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Data: FactSet; Chart: Axios Visuals

Brokerage firm Charles Schwab's earnings report Thursday sent the company's stock down more than 2%, but the numbers in the report also called into question the sustainability of the zero-fee model it has pioneered.

What's happening: Schwab now manages a record $4.11 trillion in client assets from 14.1 million accounts, having added 1.62 million new clients during the quarter, but still managed to see weak revenue and net income numbers.

  • Net income for the first half of 2020 fell 23% to $1.46 billion, down from $1.9 billion a year earlier.
  • Revenue dropped 9% to $2.45 billion from $2.62 billion in the first quarter and $2.68 billion in Q2 2019, according to CNBC.

Flashback: In an effort to take on upstarts like Robinhood, Schwab slashed its trading commissions to zero in October, forcing then-rivals E-Trade, Interactive Brokers and TD Ameritrade to follow suit in a matter of weeks.

What they're saying: "As the impact of the Fed’s dramatic monetary easing during March extended across the yield curve, the further compression in asset returns outweighed growth in client cash sweep balances from both ongoing asset gathering and the USAA acquisition," Schwab CFO Peter Crawford said.

Yes, but: The Fed has said it expects to keep interest rates low through at least 2022 and many asset managers expect rock-bottom interest rates and anemic inflation even after that.

  • Schwab also acquired USAA’s brokerage portfolio for $1.8 billion in May and is undergoing Department of Justice antitrust review for its purchase of TD Ameritrade.

What to watch: If Charles Schwab is making less money after increasing its assets under management to $4.11 trillion and adding 1.6 million clients, how can any online brokerage increase profits under the zero-fee model?

Go deeper

Ina Fried, author of Login
Oct 22, 2020 - Technology

Intel shares drop sharply despite mostly solid earnings report

Photo: Omar Marques/SOPA Images/LightRocket via Getty Images

Shares of Intel fell as much 10% in after-hours trading Thursday — after the company posted quarterly revenue and earnings generally in line with expectations.

Why it matters: The chip giant is a bellwether for the PC industry, and small signs of weakness may be playing an outsize role in spooking investors.

Dominion sends cease and desist letter to My Pillow CEO Mike Lindell

Photo: Stephen Maturen/Getty Images

Dominion Voting Systems on Monday sent a cease and desist letter to My Pillow CEO Mike Lindell over his spread of misinformation related to the 2020 election.

Why it matters: Trump and several of his allies have pushed false conspiracy theories about the company, leading Dominion to take legal action. It's suing pro-Trump lawyer Sidney Powell for defamation and $1.3 billion in damages, and a Dominion employee has sued Trump himself, OANN and Newsmax.

Off the Rails

Episode 5: The secret CIA plan

Photo illustration: Aïda Amer, Sarah Grillo/Axios. Photo: Zach Gibson/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. This Axios series takes you inside the collapse of a president.

Episode 5: Trump vs. Gina — The president becomes increasingly rash and devises a plan to tamper with the nation's intelligence command.

In his final weeks in office, after losing the election to Joe Biden, President Donald Trump embarked on a vengeful exit strategy that included a hasty and ill-thought-out plan to jam up CIA Director Gina Haspel by firing her top deputy and replacing him with a protege of Republican Congressman Devin Nunes.