Charles Schwab Corp.'s banking arm reported striking first-quarter deposit growth as brokerage clients and new customers sought to stockpile cash.

In reporting a profitable quarter that beat analyst expectations, Schwab said Wednesday that its banking deposits grew 71% from a year earlier, to $26.6 billion. The number of banking accounts grew 60%, to 508,000.

Joe Martinetto, the San Francisco company's chief financial officer, attributed most of the growth to brokerage clients fleeing the turbulent stock market by sweeping excess cash into bank accounts.

"We've definitely seen clients being more conservative, holding higher levels of cash," Martinetto said.

New brokerage accounts decreased 16%, to 207,000.

Schwab tried to capitalize on the flight to cash by introducing a high-yield savings account in February that carries a 2% interest rate. As of Wednesday deposits in the savings account had topped $1.5 billion, Martinetto said.

The company launched the savings account in part because of the success of a high-yield checking account that carries a 1% interest rate, he said. Checking account deposits increased 154%, to $6.1 billion. Schwab started offering the high-yield checking account in 2007.

Martinetto attributed the deposit growth to a "combination" of new and current clients shifting their assets to cash, though he would not say how much of the growth came from which group.

The growth in deposits was "very large," Martinetto said, but the numbers are not "particularly outsized" when considering that Schwab manages $1.4 trillion of client assets and increased its total assets by $25 billion during the first quarter.

Mark Lane, an equity research analyst with William Blair & Co. LLC, said he does not see Schwab making a dramatic push to expand its banking business. The company still does not offer certificates of deposit, and its mortgage and home equity portfolio had just $6.1 billion at the end of the quarter, he said; that total grew 56% from a year earlier but was relatively small considering the deposit base.

"The company is not aggressively competing for deposits," Lane said. "By having a bank, it gives them more flexibility."

Schwab's first-quarter net income fell 29%, to $218 million, or 19 cents a share. The average forecast of analysts polled by Thomson Reuters called for earnings of 16 cents a share.

Patrick O'Shaughnessy, an equity analyst with Raymond James Financial Services Inc., said he expects deposit growth to be a common theme in first-quarter reports for the financial services industry.

"We've seen an overall trend toward increased saving recently. You could argue that this is a sign of that," he said. "I would expect the general deposit business to be sound for companies with good brand names."

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