Discount brokerage Charles Schwab Corp. posted a 16 percent increase in second-quarter profit on Tuesday as new policies to attract clients paid off.
Net income rose to $292 million, or 23 cents per share, from $251 million, or 19 cents per share, a year earlier. The results met the average Wall Street forecast compiled by Reuters Estimates.
Net revenue increased to $1.2 billion from $1.1 billion, slightly exceeding analysts' estimates.
Non-trading revenues, including asset management fees and net interest income, accounted for 84 percent of total revenue, said Schwab's Chief Financial Officer Joe Martinetto in an interview.
Total client assets reached $1.38 trillion at the end of June, up 23 percent from June 2006.
During the quarter, net new assets totaled $26.4 billion, up 41 percent from the year-ago quarter.
Martinetto said Schwab is on track to meet its previously announced goal of creating $115 billion in new client assets for 2007.
Clients opened 206,000 new brokerage accounts during the quarter, up 20 percent from a year earlier, the San Francisco-based company said.
Schwab now has 6.9 million client brokerage accounts as well as 177,000 banking accounts and 1 million retirement plan participants.
In recent years, Schwab has expanded its array of financial services offerings to include banking, money management and advisory services to institutional and individual clients, as commissions from trading have fallen to 16 percent on total revenue.
Citigroup analyst Prashant Bhatia said in a note to clients on Monday that over the past five years, Schwab has taken a 3.2 percent market share from other retail brokerages and a 1 percent market share from firms offering all financial services.
Bhatia raised Schwab's price target from $22 to $27, saying the company is positioned to be the largest brokerage in three years, surpassing Merrill Lynch & Co. Inc., which is the current leader in U.S. client assets.
Schwab's earnings per share will grow at 20 percent per year, driven by accelerating organic growth, market share gains and higher profit margins than competitors, Bhatia wrote.
Martinetto said Schwab will not look at acquisitions to drive growth merely for consolidation or cost-saving purposes. Rather, the company will proceed cautiously in searching for strategic fits, he said.
The company does not provide earnings forecasts
Earlier this month, Schwab announced a $3.5 billion capital restructuring program that included a special dividend, a share buyback plan and a debt offering.
Schwab shares were down 1.3 percent, or 28 cents, at $21.98 in morning Nasdaq trading. The stock is currently trading close to the 52-week high of $23.02.