Schwab ETF Unit Hit by Slumping Market in 3Q

Charles Schwab Corp., the fifth-largest issuer of exchange-traded funds, said third quarter revenue from ETFs declined as roiling stock and bond markets pushed clients to move money out of the funds. 

Revenue from ETFs, equity and bond funds as well as collective trust funds fell 10% to $89 million, Schwab reported in a statement. Average client assets slid 4.2% to $422.7 billion, and average fees declined to .08% from .09%. 

Still, Schwab’s third quarter earnings and sales topped expectations Adjusted net earnings rose to $1.10 a share, beating Bloomberg-polled analysts’ expectations of $1.05. Revenue climbed 20% to $5.5 billion, topping Zacks Equity Research estimates. 

Still, clients of Westlake, Texas-based Schwab moved funds into lower risk—and lower fee—money market funds as rising interest rates, higher inflation and war in Eastern Europe hammered stock and bond markets. Total client assets dropped 13% in the quarter to $6.6 trillion as falling stock and bond prices lopped $1.4 trillion from portfolio values. 

“Equity markets remained under pressure throughout the quarter,” CEO Walt Bettinger said in the statement. “The Federal Reserve assumed an increasingly hawkish stance, tightening monetary policy at the fastest rate in four decades 

Schwab shares fell $1.55, or 2.3%, to $67.43. 

Third-party mutual funds and ETFssimilarly took a hit, dropping 14.4% compared with the third quarter last year, to $160 million.

The total amount of mutual funds, ETFs and collective trust funds fell to $1.54 trillion from $1.74 trillion. Fee revenue declined to $1.05 billion from $1.1 billion. Schwab houses over 25 ETFs. 

Contact Shubham Saharan at [email protected]