In mid-March, investors around the world were shaken by the seemingly unstoppable spread of coronavirus as the economic impact of the pandemic was yet to be truly understood – but there is often a silver lining when clouds appear.
At the same moment, investment companies experienced huge trading volumes as stock markets went into freefall. Many reported adding a significant number of new accounts, with Charles Schwab one of the companies riding this wave.
The investment services firm reported that in the first quarter of 2020, clients opened a record 609,000 new brokerage accounts – over 280,000 of those were opened in March.
On March 12, it handled a peak of four million trades and saw a 217% year-over-year increase in daily average trades for March alone.
Even CEO Walt Bettinger acknowledged in the financial release that these were “monumental volumes”.
But if the panic around the pandemic has calmed a little, markets have also rallied, as the coronavirus has been brought in control across many parts of the world. We won’t know for a month or so whether investors have been so keen to trade during the second quarter and beyond.
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There has been more good news for Charles Schwab, too.
On June 4, it was announced that the antitrust division of the Department of Justice had cleared its acquisition of rival broker TD Ameritrade, in a deal valued at $26bn. Shareholders also voted to approve the acquisition in another sign of confidence.
The transaction is expected to complete in the second half of 2020 and will make Charles Schwab — which already has $3.8trn in client assets — a force to be reckoned with in the broking space. The merged companies will have client assets worth more than $5trn.
The company’s stock price, which started the year at $48 a share, is still down around 15%, meaning investors seeking businesses that have made the most of a crisis may want to take a look.
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