Charles Schwab Corp. (SCHW), the country’s largest independent brokerage by client assets, has proven itself a top player in the financial industry for years. The company’s revenue soared 24 percent to $1.21 billion in the first quarter from $978 million a year earlier, lifted by the bull market in stocks. "This was Schwab's best quarter in some time," wrote Doug Sipkin, an analyst at Ticonderoga Securities. "Overall, pretty clean result."
But the stock market’s decline since late April has stalled Schwab’s momentum. While the long-term outlook remains bright, Schwab’s stock may be in for some turbulence now amid high volatility in financial markets.
The company’s trading volume dropped 23 percent in May from a year earlier and 9 percent from April. That represents Schwab’s slowest trading month since October. Nevertheless, the firm saw a net inflow of $9.4 billion in assets during May, reversing April’s outflow of $500 million.
One area where Schwab sees room for growth is its Advisor Services unit, which assists independent investment advisers. The division provides custody and clearing services for the advisers’ customers and offers technical advice to the advisers themselves.
The company counts more than 6,000 advisers as customers already and hopes for more, as advisers increasingly leave large brokerage firms to work for themselves. Assets in the Advisor Services area gained 10 percent to $688.6 billion in the first quarter from a year earlier.
Analysts at Trefis see a bright future for the company as a whole, expecting its brokerage accounts to continue increasing by more than 4 percent a year.
They don’t think investors have been deterred by the stock market’s recent correction. “We expect more people to invest money in the market hoping for returns during the perceived bull run, resulting in an increase in the number of Schwab clients,” Trefis analysts write.
“This is further aided by the fact that higher volatility seen in the markets also attracts short-term investors.”
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