Two reasons why Schwab’s earnings soared 46% in Q1

Schwab stock was up about 2% on the day

Charles Schwab (NASDAQ: SCHW) had an excellent first quarter, as trading revenue for the brokerage leader jumped significantly amid the volatility that dominated the first quarter.

Schwab saw its revenue spike 18% year-over-year in the quarter to $5.6 billion, which topped estimates of $5.5 billion.

Net income rose 40% to $1.9 billion, while earnings skyrocketed 46% to 99 cents per share. On an adjusted basis, earnings were $1.04 per share, which beat estimates of $1.01 per share.

There were two overriding reasons why Schwab’s earnings spiked in the volatile first quarter. The first one is that trading revenue rose 11% in the quarter to $908 million. This was due to higher trading volumes, that stemmed from a highly volatile quarter when investors were making moves to navigate the turbulence.

The second reason was a 14% increase in asset management and administration fees to $1.5 billion. In a quarter in which the Nasdaq Composite was down nearly 10% and the S&P 500 was off 5%, a 14% increase in asset management fees is no easy task. But Schwab was able to boost asset levels with a massive amount of net new assets.

Schwab sees 44% increase in new assets

Schwab added $138 billion in new assets in the quarter, a 44% year-over-year increase. In the month of march alone Schwab brought in $59 billion in new assets.

“Investors turned to Schwab to navigate an increasingly uncertain environment in 1Q25, entrusting us with $138 billion in core net new assets,” Schwab President & CEO Rick Wurster said. “This 44% year-over-year increase in asset gathering was powered by our unwavering focus on serving the needs of clients across Retail, Advisor Services, and Workplace Financial Services.”

The number of new brokerage account openings rose 8% in the quarter to 1.2 million, bringing the total number of active brokerage accounts to 37 million. Overall, total client assets rose 9% in the quarter to $9.93 trillion.

The firm saw a huge spike in money market fund assets, as investors flocked to safety amid the turbulence. Money market assets jumped about 24% to $621.5 billion. Money markets brought in $418 million in revenue, at an average fee of 0.27%.

Stock and bond funds assets rose 22% to $658 billion, generating $122 million in revenue at a fee of 0.08%.

Also, inflows into managed investing solutions were up a record 15% in the quarter to about $711 billion. Managed solutions, which include managed and custom portfolios, brought in $569 million in revenue at an average fee of 0.32%.

In addition, the firm raised its dividend by 8% to 27 cents per share, at a yield of 1.43%.

Schwab stock was up about 2% on Thursday, and it has returned roughly 5% year-to-date. That’s a solid return in this market and it should continue to perform well, given the expectation of more volatility along with Schwab’s leadership and low fees. Plus, it is reasonably valued with a P/E of 25.

Analysts have set a median price target of $88 per share, which would suggest 14% growth.