Charles Schwab’s third-quarter profit jumps on higher asset management fees

(Reuters) – Brokerage firm Charles Schwab (NYSE:SCHW)’s third-quarter net income rose about 25% on Tuesday, driven by a jump in asset management fees and client assets hitting a record high, sending its shares up more than 9% in premarket trading.

WHY IT’S IMPORTANT

Schwab’s results often reflect trends in the investment landscape. Its diversified business model spans across brokerage services, asset management, banking and other financial solutions.

The results are also among the last under the watch of CEO Walt Bettinger, who will retire at the end of 2024 after nearly 16 years at the helm, and could set the tone for the company as new chief Rick Wurster takes over.

CONTEXT

Expectations of a soft-landing of the U.S. economy and hopes of a policy easing by the Federal Reserve have allowed clients to keep up their investment activities, boosting assets under management and fees at brokerage firms such as Schwab.

Still, interest costs have jumped as higher-for-longer rates prompted the company to hand out bigger payouts on deposits and its borrowings.

BY THE NUMBERS

The Westlake, Texas-based company’s total client assets rose 27% to a record $9.92 trillion in the three months ended Sept. 30.

Net interest revenue fell about 0.7% to $2.22 billion.

Asset management and administration fees, earned from managing mutual funds and exchange-traded funds, increased 20.6% to $1.48 billion.

Net revenue rose 5% to $4.85 billion.

The company posted profit of $1.41 billion, or 71 cents per share, for the quarter, compared with $1.13 billion, or 56 cents per share, a year earlier.