Schwab's (ticker: SCH) May trades missed Street estimates, and the company continued to lose accounts. Here's an extract from Morgan Stanley analyst Scott Patrick's note to clients:
SCH chart below.
May DARTs totaled 169,400, below our estimate of 176,000
As such, DARTs increased 25.4% from a year ago, but declined 7.3% from April. Management indicated that Schwab has seen "a little bit of a pickup" in volumes in the early days of June, in contrast to a continued softening in broader market volumes. We are lowering our DARTs estimate for 2Q05 to 175,900 from 183,000 (including an estimate of 175,500 for June versus 190,000 in our old model).
Net asset inflows were a bit disappointing and net account attrition persisted
Net new client assets totaled $3.9B in May, down 11.4% from $4.4B a year ago but up from just $1.1B in April (when tax season disbursements pressure flows). Net account attrition reached 23,000 accounts in May and, on a year-to-date basis, is now running ahead of the January-May 2004 period despite aggressive price cuts since June 2004.
Our 2Q05E EPS remains unchanged at $0.13, though we now expect lower trading revenues to be offset by somewhat higher asset management & admin fees and modestly lower expenses. However, our 2005E EPS declines to $0.53 from $0.54.
Full disclosure: at the time of writing I'm short SCH.