Charles Schwab
This makes Schwab an intriguing stock as it's one of the few companies that see higher earnings in an environment of raising rates. The company has also been able to overcome the headwind of the decline in retail trading volumes which have proven too cumbersome for less established players like Robinhood
Overall, Schwab shares are down only 4.5% YTD which is significantly better than the S&P 500's
Inside the Numbers
In Q3, Schwab reported $1.10 in earnings per share which topped analysts' expectations and were a 31% improvement over last year. Revenue also topped expectations at $5.5 billion vs $5.4 billion and was 19.6% higher than last year.
As noted above, the biggest driver of the revenue increase was net interest revenue coming in at $2.9 billion, a 44% increase from last year. In total, net interest margin increased by 35 basis points to 1.97%.
Another surprise and contrary to the prevailing recession narrative are that the company's core net new assets also increased by 7% to $115 billion as it had a record in Q3 inflows from retail investors.
Overall, it was a notable quarter as the company set new records in terms of the top and bottom lines. Schwab's core business is also growing at a slower rate in an adverse environment but the company's stock price will likely be more influenced by the direction of short-term rates. Thus, it's a bet on the current environment continuing - an economy that is resilient enough to ensure continued asset growth but strong enough inflationary pressures that rates remain elevated.