Charles Schwab Corp. customers turned to more bond and savings account holdings in a tough year for stocks, the online broker said Wednesday.
stock fell 4% after it missed Wall Street forecasts for fourth-quarter earnings and revenue, while providing insights into how investors behaved in the worst stock market since the Global Financial Crisis.
Schwab’s fourth-quarter net income rose 25% to $1.97 billion, or 97 cents a share, from $1.58 billion, or 76 cents a share in the year-ago quarter.
Adjusted earnings in the latest quarter totaled $1.07 a share, short of the forecast of $1.09 a share by analysts surveyed by FactSet.
Schwab’s fourth-quarter revenue rose 17% to just under $5.5 billion, below the Wall Street target of $5.55 billion.
CFRA analyst Michael Elliott reiterated a strong buy on Schwab and kept his price target of $94 a share.
“Strong net interest revenue growth was partially offset by weaker asset management and admin fees and lower trading revenues as challenging equity markets dampened investor enthusiasm,” Elliott said in a research note. “Despite market headwinds, SCHW was able to continue driving strong operational performance.”
In the face of rocky financial markets, Schwab said it added 4 million new accounts in 2022, bringing its total to 34 million. Total client assets ended the year at $7.05 trillion, down from $8.14 trillion at the end of 2021.
Schwab also gathered $128 billion in net new assets in the fourth quarter to bring its annualized organic growth rate to about 8%.
Client allocations to fixed income increased 66% during the fourth quarter against the end of 2021, as investors took aim at self-directed tools and income-focused products such as tax-exempt and taxable bonds.
“As rates rose from the ultra-low levels observed during the most recent period of the Federal Reserve’s zero interest-rate policy, clients allocated a growing portion of their assets to higher yielding cash and fixed income alternatives,” CFO Peter Crawford said in a prepared statement.
Schwab said its balance sheet shrank 17% to $115 billion at the end of 2022 compared to 2021.
The company said it increased its liquidity by limiting new portfolio investments to help build available cash and used a “limited amount of short-term funding sources” including Federal Home Loan Bank Advances and retail certificates of deposit.