On Monday, Charles Schwab Corp. (SCHW) released its Monthly Activity Report for February 2011, recording 3% sequential growth in total client assets, driven by increase in net new assets. At the end of February, client assets totaled $1.64 trillion, up 14% on a year-over-year basis.
Though Schwab’s client trading for February was very active with daily average trades recorded at 478,000, it was down 7% sequentially but increased 21% on a year-over-year basis. In January 2011, trading activity had escalated attributable to seasonal increase in Schwab Mutual Fund OneSource transactions.
In February, Schwab’s net new assets including both new and existing clients were $7.8 billion, up 22% sequentially from $6.4 billion in January but fell 1% from $7.9 billion in last February. Schwab reported new brokerage accounts of 68,000 in February 2011. This was lower than 74,000 in January but higher than 66,000 in February 2010.
At the end of February, clients’ active brokerage accounts totaled 8.044 million, flat from the prior month and up 4% year over year. Similarly, clients’ banking accounts stood at 710,000, showing a rise of 1% sequentially and 20% from the prior-year month. However, in the corporate retirement plan participants, there was a decline of 1% from January 2011 and 2% from February 2010 to 1,438 million.
Schwab’s results are expected to be impacted by the challenging market conditions, the recently signed financial reform legislation and low interest rate environment, while the stronger client activity resulting from increased market volatility, focuses on lower-cost capital structure and management’s aggressive efforts to control cost to provide some support in the upcoming quarters. Further, the recently completed acquisition of Windward will act as a positive catalyst for the company.
Schwab currently retains its Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, considering the fundamentals, we are maintaining a ‘Neutral’ recommendation on the stock. Similarly for Schwab’s closest competitor E*TRADE Financial Corporation (ETFC), we maintain the ‘Neutral’ recommendation on the stock.
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