The Charles Schwab Corp.’s (SCHW - Analyst Report) second-quarter 2016 earnings of 30 cents per share were in line with the Zacks Consensus Estimate. Also, it was up 20% from the prior-year quarter figure.

Schwab’s shares gained nearly 1% in early market trading, indicating investors’ optimism regarding continued top-line improvement. However, price reaction during the full trading session will provide a better idea about investors’ reaction.

Revenue growth, primarily driven by increase in equity market volatility, lower level of fee waivers and stable provisions acted as tailwinds. Also, there was a significant increase in total client assets and new brokerage accounts. However, higher expenses remained a concern.

Net income available to common shareholders totaled $406 million, up 23% year over year.

The Charles Schwab Corporation (SCHW - Analyst Report) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany

Revenue Improvement Supported Results

Net revenue was $1.83 billion, up 17% year over year, supported by asset management and administration fees (up 13%) and net interest revenue (up 30%). These were partly offset by lower trading revenues and other revenues. Moreover, the reported figure surpassed the Zacks Consensus Estimate of $1.80 billion.

Total non-interest expense rose 11% year over year to $1.11 billion. All expense components increased on a year-over-year basis.

Provision for loan losses was $2 million, in line with the year-ago quarter figure.

Fee waivers were $55 million, down 67% from the year-ago quarter.

Pre-tax profit margin improved to 39.4% from 36.2% recorded last year.

As of Jun 30, 2016, Schwab’s average interest-earning assets rose 21% year over year to $187.9 billion.

Annualized return on equity as of Jun 30, 2016, came in at 13%, up from 12% recorded a year ago.

Other Business Developments

As of Jun 30, 2016, Schwab had total client assets of $2.62 trillion (up 3% year over year). Net new assets – bought by new and existing clients – were $26.6 billion during the quarter.

Also, Schwab added 271,000 new brokerage accounts in the second quarter. As of Jun 30, 2016, the company had a total of 10.0 million active brokerage accounts, 1.1 million banking accounts and 1.6 million corporate retirement plan participants.

Our Take

While focus on low-cost capital structure will improve Schwab’s performance in the quarters ahead, current equity market volatility is expected to drive up the company’s daily trading volumes. Also, the company has undertaken several initiatives to lower its dependency on interest rates. Further, we believe that a stable capital position will boost its financials.

SCHWAB (CHAS) Price, Consensus and EPS Surprise

SCHWAB(CHAS) Price, Consensus and EPS Surprise | SCHWAB(CHAS) Quote

Currently, Schwab has a Zacks Rank #5 (Strong Sell).

Among other investment brokers, Interactive Brokers Group, Inc. (IBKR - Analyst Report) and TD Ameritrade Holding Corporation (AMTD - Analyst Report) will report on Jul 19 and Raymond James Financial, Inc. (RJF - Analyst Report) is slated to report on Jul 20.