Schwab Only Partial Read on Online Brokers (SCHW, ETFC, AMTD)

Charles Schwab Corp.(NASDAQ: SCHW) is acting as a drag on the online brokerage firms today.  Schwab warned that its fourth quarter results would come in weak due to lower trading volumes and due to increased management fee waivers over money market mutual funds.  This is having a loose impact on E*TRADE Financial Corp. (NASDAQ: ETFC) and in TD AMERITRADE (NASDAQ: AMTD).

The online brokerage giant now sees $0.13 to $0.15 EPS vs. $0.17 last quarter.  Thomson Reuters has consensus of $0.17 EPS and $1.04 billion in revenue.  Management fee waivers on Schwab’s proprietary money market mutual funds is likely to increase by $30 million from total waivers of $78 million one quarter ago.  Another issue is an increase in its seasonal marketing.

The good news for E*TRADE and AMERITRADE is that it seems as though Schwab has been more exposed to these fee waivers.  The bad news is that no one ever escapes lower trading volumes.  It almost never happens that one of the big online brokerage firms has a significant trading volume versus a gain magically coming in at another.

Schwab stock was down 2.6% at $17.94, and even after noon the volume has yet to breach a full day’s volume.  E*TRADE was down only 0.6% at $1.65 on very light trading volume; and TD AMERITRADE was down o.6% at $18.47 but up off lows of the day on fairly light volume.

This might also be of little shock to those who have read about trading volumes in the last 30 days or so.  This may also act as a catalyst to drive more of those rumors about E*TRADE being a fair game buyout candidate by either of the companies in this action today.

JON C. OGG