007, with net new assets rising 92% to $160 billion. Brokerage-account growth climbed 24% in 2007 to 809,000, while total accounts increased 5% to 7 million as of Dec. 31.
Chairman and Chief Executive Charles Schwab said the results reflect the company's focus on earning clients' loyalty and helping them achieve better financial outcomes, while continuing to improve the company's own financial performance.
Analysts had expected Schwab to benefit from near-record "client- engagement" levels; a high-quality, low-risk balance sheet, and elevated client-attrition levels at rival E*Trade Financial Corp. Most online brokers such as Charles Schwab have been benefiting from revenue growth from asset fees and commissions amid generally high activity.
Charles Schwab shares were up 35 cents, or 1.6%, to $22.81 in 4 p.m. composite trading on the Nasdaq Stock Market.
