Charles Schwab Co., the fifth-largest ETF issuer, said its asset management business rode the wave of strong stock market performance, with its own ETF assets up 7% sequentially to $343 billion in the first quarter. .
The Westlake, Texas-based financial services conglomerate, which holds $339.9 billion in 30 exchange-traded funds, reported that its ETF assets jumped 22% from the first quarter of last year. This increase was roughly in line with market analysts' expectations. Total ETF assets, including non-proprietary funds, exceeded $2 trillion, up 10% from the previous quarter and 28% from the same period last year.
Schwab becomes the second major ETF issuer to report a first-quarter profit, following New York-based BlackRock Inc., which reported a 22% increase in ETF assets over the past year. Overall, Schwab reported that its first quarter net revenue was $4.7 billion, an increase of 6% compared to the previous quarter. The company reported earnings of 74 cents per share, beating expectations by a penny.
“This is a fairly positive number and continues to benefit from market tailwinds,” said CRFA analyst Michael Elliott. Elliott, who is bullish on Schwab, called the report “positive” primarily due to “significant growth in asset management fees.”
Schwab stock is up nearly 4% today and is up 41% over the past year. Schwab stock is held in 222 ETFs, with 178.1 million shares held. The maximum allocation is IShares U.S. Broker-Dealer and Exchange ETF (IAI).
Schwab's proprietary ETFs account for 17% of its $9.1 trillion in total client assets. According to the earnings report, total customer assets in the first quarter increased by 9.6% and by 28% compared with the first quarter of last year.
Elliott said Schwab's financial performance was primarily driven by total net interest income of $2.3 billion in the quarter, with an average yield of 2.02%, up from 1.9% in the fourth quarter but 2.2% in the year-ago period. %.
This revenue stream, which accounts for about half of the company's total revenue, has been affected by the gradual movement of funds held in low-yield cash accounts into higher-yield accounts as interest rates rise. However, Elliott believes this trend is slowing and that cash and cash equivalents balances of $33.8 billion are stabilizing, down from $37 billion in the same period last year.
“Refunding activity will continue to slow down,” he said.
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