Schwab shares soar on earnings beat as company pays down costly debt

CHARLES Schwab shares have jumped in early New York trading, after reporting earnings per share that topped analyst estimates and curbing some of its expensive debt, a sign the company has moved past a bout of turbulence last year. 

The company said adjusted earnings per share for the third quarter were US$0.77, beating analyst forecasts. Adjusted net income for the period was US$1.5 billion, up slightly from the prior year.

Schwab’s client transactional cash sweep, which took a hit when customers shuffled funds in search of better-yielding options, climbed US$9.2 billion sequentially. This helped the company reduce costly bank supplemental funding by US$8.9 billion, it said on Tuesday (Oct 15).

Shares of the company were up 9.3 per cent at 8.48 am in early trading in New York (8.48 pm in Singapore).

Schwab is emerging from what it called one of its most challenging years in decades last year, as steep interest rate hikes took their toll on its businesses.

Customers had pulled their deposits from Schwab’s bank in search of higher-yielding alternatives, causing the company to seek out more expensive funding sources. Higher rates also saddled the company with paper losses as the value of its bond investments took major hits.

Executives have since said the worst of those woes have subsided, as it vowed to shrink the bank over time and prioritise paying down costlier debts.

Earlier this month, Schwab named Rick Wurster as the company’s next chief executive officer, teeing him up to take over the retail brokerage business from long-time leader Walt Bettinger, who retires at the end of the year.

Wurster’s appointment followed other leadership shuffles, including the appointment of Citigroup veteran Mike Verdeschi to take over as chief financial officer from Peter Crawford.

“Third-quarter net asset gathering of over US$95 billion pushed year-to-date core net new assets to US$252 billion, up 10 per cent versus 2023 year-to-date,” said Schwab CEO Bettinger. 

The company reported US$90.8 billion of total net new assets in the quarter, an 88 per cent increase from the same period a year ago. Client transactional sweep cash balances finished September at US$384 billion, it added. BLOOMBERG