The Charles Schwab Corp. released record first quarter earnings Friday, driven by reductions in money fund fee waivers. Schwab's release says, "CFO Joe Martinetto commented, "The ongoing effect of the Fed's initial interest rate hike in December has provided a glimpse of Schwab's earnings power as rates normalize, with our diversified revenue streams generating strong first quarter revenue growth and our steady expense discipline continuing. Asset management and administration fees rose 9% year-over-year – boosted by a $61 million sequential improvement in money market fund revenue due to higher short-term rates and higher balances, but limited by market valuations that persisted below year-end levels for much of the quarter. Net interest revenue jumped 31% year-over-year, reflecting robust interest-earning asset growth during the past several quarters, and the firm's greater sensitivity to the rise in short rates relative to the decline in the long end of the curve.... Altogether, revenues grew approximately 16% from the prior year to a quarterly record of $1.8 billion." Martinetto continued, "During the first quarter, we continued working to migrate more client cash to our balance sheet while maintaining healthy capital levels. The company issued $750 million of non-cumulative perpetual preferred stock at a rate of 5.95%. Proceeds will help support the transfer of approximately $6 billion in balances relating to money fund regulatory reform, primarily in the July to September timeframe. In addition, we expect to support approximately $3 billion of incremental Schwab Bank deposit growth throughout the second half of the year, as the Bank is now the default sweep option for all new accounts. We also completed a $1.4 billion bulk transfer of client sweep cash from the broker-dealer to Schwab Bank in March." Schwab had $97 million in fee waivers in Q1 '16 compared to $184 million in Q1 '15. In other earnings news, BlackRock Chief Financial Officer Gary Shedlin told analysts on BlackRock's Q1 earnings call that the deal to buy BofA's money fund business would close later this month. (It closes Monday; watch for more Crane Data News coverage Tuesday a.m.) The transcript from Seekingalpha.com states, "In line with that commitment, we anticipate closing the Bank of America Global Capital Management transaction later this month, assuming investment management responsibilities for approximately $87 billion of related cash and liquidity AUM."
