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Charles Schwab Corp.’s stock rose Wednesday as investors mostly shrugged off its projected 10% to 11% decline in second-quarter revenue due to “temporarily compressed” net interest margin and a smaller interest-earning asset base, along with softer trading activity.
The revenue drop of up to 11% is currently worse than the roughly 6% projected drop in second-quarter revenue, to $4.78 billion from $5.09 billion, according to analyst estimates compiled by FactSet.
CFO Peter Crawford said the company
SCHW,
saw “strong business momentum” in May, but it booked a slowdown in the average daily pace of net outflows compared with April.
Schwab’s stock is up 0.7% in midday trades on Wednesday. The company’s bonds have also been rising in a sign of increased confidence in Schwab’s prospects, according to bond-pricing data from BondCliQ (see chart).
The green bars illustrate more buying than selling of Schwab bonds of late.
BondCliQ image
Schwab’s corporate-debt investors have been doing more buying than selling in recent days, in a bullish sign for the company.
The company has seen good selling of the name in its 2024 and 2028 bonds on health volume, with slightly better buying in the longest bonds, according to a bond-trading source.
Meanwhile, Schwab’s total client assets rose 5% from the year-ago period to $7.65 trillion as of May 30, but were flat with the previous month.
Schwab’s core net new assets brought to the company by new and existing clients totaled $20.7 billion in May. Net new assets excluding mutual-fund clearing totaled $24.5 billion.
Client cash as a percentage of assets was 11.5% as of May 30, compared with 12% in May 2022 and 11.3% in April 2023.
Including Wednesday’s moves, Schwab’s stock is down 33.8% in 2023, compared with a 14.2% rise by the S&P 500
SPX,
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