Charles Schwab has managed to maintain form on its securities lending revenue in Q1, following a major uptick in the closing month of 2020 caused by the internalisation of retail broker TD Ameritrade.
The US broker’s securities lending earnings for the first three months of 2021 was $204 million, up from $201 million in the prior quarter, and just $37 in Q1 2020.
Beginning in the fourth quarter of 2020, Charles Schwab unbundled securities lending from broker-related receivables and other revenue immediately following the acquisition of the retail broker that caused it securities lending revenue to balloon.
Overall, the Charles Schwab Corporation reported a net income for Q1 of “a record” $1.5 billion, compared with $1.1 billion for Q4 2020, and $795 million for the first quarter of 2020.
The company’s financial results are influenced by the TD Ameritrade deal which closed in October 2020, as well as “certain acquisition and integration-related costs and the amortisation of acquired intangibles”.
Together these transaction-related expenses totaled $273 million pre-tax for the first quarter of 2021, Charles Schwab says.
CEO Walt Bettinger said, “The first three months of 2021 have in many ways been both the most successful and the most challenging in our history.
“As the US economic recovery advanced, supported by expanding COVID-19 vaccine rollouts and government aid packages, the equity markets continued to climb, with the S&P 500 rising 78 per cent between the pandemic-driven low in March 2020 and the end of this year’s first quarter.”
Bettinger further notes that market performance was influenced by interest rates beginning to lift as well, with the 10-year Treasury yield moving to 1.74 per cent by quarter-end — its highest level since January 2020.
“This environment contributed to another rise in client engagement and activity beyond the record levels of late last year,” he adds. “As investors turned to Schwab for help in navigating current conditions, they opened 3.2 million new brokerage accounts — a level that exceeds our reported total for all of 2020, excluding the accounts we acquired as part of our recent merger and acquisition activity.”
