Shares of Charles Schwab (SCHW 0.64%) had fallen nearly 9% as of 11:26 a.m. ET today after the company reported disappointing earnings results for the first quarter of 2022.
Charles Schwab reported diluted earnings per share (EPS) of $0.67 on revenue of nearly $4.7 billion. Adjusted EPS of $0.77 missed analyst estimates for the quarter, while revenue also missed.
Although interest revenue in the quarter is up more than $300 million on a year-over-year basis, trading revenue fell by more than $250 million. Expenses rose 3% in the quarter from the first quarter of 2021.
Schwab ended March with 33.6 million active brokerage accounts and $7.86 trillion in total client assets, which increased 5% and 11%, respectively, from the first quarter of 2021.
In an earning's statement, Schwab's CEO Walt Bettinger said:
Our business momentum remained quite strong throughout the first quarter. We helped clients face a complex set of crosscurrents, which included an ongoing economic recovery supported by continued progress against the COVID pandemic, rising inflation, geopolitical turmoil driven by the Russian invasion of Ukraine, the Fed initiating its first tightening cycle since late 2015, and more volatile equity markets that remained below year-end 2021 levels for the vast majority of the period.
Not only did trading revenue normalize, but analysts had seen the stock as a top pick to benefit from rising interest rates. Perhaps the miss caught investors by surprise, considering how rates started to move in the first quarter.
I'm not overly concerned about the stock because it doesn't take much for rate increases to benefit stocks involved with banking. The company should see benefits from rising rates later this year.