Schwab Profit Rises 40 Percent, Beating Estimates


U.S. discount brokerage Charles Schwab posted a 40 percent increase in third-quarter profit Monday, beating analyst estimates as client assets grew to a record high.

Net income from continuing operations for the third quarter rose to $323 million, or 27 cents per share, from $230 million, or 18 cents per share, in the year-ago quarter.

Analysts were expecting the brokerage and financial services firm to earn 25 cents per share, according to Reuters Estimates.

Net new assets rose 66 percent to $37.3 billion from the year-ago quarter, taking total client assets to a record $1.44 trillion at the end of September.

Schwab will exceed its 2007 target of $115 billion for net new client asset growth, Chief Financial Officer Joe Martinetto said in an interview.

Net new client asset growth is "running at a pace that will allow us to exceed our 2007 target," Martinetto said.

He also said growth in client assets, a central focus for the company, will continue to drive earnings in coming quarters.

Schwab earned $1.5 billion, or $1.28 per share, during the quarter including a $1.2 billion after-tax gain from the sale of its U.S. Trust wealth management unit to Bank of America.

Net revenue rose 21 percent to $1.3 billion, slightly beating the average analyst forecast as compiled by Reuters Estimates.

Strong trading activity helped revenue growth during the quarter, the company said in a statement.

Interest revenue earned by temporarily investing the proceeds from the U.S. Trust sale also boosted non-trading revenue 19 percent to $1.1 billion.

Schwab sold U.S. Trust for $3.3 billion and used the proceeds to fund a $3.5 billion capital restructuring plan, including a special cash dividend that returned $1.2 billion to shareholders.

Clients opened 183,000 new brokerage accounts during the quarter.

Chief Executive Charles Schwab said in a statement the growth in client assets reflected the company's success in building strong relationships during a summer marked by stock market volatility.

Shares of Schwab were nearly flat at $22.81 in morning trading on the New York Stock Exchange.