NEW YORK — Charles Schwab Corp.'s fourth-quarter profit climbed 37% from a year-ago period dented by legal settlements, as the discount brokerage's trading revenue was bolstered by its summer acquisition of optionsXpress.
But trading activity at Schwab, like rival TD Ameritrade Holding Corp. (AMTD), weakened during a period of turbulent markets. The San Francisco company also posted asset management fees that fell 8% from a year earlier amid higher money market fund fee waivers.
Shares of Schwab recently traded down 0.7% at $12.08. The company's stock has climbed 7.3% year-to-date.
Schwab, the largest discount brokerage by market capitalization, reported $458 million in asset fees, down from $497 million a year earlier, though nearly flat sequentially.
Schwab would have earned more in that business, but the company waived $168 million in fees on its money market funds, a figure slightly higher than its $165 million guidance. With over three years of low interest rates, Schwab is waiving those fees so that client's yields don't turn negative.
"Our fourth quarter results were particularly impacted by elevated market volatility and lower rates, which persisted through year-end," said Chief Financial Officer Joe Martinetto in a statement.
Many of Schwab's revenue lines fell from year ago and the prior period as the on-going European sovereign-debt crisis and concerns about a slowing economic recovery led to weaker levels of client activity.
Schwab Chief Executive Walt Bettinger said the company's financial performance is "not immune to the challenges posed by the current economic environment," though he said the firm is focused on initiatives "under our control."
For the period ending Dec. 31, Schwab reported a profit of $163 million, or 13 cents a share, up from $119 million, or 10 cents a share, a year earlier. The prior year included $124 million in charges related to its YieldPlus fund. The company in December had expected earnings to decline between 4 cents and 6 cents from the 18 cents recorded in the third quarter.
Revenue decreased 1.2% to $1.11 billion, matching estimates of analysts polled by Thomson Reuters.
One bright spot for Schwab was its trading revenue, which climbed 13% from a year ago to $233 million. The company said its daily average revenue trades, or DARTs, a measure of trading volume, also rose 13% to 307,400.
The year-earlier period didn't include OptionsXpress, which Schwab purchased in the third quarter. In a figure more reflective of year-end trends, Schwab's DARTs — a measure that includes all trades that generate either commission revenue or revenue from principal markups such as fixed income — fell 5% sequentially.
In a possible sign of better retail engagement for 2012 though, Schwab said it added $10.5 billion in net new assets in December, its highest monthly total of the year, excluding large one-time outflows.
Macquarie analyst Ed Ditmire said he believed that figure was the most important number in the company's report. In a note to clients, he wrote that the monthly asset total implied a 7.5% annualized growth rate, ahead of his prior 4% projection, though market depreciation was a mitigating factor.
In the fourth quarter, Schwab said it gathered $21.5 billion in net new money, down 18% from $26.2 billion, a year earlier.
Total client assets at the company rose 7% year-over-year to $1.7 trillion.
