Charles Schwab SCHW has reported a 60% decline in core net new assets in January 2024 compared to the previous month. The figure also dropped 52% from the prior-year month’s level. This is indeed a worrisome trend for the company and its shareholders.
Schwab’s Financial Activity
Schwab’s total client assets in November 2023 remained relatively stable with the December 2023 level, showing a 14% increase from January 2023. However, the numbers for January 2024 are cause for concern as it depicts a decline in the company’s performance.
The average interest-earning assets of $443.7 billion in January reflected a 1% decline from the December 2023 level and a 13% decrease year over year. Average margin balances also showed a 2% drop from the previous month’s level but were up 2% on a year-over-year basis. The company also witnessed a decrease in average bank deposit account balances from January 2023.
Despite a hike in the number of new brokerage accounts, which increased 8% sequentially and 6% year-over-year, the overall slump in the net new assets balance for January 2024 raises concerns about Schwab’s growth trajectory.
Market Performance and Outlook
Over the past three months, shares of Schwab have rallied 13.4% compared with the industry’s rise of 13.2%. However, the recent decline in net new assets is a red flag for investors.
Competitive Landscape
Competitor Interactive Brokers Group, Inc. (IBKR) reported a rise in client Daily Average Revenue Trades (DARTs) on a sequential and year-over-year basis, painting a contrasting picture to Schwab’s decline in net new assets balance.
As another contender, LPL Financial (LPLA), gears up to release its monthly activity report, it remains to be seen how the broader industry trends will impact Schwab’s position in light of its net new assets decline.
Investor Advice
Investors are advised to remain cautious amidst the fluctuating market dynamics and to closely monitor the performance of Charles Schwab in the coming months.
Overall, Charles Schwab’s recent decline in net new assets balance is a cause for concern, particularly in light of contrasting market trends. Investors are urged to exercise vigilance and consider the broader implications of this decline.
