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Schwab 3Q net in line
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October 14, 1999: 11:01 a.m. ET
Profit jumps 27%, but No. 1 discount broker processes fewer trades
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NEW YORK (CNNfn) - Charles Schwab's third- quarter net income jumped 27 percent -- even as the No. 1 discount and Internet broker processed fewer stock trades and opened far fewer accounts compared with its record second quarter due to investor nerves over interest rates, the company reported Thursday.
Schwab reported net income of $124.5 million, or 15 cents per diluted share, on revenue of $883.7 million. The per-share results are in line with analysts' consensus estimate, according to forecast-tracking firm First Call. The profit numbers are well above the $97.8 million, or 12 cents a share, earned in the third quarter of 1998, when the company brought in revenue totaling $705.2 million.
Schwab processed 175,400 trades a day in the third quarter, up from 141,900 a day a year earlier, but down from the 200,000-plus it recorded in the first two quarters of this year. The brokerage opened 282,000 new accounts in the third quarter, slightly up from 278,400 a year earlier but down sharply from the 421,900 new accounts Schwab attracted in the record second quarter.
"Over the past three months, concerns about the interest rate environment led to lower trading volumes and weaker returns in the securities markets," Chairman and co-CEO Charles R. Schwab said in a statement.
After years of tremendous growth, the online brokerage industry is facing slowing trading volumes and new account growth this quarter not only because of jittery markets but more competition. To counter this trend, online brokers are expected to spend $1 billion-plus in advertising the next year to sign up more customers.
However, Schwab rival ETrade (EGRP), the No. 2 U.S. Web broker, on Wednesday reported only a slight drop in trading volume and account growth in its latest quarter. ETrade's growth, though, came at a cost: heavy advertising spending has put the Menlo Park, Calif.-broker into the red.
Schwab said it attracted $24.6 billion in new customer funds in the third quarter, bringing its total to $595 billion in accounts. and 6.3 million active accounts. Customers had put $21.6 billion into their accounts in Schwab's second quarter.
For the first nine months, the firm posted net income of $418.4 million, or 50 cents a share, compared with $242.1 million, or 30 cents a share in the same period a year earlier. Revenue rose 45 percent to $1.95 billion.
In mid-morning trading, shares in the San Francisco-based Schwab (SCH) climbed 1-9/16 to 29-5/8.
-- from staff and wire reports
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