Schwab’s Numbers Down, But Now The Envy of Wall Street (SCHW)

Charles Schwab Corp. (NASDAQ: SCHW) results might not be that great compared to before, but they may be the envy of Wall Street.  The online discount broker not only made money on a GAAP and non-GAAP basis, but it even beat analysts’ estimates.

The online brokerage giant posted $0.27 EPS, a penny better than the $0.26estimates from First Call.  Revenues fell a mere 4.5% on a year-over-year basis to $1.28 billion.  That was in-line with consensus estimates.

Net new accounts for the quarter were 51,400, a dropof about 15% year-over-year and its total accounts showed a year-over-year gain of about 3% to some 5.2 million.

Chuckie and friends did note that the near-zero rates and lower equityvalues combined with no real positive catalysts are making the companyoperate as though the economic environment will not improve for sometime.

It did not give guidance but did note that the current environment should create somerevenue pressure that will force it to reduce expenses significantly.It will cut  7% to 8% of its total operatingspending seen in 2008.

Schwab also noted that further deterioration in the housing market could hurt the mortgage-backed securities in its investmentportfolio, although its holdings backed by Alt-A collateral are arelatively small portion of the total portfolio.

There are many metrics which may cause some concern.  When you seedouble-digit declines in assets under management and a mountain ofcautious comments, it is impossible not to at least have some pause forconcern.  But either way, Schwab may suddenly find itself as the envyof Wall Street and other financial firms.

Shares are up about 4% at $15.42 in early pre-market indications.  Its52-week trading range is $14.28 to $26.20 and its market cap thismorning before the pop is about $17.2 billion.

Jon C. Ogg
January 16, 2009