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Charles Schwab (NYSE: BLACK) earned more than $53 billion of basic net assets from new customers in March, its second-highest amount for any March in its history, the company’s founder and chief executive officer said.
“Our business is extremely strong,” founder and co-chairman Charles Schwab and CEO and co-chairman Walt Bettinger in a comment posted Thursday night on the company’s website. Specifically, the company’s trading and wealth management businesses “experienced a very strong first quarter,” they added.
The duo also explained the effect of the Federal Reserve’s tightening policy on the company’s business. “The logical and expected outcome of that process for banks and brokerage firms, including Schwab (SCHW), has been that as interest rates rose, investors shifted their investment cash from relatively low-yielding accounts to higher-yielding investments, such as money market funds. they said.
That trend is expected to eventually level off. The amount of cash that clients prefer to have access to, called transactional cash, is typically about 5-10% of a client’s overall assets at Schwab (SCHW), they said. While it increases during uncertain times, “history suggests that the movement of cash into investments such as money markets, bonds and certificates of deposit peaks and then returns to historical norms,” Schwab and Bettinger said.
Higher interest rates increase Schwab’s (SCHW) cost of financing and “consequently have some impact on earnings,” they said. “But that higher cost of financing will start to come down, which combined with the natural growth of our business and lower expenses, we will eventually start to enjoy earnings growth.”
They also said the United States may be headed for a recession. “It may be mild, but of course, no one ever knows,” they say. saying. “But for investors, the anticipation of a recession is generally seen as an opportunity to participate, so recessions often mark a change in the stock market.”
Management at Charles Schwab (SCHW) will provide investors with more information in the company’s spring business update on April 17.
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