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Charles Schwab Profit Down 20% - Update

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Charles Schwab Corp. (SCHW: Quote) Monday reported a 20 percent decline in first-quarter profit, as the brokerage's bottom line was bruised by higher compensation and marketing expenses as well as revenue decline.

Nonetheless, Charles Schwab's earnings for the quarter were in line with analysts' expectations, while revenues trumped estimates.

Compensation and benefit expenses for the quarter rose 6 percent, while advertising and marketing costs increased 12 percent. Total expenses excluding interests for the quarter increased by 8 percent to $876 million.

Asset management fees for the quarter slipped 4 percent to $484 million, reflecting higher money market fund waivers. Many US brokerages have been waiving fees on money market funds due mainly to a near-zero interest rate environment since December 2008. For the first quarter, Charles Schwab waived $163 million in money market fund fees, compared to $112 million last year.

Total revenues dropped 1 percent to $1.19 billion from $1.21 billion last year. Seventeen Wall Street analysts had a consensus revenue estimate of $1.18 billion for the quarter.

Charles Schwab, which is one of the largest brokerages in the U.S. by client assets, said its third-quarter net income dropped to $195 million or $0.15 per share from $243 million or $0.20 per share last year. On average, 20 analysts polled by Thomson Reuters expected earnings of $0.15 per share for the quarter. Analysts' estimates typically exclude one-time items.

Charles Schwab client's daily average trades for the quarter were flat with last year at 318 thousand, while average revenue per trade improved 2 percent to $12.35.

Financial Chief Joe Martinetto said, "By carefully balancing our spending against environmental conditions, we are poised to deliver both expanded client service capabilities and improving revenues and earnings throughout 2012 if interest rates at least stabilize."

SCHW is currently trading at $13.66, down $0.19 or 1.37 percent, on a volume of 10.7 million shares on the NYSE.

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by RTT Staff Writer

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