Charles Schwab stock rebounds after reporting record client assets amid shift to zero commissions

Key Points
  • Brokerage firm Charles Schwab said Tuesday that its client asset reached a record high of $3.77 trillion in the third quarter.
  • This comes after the firm ended commission fees for online trading in U.S. stocks, exchange-traded funds and options.
  • The company reported third-quarter earnings and revenue that beat Wall Street's expectations.
A pedestrian holding an umbrella walks past a Charles Schwab office in New York.
Scott Eells | Bloomberg | Getty Images

Shares of Charles Schwab jumped Tuesday after the brokerage giant said its client assets reached a record high in the third quarter, in its first earnings report since dropping commission fees.

Schwab jumped 5.4% after reporting total client assets climbed to $3.77 trillion at the end of the quarter.

Earlier this month, shares of Schwab tanked when the broker announced it would offer commission-free online trading in U.S. stocks, exchange-traded funds and options. Investors worried that the lost commission revenue, which fed about $90 million to $100 million in quarterly revenue, would pressure margins.

But Schwab is betting the lost fee revenue can be made up by new assets for the firm. The company said clients brought in $56.6 billion in new assets in the third quarter. The firm added 363,000 new brokerage accounts in the quarter, bringing the total number of accounts to 12.1 million.

"We eliminated online trade commissions for stocks, ETFs, and options listed on U.S. or Canadian exchanges, a move that represents another significant investment in bringing ever greater value to our clients," said Schwab CEO Walt Bettinger in a press release. "This action is consistent with the principles on which our company was founded, helping realize Chuck Schwab's vision of making investing accessible to all."

Rival brokerage firms Interactive Brokers, TD Ameritrade and E-Trade took the same step in dropping commissions this month, escalating the brokerage-fee wars.

Schwab reported third-quarter earnings that beat analysts' expectations. The company reported earnings per share of 70 cents, compared with the 64 cents expected by Wall Street, according to Refinitiv. The earnings were up from 65 cents a share a year earlier. Revenue came in at $2.711 billion, topping expectations of $2.644 billion, and rising from $2.579 billion in the same quarter a year ago.