by (Bloomberg) – Charles Schwab Corp. surged in early trading in New York after reporting earnings per share that beat analysts’ estimates and reduced some of its costly debt – a sign that the company has overcome a period of turbulence last year.
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The company said adjusted earnings per share for the third quarter were 77 cents, beating analysts’ forecasts. Adjusted net income for the period was $1.5 billion, up slightly from the previous year.
Schwab’s client transactional cash flow — which took a hit as clients shuffled their funds in search of higher-yielding options — soared $9.2 billion sequentially, helping the company to reduce costly additional financing to banks by $8.9 billion, it said in a statement Tuesday.
The company’s shares were up 9.3% as of 8:48 a.m. in early trading in New York.
Schwab is emerging last year from what it called one of the most difficult years in decades, as sharp rises in interest rates took a toll on its business. Customers had withdrawn their deposits from Schwab’s bank in search of higher-yielding alternatives, forcing the company to seek more expensive sources of funding. Higher rates also saddled the company with paper losses, with the value of its bond investments taking a hit.
Executives have since said the worst of those woes have abated as the bank has committed to reducing the size of the bank over time and prioritizing paying down the costliest debts.
Earlier this month, Schwab named Rick Wurster as the company’s next CEO, preparing him to take over the retail brokerage business from longtime leader Bettinger who is retiring at the end of the year. Wurster’s appointment follows other management shakeups, including the appointment of Mike Verdeschi — a Citigroup Inc. veteran — to succeed Peter Crawford as chief financial officer.
“Third quarter net asset collection of more than $95 billion pushed year-to-date net new assets to $252 billion, up 10% year-to-date 2023,” said Schwab CEO Walt Bettinger.
The company reported $90.8 billion in total net new assets during the quarter, an increase of 88% from the same period last year. Cash balances from customer operations ended September at $384 billion, the company said.
(Updates with additional metrics throughout, starting with net income in the second paragraph.)
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