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Schwab Reports Lukewarm May Numbers

Shares of Charles Schwab edged lower after the broker's May trading activity rose 17% but was still a bit weaker than one bullish analyst was projecting.



) -- Shares of

Charles Schwab

(SCHW) - Get Report

were off slightly on Monday after the broker said average daily client trades surged 17% last month compared to retail activity in April -- aided by the so-called flash crash.

Schwab said average daily trading totaled 512,700 in May, up 14% from the prior-year period. FBR Capital Markets reiterated an outperform rating on the stock with a 12-month price target of $20 following the news but said the activity for May was lower than expected.

"Although slowing, Schwab is still well positioned to attract strong organic client asset growth in this market environment in our view," the firm said. "While May activity levels were below our expectations, we note that client trades are still rising, which, along with rising interest rates, should provide solid earnings momentum for the company going forward."

Daily average revenue trades, or DARTs as they are commonly known, are a significant portion of the online brokerage firms' revenue components. Schwab's monthly uptick bodes well for similar metrics at rivals

TD Ameritrade

(AMTD) - Get Report


TheStreet Recommends

E*Trade Financial


as market volatility surrounding the May 6 flash crash, which sent the Dow Jones Industrial Average plunging 1,000 points at one point, sent investors fleeing for safety stocks and investments.

Still analysts say that while May briefly saw a pick-up in DART activity, retail investors have since retreated from the market. Another analyst mentions that he sees "few catalysts" for Schwab and TD Ameritrade shares given the lack of

interest rate hikes

combined with upcoming seasonal slowdown in trading activity.

TD Ameritrade and E*Trade are expected to report their monthly trading activity later this week.

Schwab said net new assets brought in by new and existing clients last month totaled $4.7 billion.

Still the broker experienced outflows of $29.5 billion related to a mutual fund clearing services client that began a "scheduled transfer of assets to an internal platform," according to Schwab. Including the clearing outflow, new assets fell by $24.8 billion last month. An additional outflow of approximately $22 billion has already occurred in June as the client completed the asset transfer, Schwab added.

Schwab's total client assets were $1.412 trillion as of May 31, an increase of 16% from the year-earlier period, yet down 7% from April.

Separately Schwab said it has cut the operating expense ratios on six of its eight proprietary exchange-traded funds. Clients can still trade the ETFs on Schwab platforms commission free, the firm said.

Schwab's stock slipped 16 cents to $16.18 in midday action, while shares of fellow brokers TD Ameritrade and E*Trade were both up nominally.

--Written by Laurie Kulikowski in New York.