Charles Schwab says retail trading kept booming in second quarter amid market comeback

A pedestrian passes in front of a Charles Schwab Corp. bank branch in downtown Chicago, Illinois.

Christopher Dilts | Bloomberg | Getty Images

Charles Schwab’s trading activity and new accounts continued to surge in the second quarter amid a boom in retail investing during an unprecedented time for financial markets. 

The broker managed 1.62 million daily active revenue trades in the second quarter, up 126% since last year. This is an increase from the 1.54 million daily active trades in the first quarter of 2020. 

The major online brokers — Charles Schwab, TD Ameritrade, Etrade and Robinhood — have seen new accounts and trading activity surge this year during the coronavirus recession. The brokerage industry experienced a retail gold rush as small investors saw the market rout and subsequent rebound as an opportunity. 

After adding a record 609,000 new accounts in the first quarter, Schwab continued to add new members, bolstered by zero commissions and fractional trades. Schwab added 1.6 million new accounts in the second quarter, which includes the addition of 1.1 million USAA member accounts obtained from the sale of USAA’s brokerage portfolio to Schwab for $1.8 billion in May. 

Excluding the USAA accounts, the broker added 552,000 new accounts in the second quarter.

After a 34% collapse to its March low, the S&P 500 rebounded in the second quarter and is now 46% off that low and about flat for 2020. The comeback was led by popular technology companies like Apple and Amazon. Well-known consumer brands like airlines and cruise lines have also rallied off their worst levels as the regular investor bets they can make it through the pandemic.

Schwab now manages a record $4.11 trillion in clients assets from 14.1 million accounts. 

Schwab, however, missed on the top and bottom lines of its second quarter earnings. Earnings came in at 48 cents per share, below estimates of 53 cents per share, according to Refinitiv. Revenue also fell short of estimates. Schwab made $2.45 billion in the second quarter, slightly below Wall Street’s forecast of $2.49 billion. 

Net interest revenue took a hit, declining 14% since last year to $1,4 billion. 

“As the impact of the Fed’s dramatic monetary easing during March extended across the yield curve, the further compression in asset returns outweighed growth in client cash sweep balances from both ongoing asset gathering and the USAA acquisition,” Schwab CFO Peter Crawford said. 

Shares of Schwab ticked nearly 3% lower on Thursday. 

Bettinger also said Schwab “made significant progress on our pending acquisition of TD Ameritrade, with the completion of the Department of Justice antitrust review and affirmative votes by both Schwab and TD Ameritrade stockholders.”

Schwab — which announced last November it would buy rival broker TD Ameritrade in the all-stock deal valued at $26 billion — received antitrust approval from the Justice Department for its acquisition of TD Ameritrade, sources told CNBC’s David Faber last month. 

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