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Charles Schwab Gains Despite Fourth-Quarter Earnings Miss

Shares of discount bank and brokerage giant Charles Schwab rise, even as the company reports fourth-quarter earnings below analysts’ forecasts.

Shares of discount bank and brokerage giant Charles Schwab  (SCHW) - Get Charles Schwab Corporation (The) Report gained on Thursday, even as the company reported fourth-quarter earnings that were below analysts’ forecasts.

Net income for the fourth quarter of 2019 was $852 million, or 62 cents a share, down from $965 million, or 65 cents, in the fourth quarter of 2018. Revenue came in at $2.61 billion, down from $2.67 billion in the year-earlier quarter.

Analysts polled by FactSet had expected per-share earnings of 64 cents on revenue of $2.63 billion. The results included an expense related to pending acquisitions of 1 cent a share. 

Schwab CEO Walt Bettinger pointed to a "complex trading environment" in 2019 that both encouraged – and discouraged – investor sentiment and corresponding trading activity, including the U.S.-China trade war, Brexit, rate cuts from the Federal Reserve and other events.

Still, the company managed to pull core net new assets of $211.7 billion, including a record fourth-quarter draw-in of $66.2 billion.

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“Altogether, our robust asset gathering plus strong market returns drove total client assets to surpass the $4 trillion mark to a record $4.04 trillion at Dec. 31, closing the year up 24%,” he said.

Net interest revenue dropped 1.9% to $1.6 billion, while asset management and administration fees revenue rose 12% to $845 million. Trading revenue dropped 58% to $86 million on the back of the company's move to cut its retail commission fees to zero.

The results follow the online trading juggernaut's deal to tie the knot with TD Ameritrade  (AMTD) - Get AMTD IDEA Group American Depositary Shares each representing one Class A Report, announced in November. The all-stock deal followed Schwab's move in October to eliminate commissions for its retail clients, setting off a so-called "zero commissions" war in the online brokerage space.

Investors shrugged off the lackluster bottom-line numbers, pushing Shares of Charles Schwab up 1.23% at $47.70 in morning trading on Thursday. The stock has gained more than 20% in the past three months through Wednesday. TD Ameritrade was up 1.38% at $49.91.

Charles Schwab Q4 Earnings graphic