Market Overview

Brokerage Revenues Set Records This Earnings Season As Volatility Returns To The Market

Brokerage Revenues Set Records This Earnings Season As Volatility Returns To The Market

Last week, E*TRADE Financial Corp (NASDAQ: ETFC) reported $5.3 billion in new brokerage assets, $10.5 billion in customer margin balances and 309,000 daily average revenue trades (DARTs) for the quarter — all company records.

“This was yet another quarter defined by meaningful progress in the business and excellent financial results, as we produced the strongest quarterly revenues and adjusted operating margin in Company history,” E*TRADE CEO Karl Roessner said in a press release.

Charles Schwab Corporation Common Stock (NYSE: SCHW) did similarly well.

The firm reported a 69-percent rise in core net new assets to an all-time high of $65.6 billion; a record $783 million net income; and a 15-percent year-over-year revenue growth to $2.4 billion. The latter metric marked an 11th consecutive record quarter.

“Engagement remained strong during the quarter, with trading activity rising nearly 40 percent year-over-year to a new all-time high and clients continuing to be net buyers of securities,” CEO Walt Bettinger said in a statement. “New accounts totaled 443,000 company-wide – the highest quarterly level in 18 years.”

TD Ameritrade Holding Corp. (NASDAQ: AMTD) rounded out the brokerage trio on Monday with record average daily client trades (943,000) and net revenues ($1.4 billion). The company also recorded net new client assets of approximately $22.2 billion.

"In our second quarter, market volatility returned in full force as the implications of tax reform became clearer, interest rates continued to rise, and tariff talks surprised the markets," EVP and CFO Steve Boyle said in a press release. "These events drove record revenue in the quarter and more than offset some volatility-related losses."

Why The Good Turn?

Management at each of the firms attributed the positive performances to fresh volatility, which drove client engagement.

"In the first quarter, investors experienced sharp market swings after nine consecutive quarters of positive S&P 500 returns,” Bettinger said. “Amidst the volatility, client interactions surged.”

Charles Schwab recorded call volumes and web logins up nearly 20 and 50 percent, respectively, from their quarterly averages.

The indices have been volatile since striking all-time highs in January, and the first-quarter increase in inflows could have been extrapolated from February’s significant sell-off. The phenomenon preceded, if not prompted, some of the biggest trading days in brokerages’ history.

What It Meant For Brokers

The pop in investments combined with returned volatility has been a boon to brokerages, which make more money when their clients are more active. E*TRADE ultimately posted 14.3-percent top-line and 4.7-percent bottom-line beats.

Their solid performances begot even better performances. E*TRADE struck 52-week highs on its report, while Charles Schwab rose 8.5 percent over the next week.

TD Ameritrade, which alone missed top-line Street estimates due to its Scottrade acquisition, traded down (2 percent) after reporting earnings.

Related Links:

What Is The VIX, And What Does It Do?

Market Volatility Helps Big Banks: Q1 Earnings Roundup

Posted-In: brokersEarnings Long Ideas News Education Top Stories Trading Ideas General Best of Benzinga


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