On October 15, Charles Schwab (NYSE: SCHW) released its 3^rd quarter earnings, declaring a 13% year-on-year increase in net revenues to more than $1.5 billion for the quarter. Due to the low trading volumes during the quarter, Schwab (NYSE: SCHW) experienced a 7% to $209 million year-on-year decrease in its trading revenues in Q3. A profound growth that was seen in interest-based revenues, as well as the asset management revenues balanced out the decrease in trading revenues. An increase of 13%, leading to $573 million rise was seen in the net interest revenues. Asset management and administration fees rose by 11% year-on-year to $649 million. Schwab (NYSE: SCHW)’s revenues increased by the double in the quarter by reaching $120 million that the company used to recover $45 million of the net insurance.

By the end of September 2012, Schwab (NYSE: SCHW)’s client assets summed up to $2.4 trillion, which is 12% more than last year’s level.  The indicated output on the total client asset remained 0.11%, same as last year levels. Schwab (NYSE: SCHW)’s revenues are expected to be 13% more for the current year, due to 10% year-on-year growth of the client assets.

In Q3, Schwab (NYSE: SCHW), saw a 5% year-on-year growth in its interest-earning-assets to $138 billion, as the brokerage combined new trading accounts. By the end of the quarter the company had 9.32 million brokerage accounts. Towards the end of the year, the total interest earning asset is expected to increase by 7-8% to $140 billion. The potential yield on these assets is about 15 basis points more than the previous year quarter at 1.65% on a full year basis. Towards the end of year 2014, the net interest yield is expected to be near1.70%.

Trading activity of Schwab (NYSE: SCHW)

In comparison to the last year quarter, the Q3 revenues, generated by trading commissions business were lower. Trading volume of July as well as August declined on a year-to-year basis, and experienced a boost in September. The July’s trading volume was -8% and that of August was -2%. Daily average client’s trade of the company has declined by 2% at 469,000 trades per day. The June quarter was ended by adding 9.2 million brokerage accounts, which; by the end of September increased to more than 9.3 million active accounts.

Improvements in Margins

Schwab (NYSE: SCHW)’s operating expenses had been consistent till date. However, the compensation and professional services expenses increased by 6% to $2.8 billion in 2014. The net revenue collected by the brokerage increased by 13% to $4.5 billion between the months of January and September. Due to that Schwab (NYSE: SCHW)’s net income has grown by 30% to $971 million.

From the year 2010 to 2013, Schwab (NYSE: SCHW)’s EBITDA margin grew from 32.2% to 35.1% and has continued to improve in 2014 as well. The growth of the brokerage EBITDA margins seems likely in the future as well because of the growing client asset base, under management and the rising interest rates.

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