(Bloomberg) — Shares of Charles Schwab Corp. (SCHW) rose after reporting per-share earnings that beat analyst estimates and curbing some of its costly debt, a sign the company has overcome a bout of turbulence last year. last year.
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The company said adjusted earnings per share for the third quarter were 77 cents, beating analysts’ forecasts. Adjusted net income for the period was $1.5 billion, up slightly from the prior year.
Schwab’s client transactional cash flow, which was hit as clients shuffled funds in search of better-performing options, increased $9.2 billion sequentially, helping the company reduce costly bank supplemental financing by $8.9 billion. million dollars, it said in a statement Tuesday.
“Some might refer to this as an inflection point,” although time will tell, Schwab’s outgoing CEO Walt Bettinger said on a call with analysts on Tuesday.
The company’s shares were up 7.45% at 10:10 a.m. in New York.
Schwab is emerging from what it called last year one of the most challenging years in decades, when sharp increases in interest rates took a toll on its business. Customers had withdrawn their deposits from Schwab’s bank in search of higher-yielding alternatives, prompting the company to look for more expensive sources of financing. Higher rates also saddled the company with paper losses as the value of its bond investments took big hits.
Executives have since said the worst of those problems have receded as they vowed to reduce the bank’s balance sheet over time and prioritize paying down more costly debt.
One change Bettinger had proposed last year was to shorten the duration of its stock portfolio. On Tuesday, Verdeschi said that’s not something the company is currently pursuing.
Earlier this month, Schwab named Rick Wurster as the company’s next CEO, preparing him to take over the retail brokerage business from longtime leader Bettinger, who is retiring at the end of the year. Wurster’s appointment followed other leadership changes, including the appointment of Mike Verdeschi, a Citigroup Inc. veteran, to take over as chief financial officer, replacing Peter Crawford.
“Third-quarter net asset raising of more than $95 billion boosted year-to-date core net new assets to $252 billion, up 10% year-to-date from 2023,” it said. Bettinger in the statement.
The company reported $90.8 billion in total net new assets in the quarter, an increase of 88% from the same period a year ago. Customer transactional sweep cash balances ended September at $384 billion, the company said.
Schwab said it expects its full-year 2024 revenue to grow 2% to 3% from a year ago. While the company predicts net interest margin will expand over the next year, it may fall short of the 3% target it previously predicted given the lower rate environment, Verdeschi said on a call with analysts.
(Updates with CEO comments in fourth paragraph and updated company outlook in last paragraph.)
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