Earnings Growth for Charles Schwab Doesn't Prevent a Slide

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Before the market opened this morning, online brokerage house Charles Schwab (NAS: SCHW) reported earnings of $0.13 per share on $1.11 billion of revenue. Even though these numbers met analyst expectations, revenue still decreased just over 1% from the same quarter last year, with earnings per share down $0.03 from the third quarter. This led to the stock being down as much as 2% from yesterday's close in early trading this morning.

Consumer confidence is low
While more of a traditional bank than rival TD AMERITRADE (NAS: AMTD) , both have seen a slight dip the last two days as both reported less than-stellar-earnings. Investors may have been dismayed by reports of fewer trades during the fourth quarter from AMERITRADE, while Schwab's performance was "not immune to the challenges posed by the current economic environment, which led to sequential declines in all major revenue lines," according to President and CEO Walt Bettinger.

With E*TRADE Financial (NAS: ETFC) reporting its earnings next week, the big three public online brokers will be complete and investors will have a better understanding of the confidence felt in the market during the fourth quarter. Should concerns about Europe persist long into the new year, anticipated earnings from all three could be driven down. Analysts have reduced expectations for next year, lowering expected earnings per share to $0.71, down from $0.75 90 days ago.

More than a brokerage house
Surprisingly, Schwab saw some growth in the traditional banking side of its business. Total banking assets grew to $66.1 billion, accounting for 61% of total assets. Total mortgage and home equity loans equal $9.1 billion, and the bank originated $951 million of first mortgages during the fourth quarter. Also included in banking assets were over 593,000 high-yielding checking accounts with over $10.8 billion in balances. While these numbers pale in comparison to traditional banks, it provides some alternative revenue streams for the business going forward.

What it means to you
While not as dependent on the investing habits of its customers as much as TD AMERITRADE or E*TRADE, Schwab's earnings can be an small hint of how individual investors feel about the stock market as a whole. Add these companies to My Watchlist to keep an eye on some microeconomic indicators.

At the time this article was published Fool contributor Robert Eberhard holds no position in any company mentioned. Follow him on Twitter @GuruEbby. Motley Fool newsletter services have recommended buying shares of TD Ameritrade Holding and Charles Schwab. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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