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Here's an extract from the note Morgan Stanley analyst Scott Patrick sent to clients in reaction to Schwab's (ticker: SCH) Q1 earnings:

Ongoing Cost Saves Offset a Somewhat Weaker Top Line

Schwab reported 1Q05 operating EPS of $0.12, in line with our estimate
Operating results were largely in line with expectations, with lower than expected revenues ($1,059M versus our estimate of $1,071M) offset by a favorable variance in operating expenses ($792M versus our forecast of $804M), as cost saves continued to yield dividends.

Client metrics: Some mixed messages
In 1Q05, net account attrition continued, reaching 34,200 accounts. That said, net new client assets reached $16.1B, the highest level since 3Q01. And though trends in trading activity continued to outpace peers in 1Q05, a reflection of significant price cuts, DARTs in the early days of April declined 13% to 170,000 from March's level.

EPS estimates remain unchanged, but some moving parts
Though our EPS estimate for 2Q05 remains unchanged at $0.13, we now expect lower trading revenues to be offset by better expense control. Our EPS estimate for the full year also remains unchanged, at $0.54.

We maintain our Equal-weight-V stock rating
Cost reduction initiatives continue and efforts to reassert the company's competitive positioning among customers are yielding dividends, such as strong trends in trading activity relative to peers and solid net asset inflows. That said, net account losses at Schwab remain a considerable concern and we think the risk of cutting into the meat of the organization is increasing as cost-cutting initiatives progress. As such, we are not ready to pay a meaningful premium multiple for this name.

Industry View: In-Line
We continue to favor retail brokerage companies over non-diversified institutional equity players.

Full disclosure: at the time of writing I'm short SCH.

Source: Sell-side reaction to Schwab earnings