You know you're good when you can put up a profit of $1.5 billion on only $1.3 billion in net revenue. It's not David Blaine trickery, either. Charles Schwab
Back out the one-time gravy, and Schwab still had an impressive quarter. Net revenue clocked in 21% higher than the same period a year ago. Diluted earnings per share from continuing operations surged 50% higher to $0.27, ahead of Wall Street's $0.25 profit target.
Schwab scored well all over, growing its brokerage client base as well as the number of retirement plan participants and banking customer accounts. Schwab also made the most of its newfound wealth -- both organically grown and from the U.S. Trust sale -- to repurchase shares and issue a special cash dividend to investors.
So why did the stock shed 1.4% of its value yesterday? Well, at the end of the day, Schwab is still hog-tied to market sentiment. Sure, the company has done a great job of growing its non-trading revenue. However, discount brokers like Schwab, TD AMERITRADE
Investors aren't dumb about that. A rocky trading day -- like yesterday -- may result in a flurry of trading activity, but it's not good for the industry if too many volatile days get strung together to the point of scaring away retail investors.
Either way, now is the time to hold the industry's wrist to feel the pulse. E*Trade posts its third-quarter numbers tomorrow. TD AMERITRADE follows next week. With consolidation chatter fading, the industry will have to stand on its own financial merits.
Schwab ran a great opening leg yesterday. Let's see if its peers can hold the baton in the coming days.
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Longtime Fool contributor Rick Munarriz has been trading exclusively through discount brokers since 1990, but he does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.