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Schwab Reports Third Quarter Results

Successfully Completed Largest Brokerage Conversion Event in History

September Core Net New Assets Exceeded $27 Billion

Bank Sweep Deposits Grew During September

The Charles Schwab Corporation announced today that its net income for the third quarter of 2023 was $1.1 billion compared with $2.0 billion for the third quarter of 2022. Net income for the nine months ended September 30, 2023 was $4.0 billion, compared with $5.2 billion for the year-earlier period.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20231016043490/en/

 

Three Months Ended

September 30,

 

%

 

Nine Months Ended

September 30,

 

%

Financial Highlights (1)

2023

 

2022

 

Change

 

2023

 

2022

 

Change

 

 

 

 

 

 

 

Net revenues (in millions)

$

4,606

 

$

5,500

 

(16

)%

$

14,378

 

$

15,265

 

(6

)%

Net income (in millions)

 

 

 

 

 

 

GAAP

$

1,125

 

$

2,020

 

(44

)%

$

4,022

 

$

5,215

 

(23

)%

Adjusted (1)

$

1,518

 

$

2,211

 

(31

)%

$

4,792

 

$

5,783

 

(17

)%

Diluted earnings per common share

 

 

 

 

 

 

GAAP

$

.56

 

$

.99

 

(43

)%

$

2.03

 

$

2.53

 

(20

)%

Adjusted (1)

$

.77

 

$

1.10

 

(30

)%

$

2.45

 

$

2.83

 

(13

)%

Pre-tax profit margin

 

 

 

 

 

 

GAAP

 

30.0

%

 

48.7

%

 

 

36.1

%

 

44.5

%

 

Adjusted (1)

 

41.3

%

 

53.3

%

 

 

43.1

%

 

49.4

%

 

Return on average common stockholders’ equity (annualized)

 

14

%

 

25

%

 

 

18

%

 

18

%

 

Return on tangible common equity (annualized) (1)

 

58

%

 

74

%

 

 

66

%

 

42

%

 

Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.

(1)

Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-12 of this release.

 

Co-Chairman and CEO Walt Bettinger stated, “Against a very challenging economic and geopolitical backdrop, investors continued turning to Schwab as a trusted partner and a wealth management leader. It is truly humbling to see our clients award us with near-record Client Promoter Scores and allow us the privilege to help them move toward their financial goals – particularly during a period where the U.S. government narrowly avoided a shutdown, major equity markets posted a quarterly loss, and long-term interest rates touched levels not seen in many years. Third parties also continue to recognize the firm, with Investor’s Business Daily naming us one of its most trusted financial services firms and Charles Schwab Bank as its most trusted bank for 2023.”

“By seeing ‘through clients’ eyes’ for the last 50 years, we have earned consistent confidence from investors that helps power our strong organic growth,” continued Mr. Bettinger. “During the third quarter, we gathered $46 billion in core net new assets, including $27 billion in September following the completion of our latest Ameritrade client conversion cohort. While expected deal-related attrition has temporarily weighed on net new asset flows, our underlying growth recipe remains very much intact. Year-to-date, we have attracted $248 billion of core net new assets from accounts originally opened at Schwab – an annualized Schwab originated organic growth rate of over 6%. As of September 30, investors have entrusted us with a total of $7.82 trillion in client assets across 34.5 million accounts.”

Mr. Bettinger added, “Over Labor Day Weekend, we successfully completed the single largest conversion event in our industry’s history. During those three days, we transitioned $1.3 trillion in client assets – including more than 7,000 Registered Investment Advisors (RIA) served by the Ameritrade Institutional business and 3.6 million retail accounts. The thoughtful planning and relentless dedication of our employees helped ensure there were no significant disruptions to the client experience and overall service levels remained strong – including answering client calls in under 1 minute. We have now converted approximately 80% of Ameritrade client assets and accounts, with deal-related attrition tracking markedly better than our initial expectations. In addition to these favorable retention trends, engagement levels across recently converted clients has also picked up – including positive new account formation and net asset flows across both Retail and RIA clients.”

Mr. Bettinger concluded, “Concurrent with progressing the Ameritrade integration, we remain focused on further enhancing Schwab’s modern wealth platform by advancing our key strategic initiatives of scale and efficiency, win-win monetization, and segmentation. We have identified a number of opportunities for increased efficiency, including capturing the remaining deal expense synergies, streamlining our operational design, aligning our geographic footprint to match our hybrid workforce, and harnessing the benefits of increased automation. Once fully implemented, we expect these actions to deliver at least $1 billion of incremental annual expense savings. Even as we seek to improve upon our industry leading cost structure, we are continuing to enhance our segmented offering for the broad range of clients we serve. For clients seeking assistance with their portfolios, our wealth management solutions attracted year-to-date net flows of $24 billion – including record flows into Schwab Wealth Advisory™, Wasmer Schroeder™ Strategies, and Schwab Personalized Indexing®. At the same time, Schwab is expanding the suite of tools and resources available to self-directed investors to help them achieve better financial outcomes. Today we announced the launch of our new end-to-end trader experience that combines access to thinkorswim® with curated education for all levels and specialized service and support. This offer is tailored to meet the specific needs of a highly engaged client group that on average maintains approximately 4x more assets at the firm relative to other retail households while also utilizing a broad array of other products offered across Schwab. Continuing to invest in our platform allows us to meet the evolving needs of investors, while keeping us positioned for sustained growth over time.”

CFO Peter Crawford noted, “Our continued success with clients and diversified model helped produce third quarter net revenues of $4.6 billion. This result represents a 16% decline from last year’s record period, primarily driven by the temporary utilization of higher cost funding, lower interest-earning assets, and softer trading volumes. Net interest revenue was down 24% year-over-year to $2.2 billion, reflecting the impact of client allocation decisions within a higher interest rate environment. However, cash realignment activity decelerated further during the quarter – even with the brief uptick in August and an increase in long-term interest rates. September was particularly strong as net outflows from transactional cash were lower than any prior monthly period this cycle and bank sweep deposits increased month-over-month for the first time since March 2022. Additionally, the combination of ongoing interest in Schwab’s proprietary fund products, growth in no-transaction fee platform balances, and strong flows into our advised solutions pushed asset management and administration fees to a quarterly record of $1.2 billion, up 17% versus the prior year.”

“We maintained Schwab’s balanced approach to expense management while successfully reaching another key checkpoint in the Ameritrade integration effort,” added Mr. Crawford. “GAAP expenses were up 14% to $3.2 billion, including $106 million in acquisition and integration-related costs, $135 million in amortization of acquired intangibles, and $279 million in costs related to our previously announced restructuring. Exclusive of those items, adjusted total expenses (1) equaled $2.7 billion, or a year-over-year increase of 5%. Pre-tax profit margins finished the quarter at 30.0%, or 41.3% on an adjusted (1) basis – the 12th consecutive quarter above 40%.”

Mr. Crawford concluded, “During the quarter, our balance sheet management continued to prioritize flexibility in support of our growing client base. In late August, we issued approximately $2.4 billion of senior notes across two tranches due in 2026 and 2034, further bolstering our diversified liquidity profile. Schwab’s consolidated balance sheet totaled $475 billion at quarter-end, down 7% sequentially, as available net cash flows from our investment portfolio were used to pay down supplemental borrowings. Our capital levels also continued to build during the quarter as our consolidated Tier 1 Leverage ratio increased to 8.2% and our Adjusted Tier 1 Leverage Ratio (1) expanded by more than 40 basis points to 4.1%. Ratios at Charles Schwab Bank, SSB (CSB) followed a similar trajectory with CSB Tier 1 Leverage increasing to 9.6%, or 4.4% on an adjusted (1) basis. As we move towards a new year, our consistent strategy, key competitive advantages, and ‘through the cycle’ financial model keep us well-positioned to deliver long-term value to all of our stakeholders.”

(1)

Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-12 of this release.

 

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary. The most recent commentary, which provides perspective on client cash realignment trends and second quarter revenue expectations, was posted on June 14, 2023.

Fall Business Update

The company will host its Fall Business Update for institutional investors this morning from 8:00 a.m. - 9:00 a.m. CT, 9:00 a.m. - 10:00 a.m. ET. Registration for this Update webcast is accessible at https://www.aboutschwab.com/schwabevents.

Forward-Looking Statements

This press release contains forward-looking statements relating to the company’s strategy and approach; growth in the client base, client accounts, and assets; Ameritrade integration and deal-related attrition; opportunities for increased efficiency and resulting incremental annual expense savings; positioning; success with clients; model; competitive advantages; and stakeholder value. These forward-looking statements reflect management’s expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the company’s ability to attract and retain clients and independent investment advisors and grow those relationships and client assets; develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; hire and retain talent; support client activity levels; successfully implement integration strategies and plans; capture Ameritrade deal expense synergies, streamline its operational design, align its real estate footprint, and harness the benefits of automation in order to deliver expected incremental annual expense savings, and the costs incurred in connection with such actions; manage expenses; and monetize client assets. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including the level of interest rates and equity valuations; asset attrition from clients originating at Ameritrade is higher than expected; client cash allocation decisions; client sensitivity to rates; level of client assets, including cash balances; competitive pressures on pricing; the level and mix of client trading activity; market volatility; capital and liquidity needs and management; balance sheet positioning relative to changes in interest rates; interest earning asset mix and growth; new or changed legislation, regulation or regulatory expectations; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 34.5 million active brokerage accounts, 2.5 million corporate retirement plan participants, 1.8 million banking accounts, and $7.82 trillion in client assets. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiaries, Charles Schwab & Co., Inc., TD Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC, https://www.sipc.org), and their affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent, fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.aboutschwab.com. TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are separate but affiliated companies and subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank.

 

THE CHARLES SCHWAB CORPORATION

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

 

2023

 

2022

 

2023

 

2022

Net Revenues

 

 

 

 

Interest revenue

$

4,028

 

$

3,357

 

$

12,148

 

$

8,386

 

Interest expense

 

(1,791

)

 

(431

)

 

(4,851

)

 

(733

)

Net interest revenue

 

2,237

 

 

2,926

 

 

7,297

 

 

7,653

 

Asset management and administration fees (1)

 

1,224

 

 

1,047

 

 

3,515

 

 

3,167

 

Trading revenue

 

768

 

 

930

 

 

2,463

 

 

2,778

 

Bank deposit account fees

 

205

 

 

413

 

 

531

 

 

1,059

 

Other

 

172

 

 

184

 

 

572

 

 

608

 

Total net revenues

 

4,606

 

 

5,500

 

 

14,378

 

 

15,265

 

Expenses Excluding Interest

 

 

 

 

Compensation and benefits

 

1,770

 

 

1,476

 

 

4,906

 

 

4,448

 

Professional services

 

275

 

 

264

 

 

805

 

 

766

 

Occupancy and equipment

 

305

 

 

292

 

 

923

 

 

855

 

Advertising and market development

 

102

 

 

89

 

 

293

 

 

296

 

Communications

 

151

 

 

131

 

 

485

 

 

444

 

Depreciation and amortization

 

198

 

 

167

 

 

566

 

 

476

 

Amortization of acquired intangible assets

 

135

 

 

152

 

 

404

 

 

460

 

Regulatory fees and assessments

 

114

 

 

65

 

 

277

 

 

200

 

Other

 

173

 

 

187

 

 

535

 

 

530

 

Total expenses excluding interest

 

3,223

 

 

2,823

 

 

9,194

 

 

8,475

 

Income before taxes on income

 

1,383

 

 

2,677

 

 

5,184

 

 

6,790

 

Taxes on income

 

258

 

 

657

 

 

1,162

 

 

1,575

 

Net Income

 

1,125

 

 

2,020

 

 

4,022

 

 

5,215

 

Preferred stock dividends and other

 

108

 

 

136

 

 

299

 

 

401

 

Net Income Available to Common Stockholders

$

1,017

 

$

1,884

 

$

3,723

 

$

4,814

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

Basic

 

1,821

 

 

1,887

 

 

1,825

 

 

1,892

 

Diluted

 

1,827

 

 

1,895

 

 

1,832

 

 

1,901

 

Earnings Per Common Shares Outstanding (2):

 

 

 

 

Basic

$

.56

 

$

1.00

 

$

2.04

 

$

2.54

 

Diluted

$

.56

 

$

.99

 

$

2.03

 

$

2.53

 

(1)

No fee waivers were recognized for the three and nine months ended September 30, 2023, or for the three months ended September 30, 2022. Includes fee waivers of $57 million for the nine months ended September 30, 2022.

(2)

The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

 

THE CHARLES SCHWAB CORPORATION

Financial and Operating Highlights

(Unaudited)

 

 

Q3-23 % change

 

2023

 

2022

 

vs.

 

vs.

 

Third

 

Second

 

First

 

Fourth

 

Third

(In millions, except per share amounts and as noted)

Q3-22

 

Q2-23

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Net Revenues

 

 

 

 

 

 

 

Net interest revenue

(24

)%

(2

)%

$

2,237

 

$

2,290

 

$

2,770

 

$

3,029

 

$

2,926

 

Asset management and administration fees

17

%

4

%

 

1,224

 

 

1,173

 

 

1,118

 

 

1,049

 

 

1,047

 

Trading revenue

(17

)%

(4

)%

 

768

 

 

803

 

 

892

 

 

895

 

 

930

 

Bank deposit account fees

(50

)%

17

%

 

205

 

 

175

 

 

151

 

 

350

 

 

413

 

Other

(7

)%

(20

)%

 

172

 

 

215

 

 

185

 

 

174

 

 

184

 

Total net revenues

(16

)%

(1

)%

 

4,606

 

 

4,656

 

 

5,116

 

 

5,497

 

 

5,500

 

Expenses Excluding Interest

 

 

 

 

 

 

 

Compensation and benefits (1)

20

%

18

%

 

1,770

 

 

1,498

 

 

1,638

 

 

1,488

 

 

1,476

 

Professional services

4

%

1

%

 

275

 

 

272

 

 

258

 

 

266

 

 

264

 

Occupancy and equipment

4

%

(4

)%

 

305

 

 

319

 

 

299

 

 

320

 

 

292

 

Advertising and market development

15

%

(1

)%

 

102

 

 

103

 

 

88

 

 

123

 

 

89

 

Communications

15

%

(20

)%

 

151

 

 

188

 

 

146

 

 

144

 

 

131

 

Depreciation and amortization

19

%

4

%

 

198

 

 

191

 

 

177

 

 

176

 

 

167

 

Amortization of acquired intangible assets

(11

)%

1

%

 

135

 

 

134

 

 

135

 

 

136

 

 

152

 

Regulatory fees and assessments

75

%

43

%

 

114

 

 

80

 

 

83

 

 

62

 

 

65

 

Other

(7

)%

(4

)%

 

173

 

 

180

 

 

182

 

 

184

 

 

187

 

Total expenses excluding interest

14

%

9

%

 

3,223

 

 

2,965

 

 

3,006

 

 

2,899

 

 

2,823

 

Income before taxes on income

(48

)%

(18

)%

 

1,383

 

 

1,691

 

 

2,110

 

 

2,598

 

 

2,677

 

Taxes on income

(61

)%

(35

)%

 

258

 

 

397

 

 

507

 

 

630

 

 

657

 

Net Income

(44

)%

(13

)%

 

1,125

 

 

1,294

 

 

1,603

 

 

1,968

 

 

2,020

 

Preferred stock dividends and other

(21

)%

(11

)%

 

108

 

 

121

 

 

70

 

 

147

 

 

136

 

Net Income Available to Common Stockholders

(46

)%

(13

)%

$

1,017

 

$

1,173

 

$

1,533

 

$

1,821

 

$

1,884

 

Earnings per common share (2):

 

 

 

 

 

 

 

Basic

(44

)%

(13

)%

$

.56

 

$

.64

 

$

.84

 

$

.98

 

$

1.00

 

Diluted

(43

)%

(13

)%

$

.56

 

$

.64

 

$

.83

 

$

.97

 

$

.99

 

Dividends declared per common share

14

%

 

$

.25

 

$

.25

 

$

.25

 

$

.22

 

$

.22

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

(3

)%

 

 

1,821

 

 

1,820

 

 

1,834

 

 

1,864

 

 

1,887

 

Diluted

(4

)%

 

 

1,827

 

 

1,825

 

 

1,842

 

 

1,873

 

 

1,895

 

Performance Measures

 

 

 

 

 

 

 

Pre-tax profit margin

 

 

 

30.0

%

 

36.3

%

 

41.2

%

 

47.3

%

 

48.7

%

Return on average common stockholders’ equity (annualized) (3)

 

 

 

14

%

 

17

%

 

23

%

 

27

%

 

25

%

Financial Condition (at quarter end, in billions)

 

 

 

 

 

 

 

Cash and cash equivalents

(28

)%

(30

)%

$

33.3

 

$

47.7

 

$

49.2

 

$

40.2

 

$

46.5

 

Cash and investments segregated

(58

)%

(26

)%

 

18.6

 

 

25.1

 

 

31.0

 

 

43.0

 

 

44.1

 

Receivables from brokerage clients — net

(6

)%

6

%

 

69.1

 

 

65.2

 

 

63.2

 

 

66.6

 

 

73.9

 

Available for sale securities

(53

)%

(12

)%

 

110.3

 

 

125.8

 

 

141.3

 

 

147.9

 

 

236.5

 

Held to maturity securities

69

%

(2

)%

 

162.5

 

 

166.3

 

 

169.9

 

 

173.1

 

 

96.3

 

Bank loans — net

 

 

 

40.3

 

 

40.1

 

 

40.0

 

 

40.5

 

 

40.4

 

Total assets

(18

)%

(7

)%

 

475.2

 

 

511.5

 

 

535.6

 

 

551.8

 

 

577.6

 

Bank deposits

(28

)%

(7

)%

 

284.4

 

 

304.4

 

 

325.7

 

 

366.7

 

 

395.7

 

Payables to brokerage clients

(34

)%

(14

)%

 

72.8

 

 

84.8

 

 

87.6

 

 

97.4

 

 

110.0

 

Other short-term borrowings (4)

N/M

(3

)%

 

7.6

 

 

7.8

 

 

7.1

 

 

4.7

 

 

0.5

 

Federal Home Loan Bank borrowings (4)

N/M

(22

)%

 

31.8

 

 

41.0

 

 

45.6

 

 

12.4

 

 

 

Long-term debt

19

%

10

%

 

24.8

 

 

22.5

 

 

20.0

 

 

20.8

 

 

20.8

 

Stockholders’ equity

2

%

2

%

 

37.8

 

 

37.1

 

 

36.3

 

 

36.6

 

 

37.0

 

Other

 

 

 

 

 

 

 

Full-time equivalent employees (at quarter end, in thousands)

2

%

(2

)%

 

35.9

 

 

36.6

 

 

36.0

 

 

35.3

 

 

35.2

 

Capital expenditures — purchases of equipment, office facilities, and property,

net (in millions)

30

%

49

%

$

250

 

$

168

 

$

187

 

$

211

 

$

193

 

Expenses excluding interest as a percentage of average client assets (annualized)

 

 

 

0.16

%

 

0.15

%

 

0.17

%

 

0.16

%

 

0.16

%

Clients’ Daily Average Trades (DATs) (in thousands)

(6

)%

(1

)%

 

5,218

 

 

5,272

 

 

5,895

 

 

5,389

 

 

5,523

 

Number of Trading Days

(2

)%

1

%

 

62.5

 

 

62.0

 

 

62.0

 

 

62.5

 

 

64.0

 

Revenue Per Trade (5)

(11

)%

(4

)%

$

2.35

 

$

2.46

 

$

2.44

 

$

2.66

 

$

2.63

 

 

 

 

 

 

 

 

 

(1)

Third quarter of 2023 includes $276 million in restructuring costs.

(2)

The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

(3)

Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.

(4)

Beginning in the first quarter of 2023, Federal Home Loan Bank borrowings are presented separately from other short-term borrowings. Prior period amounts have been reclassified to reflect this change.

(5)

Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.

N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions, except ratios or as noted)

(Unaudited)

 

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

2023

2022

2023

2022

 

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Average

Balance

Interest

Revenue/

Expense

Average

Yield/

Rate

Interest-earning assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

34,391

$

459

5.22

%

$

53,127

$

294

2.16

%

$

38,700

$

1,419

4.83

%

$

63,598

$

461

 

0.95

%

Cash and investments segregated

 

21,987

 

285

5.08

%

 

49,554

 

214

1.69

%

 

29,752

 

1,041

4.61

%

 

50,891

 

308

 

0.80

%

Receivables from brokerage clients

 

63,760

 

1,282

7.87

%

 

72,751

 

912

4.91

%

 

61,682

 

3,533

7.55

%

 

78,630

 

2,244

 

3.76

%

Available for sale securities (1,2)

 

129,545

 

724

2.22

%

 

273,968

 

1,161

1.69

%

 

143,360

 

2,340

2.17

%

 

281,897

 

3,196

 

1.51

%

Held to maturity securities

 

163,904

 

706

1.72

%

 

97,568

 

345

1.41

%

 

167,405

 

2,172

1.73

%

 

100,890

 

1,062

 

1.40

%

Bank loans

 

40,177

 

426

4.23

%

 

39,984

 

300

2.99

%

 

40,183

 

1,227

4.08

%

 

38,238

 

717

 

2.50

%

Total interest-earning assets

 

453,764

 

3,882

3.37

%

 

586,952

 

3,226

2.17

%

 

481,082

 

11,732

3.23

%

 

614,144

 

7,988

 

1.73

%

Securities lending revenue

 

 

105

 

 

 

124

 

 

 

341

 

 

 

383

 

 

Other interest revenue

 

 

41

 

 

 

7

 

 

 

75

 

 

 

15

 

 

Total interest-earning assets

$

453,764

$

4,028

3.50

%

$

586,952

$

3,357

2.26

%

$

481,082

$

12,148

3.35

%

$

614,144

$

8,386

 

1.81

%

Funding sources

 

 

 

 

 

 

 

 

 

 

 

 

Bank deposits

$

290,853

$

911

1.24

%

$

420,132

$

241

0.23

%

$

315,309

$

2,392

1.01

%

$

440,801

$

285

 

0.09

%

Payables to brokerage clients

 

63,731

 

66

0.41

%

 

96,802

 

41

0.17

%

 

68,548

 

205

0.40

%

 

101,472

 

47

 

0.06

%

Other short-term borrowings (3)

 

7,315

 

97

5.26

%

 

708

 

4

1.95

%

 

7,286

 

280

5.13

%

 

2,656

 

12

 

0.60

%

Federal Home Loan Bank borrowings (3,4)

 

36,287

 

477

5.18

%

 

 

 

 

35,896

 

1,387

5.11

%

 

 

 

 

Long-term debt

 

23,492

 

193

3.30

%

 

21,024

 

131

2.49

%

 

21,685

 

489

3.01

%

 

20,673

 

363

 

2.34

%

Total interest-bearing liabilities

 

421,678

 

1,744

1.64

%

 

538,666

 

417

0.31

%

 

448,724

 

4,753

1.41

%

 

565,602

 

707

 

0.17

%

Non-interest-bearing funding sources

 

32,086

 

 

 

48,286

 

 

 

32,358

 

 

 

48,542

 

 

Securities lending expense

 

 

46

 

 

 

13

 

 

 

96

 

 

 

28

 

 

Other interest expense

 

 

1

 

 

 

1

 

 

 

2

 

 

 

(2

)

 

Total funding sources

$

453,764

$

1,791

1.56

%

$

586,952

$

431

0.29

%

$

481,082

$

4,851

1.35

%

$

614,144

$

733

 

0.16

%

Net interest revenue

 

$

2,237

1.94

%

 

$

2,926

1.97

%

 

$

7,297

2.00

%

 

$

7,653

 

1.65

%

(1)

Amounts have been calculated based on amortized cost.

(2)

Beginning in the first quarter of 2023, amounts include the impact of derivative financial instruments and the related hedge accounting on our available for sale securities.

(3)

Beginning in the first quarter of 2023, Federal Home Loan Bank borrowings are presented separately from other short-term borrowings. Prior period amounts have been reclassified to reflect this change.

(4)

Average balance and interest expense was less than $500 thousand in the prior period.

 

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions, except ratios or as noted)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

Average

Client

Assets

 

Revenue

 

Average

Fee

 

 

Average

Client

Assets

 

Revenue

 

Average

Fee

 

 

Average

Client

Assets

 

Revenue

 

Average

Fee

 

 

Average

Client

Assets

 

Revenue

 

Average

Fee

Schwab money market funds before fee

waivers

$

414,074

 

$

270

 

0.26

%

 

 

$

184,834

 

$

132

 

0.28

%

 

 

$

368,788

 

$

735

 

0.27

%

 

 

$

158,525

 

$

340

 

 

0.29

%

Fee waivers

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(57

)

 

 

Schwab money market funds

 

414,074

 

 

270

 

0.26

%

 

 

 

184,834

 

 

132

 

0.28

%

 

 

 

368,788

 

 

735

 

0.27

%

 

 

 

158,525

 

 

283

 

 

0.24

%

Schwab equity and bond funds, exchange-traded funds (ETFs), and collective trust funds (CTFs)

 

485,326

 

 

99

 

0.08

%

 

 

 

422,711

 

 

89

 

0.08

%

 

 

 

466,995

 

 

284

 

0.08

%

 

 

 

436,928

 

 

278

 

 

0.09

%

Mutual Fund OneSource® and other

no-transaction-fee funds

 

255,039

 

 

170

 

0.26

%

 

 

 

183,019

 

 

139

 

0.30

%

 

 

 

235,561

 

 

469

 

0.27

%

 

 

 

196,032

 

 

453

 

 

0.31

%

Other third-party mutual funds and ETFs

 

632,902

 

 

127

 

0.08

%

 

 

 

747,676

 

 

160

 

0.08

%

 

 

 

663,577

 

 

393

 

0.08

%

 

 

 

805,204

 

 

510

 

 

0.08

%

Total mutual funds, ETFs, and CTFs (1)

$

1,787,341

 

 

666

 

0.15

%

 

 

$

1,538,240

 

 

520

 

0.13

%

 

 

$

1,734,921

 

 

1,881

 

0.14

%

 

 

$

1,596,689

 

 

1,524

 

 

0.13

%

Advice solutions (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based

$

468,305

 

 

476

 

0.40

%

 

 

$

431,276

 

 

452

 

0.42

%

 

 

$

455,730

 

 

1,393

 

0.41

%

 

 

$

446,979

 

 

1,409

 

 

0.42

%

Non-fee-based

 

97,957

 

 

 

 

 

 

 

85,567

 

 

 

 

 

 

 

95,951

 

 

 

 

 

 

 

87,528

 

 

 

 

 

Total advice solutions

$

566,262

 

 

476

 

0.33

%

 

 

$

516,843

 

 

452

 

0.35

%

 

 

$

551,681

 

 

1,393

 

0.34

%

 

 

$

534,507

 

 

1,409

 

 

0.35

%

Other balance-based fees (2)

 

610,450

 

 

64

 

0.04

%

 

 

 

537,809

 

 

58

 

0.04

%

 

 

 

588,922

 

 

189

 

0.04

%

 

 

 

573,733

 

 

186

 

 

0.04

%

Other (3)

 

 

 

18

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

52

 

 

 

 

 

 

 

48

 

 

 

Total asset management and administration fees

 

 

$

1,224

 

 

 

 

 

 

$

1,047

 

 

 

 

 

 

$

3,515

 

 

 

 

 

 

$

3,167

 

 

 

(1)

Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Wealth Advisory™, Schwab Managed Portfolios™, Managed Account Select®, Schwab Advisor Network®, Windhaven Strategies®, ThomasPartners® Strategies, Schwab Index Advantage® advised retirement plan balances, Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, Schwab Intelligent Portfolios Premium®, TD Ameritrade AdvisorDirect®, Essential Portfolios, Selective Portfolios, and Personalized Portfolios; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For the total end of period view, please see the Monthly Activity Report.

(2)

Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

(3)

Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

 

THE CHARLES SCHWAB CORPORATION

Growth in Client Assets and Accounts

(Unaudited)

 

 

 

 

 

 

 

 

Q3-23 % Change

 

2023

 

2022

 

vs.

 

vs.

 

Third

 

Second

 

First

 

Fourth

 

Third

(In billions, at quarter end, except as noted)

Q3-22

 

Q2-23

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Assets in client accounts

 

 

 

 

 

 

 

Schwab One®, certain cash equivalents and bank deposits

(30

)%

(8

)%

$

353.1

 

$

384.4

 

$

408.5

 

$

459.4

 

$

501.4

 

Bank deposit account balances

(29

)%

(3

)%

 

99.5

 

 

102.7

 

 

106.5

 

 

126.6

 

 

139.6

 

Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs

 

 

 

 

 

 

 

Money market funds (1)

107

%

11

%

 

436.3

 

 

392.9

 

 

357.8

 

 

278.9

 

 

211.1

 

Equity and bond funds and CTFs (2)

19

%

(3

)%

 

167.9

 

 

172.6

 

 

163.1

 

 

153.6

 

 

141.5

 

Total proprietary mutual funds and CTFs

71

%

7

%

 

604.2

 

 

565.5

 

 

520.9

 

 

432.5

 

 

352.6

 

Mutual Fund Marketplace® (3)

 

 

 

 

 

 

 

Mutual Fund OneSource® and other no-transaction-fee funds

59

%

13

%

 

288.0

 

 

254.6

 

 

244.3

 

 

235.7

 

 

181.5

 

Mutual fund clearing services

24

%

(2

)%

 

216.9

 

 

220.7

 

 

201.7

 

 

191.1

 

 

175.3

 

Other third-party mutual funds (4)

(5

)%

(8

)%

 

1,055.3

 

 

1,150.8

 

 

1,123.6

 

 

1,077.1

 

 

1,105.7

 

Total Mutual Fund Marketplace

7

%

(4

)%

 

1,560.2

 

 

1,626.1

 

 

1,569.6

 

 

1,503.9

 

 

1,462.5

 

Total mutual fund assets

19

%

(1

)%

 

2,164.4

 

 

2,191.6

 

 

2,090.5

 

 

1,936.4

 

 

1,815.1

 

Exchange-traded funds

 

 

 

 

 

 

 

Proprietary ETFs (2)

23

%

(2

)%

 

286.2

 

 

293.2

 

 

280.6

 

 

259.3

 

 

232.2

 

Other third-party ETFs

24

%

(2

)%

 

1,352.6

 

 

1,381.4

 

 

1,297.5

 

 

1,208.4

 

 

1,094.6

 

Total ETF assets

24

%

(2

)%

 

1,638.8

 

 

1,674.6

 

 

1,578.1

 

 

1,467.7

 

 

1,326.8

 

Equity and other securities

18

%

(4

)%

 

2,886.4

 

 

3,002.7

 

 

2,772.2

 

 

2,529.4

 

 

2,451.3

 

Fixed income securities

55

%

3

%

 

747.4

 

 

722.6

 

 

684.7

 

 

593.4

 

 

481.5

 

Margin loans outstanding

(9

)%

4

%

 

(65.1

)

 

(62.8

)

 

(60.5

)

 

(63.1

)

 

(71.5

)

Total client assets

18

%

(2

)%

$

7,824.5

 

$

8,015.8

 

$

7,580.0

 

$

7,049.8

 

$

6,644.2

 

Client assets by business

 

 

 

 

 

 

 

Investor Services

19

%

(3

)%

$

4,157.7

 

$

4,267.9

 

$

4,001.9

 

$

3,682.1

 

$

3,508.1

 

Advisor Services

17

%

(2

)%

 

3,666.8

 

 

3,747.9

 

 

3,578.1

 

 

3,367.7

 

 

3,136.1

 

Total client assets

18

%

(2

)%

$

7,824.5

 

$

8,015.8

 

$

7,580.0

 

$

7,049.8

 

$

6,644.2

 

Net growth in assets in client accounts (for the quarter ended)

 

 

 

 

 

 

 

Net new assets by business

 

 

 

 

 

 

 

Investor Services (5)

(48

)%

(21

)%

$

28.6

 

$

36.0

 

$

79.4

 

$

64.3

 

$

55.1

 

Advisor Services (6)

(67

)%

(46

)%

 

19.6

 

 

36.0

 

 

71.3

 

 

64.1

 

 

59.5

 

Total net new assets

(58

)%

(33

)%

$

48.2

 

$

72.0

 

$

150.7

 

$

128.4

 

$

114.6

 

Net market gains (losses)

 

 

 

(239.5

)

 

363.8

 

 

379.5

 

 

277.2

 

 

(302.9

)

Net growth (decline)

 

 

$

(191.3

)

$

435.8

 

$

530.2

 

$

405.6

 

$

(188.3

)

New brokerage accounts (in thousands, for the quarter ended)

 

(7

)%

 

894

 

 

960

 

 

1,042

 

 

931

 

 

897

 

Client accounts (in thousands)

 

 

 

 

 

 

 

Active brokerage accounts (7)

2

%

 

 

34,540

 

 

34,382

 

 

34,120

 

 

33,758

 

 

33,875

 

Banking accounts

6

%

1

%

 

1,799

 

 

1,781

 

 

1,746

 

 

1,716

 

 

1,696

 

Corporate retirement plan participants

7

%

1

%

 

2,463

 

 

2,443

 

 

2,379

 

 

2,351

 

 

2,305

 

 

 

 

 

 

 

 

 

(1)

Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.

(2)

Includes balances held on and off the Schwab platform. As of September 30, 2023, off-platform equity and bond funds, CTFs, and ETFs were $24.3 billion, $3.4 billion, and $95.2 billion, respectively.

(3)

Excludes all proprietary mutual funds and ETFs.

(4)

As of September 30, 2023, third-party money funds were $1.0 billion.

(5)

Third quarter of 2023 includes net inflows of $3.3 billion from off-platform Schwab Bank Retail Certificates of Deposit (CDs). Second quarter of 2023 includes an inflow of $12.0 billion from a mutual fund clearing services client and inflows of $7.8 billion from off-platform Schwab Bank Retail CDs. First quarter of 2023 includes inflows of $19.0 billion from off-platform Schwab Bank Retail CDs.

(6)

Third quarter of 2023 includes an outflow of $0.8 billion from an international relationship.

(7)

Fourth quarter of 2022 includes the Company-initiated closure of approximately 350 thousand low-balance accounts. Third quarter of 2022 includes the Company-initiated closure of approximately 152 thousand low-balance accounts.

 

The Charles Schwab Corporation Monthly Activity Report For September 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change

 

 

Sep

 

Oct

 

Nov

 

Dec

 

Jan

 

Feb

 

Mar

 

Apr

 

May

 

Jun

 

Jul

 

Aug

 

Sep

 

Mo.

 

Yr.

Market Indices (at month end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dow Jones Industrial Average®

28,726

 

32,733

 

34,590

 

33,147

 

34,086

 

32,657

 

33,274

 

34,098

 

32,908

 

34,408

 

35,560

 

34,722

 

33,508

 

(3

)%

17

%

Nasdaq Composite®

10,576

 

10,988

 

11,468

 

10,466

 

11,585

 

11,456

 

12,222

 

12,227

 

12,935

 

13,788

 

14,346

 

14,035

 

13,219

 

(6

)%

25

%

Standard & Poor’s® 500

3,586

 

3,872

 

4,080

 

3,840

 

4,077

 

3,970

 

4,109

 

4,169

 

4,180

 

4,450

 

4,589

 

4,508

 

4,288

 

(5

)%

20

%

Client Assets (in billions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Client Assets

7,127.6

 

6,644.2

 

7,004.6

 

7,320.6

 

7,049.8

 

7,480.6

 

7,380.2

 

7,580.0

 

7,631.5

 

7,650.2

 

8,015.8

 

8,241.0

 

8,094.7

 

 

 

Net New Assets (1)

39.8

 

42.0

 

33.1

 

53.3

 

36.1

 

41.7

 

72.9

 

13.6

 

24.6

 

33.8

 

12.9

 

8.1

 

27.2

 

N/M

(32

)%

Net Market Gains (Losses)

(523.2

)

318.4

 

282.9

 

(324.1

)

394.7

 

(142.1

)

126.9

 

37.9

 

(5.9

)

331.8

 

212.3

 

(154.4

)

(297.4

)

 

 

Total Client Assets (at month end)

6,644.2

 

7,004.6

 

7,320.6

 

7,049.8

 

7,480.6

 

7,380.2

 

7,580.0

 

7,631.5

 

7,650.2

 

8,015.8

 

8,241.0

 

8,094.7

 

7,824.5

 

(3

)%

18

%

Core Net New Assets (2)

39.8

 

42.0

 

33.1

 

53.3

 

36.1

 

41.7

 

53.9

 

(2.3

)

20.7

 

33.8

 

13.7

 

4.9

 

27.1

 

N/M

(32

)%

Receiving Ongoing Advisory Services (at month end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

466.6

 

487.3

 

514.0

 

499.8

 

524.6

 

515.5

 

526.2

 

530.7

 

526.3

 

547.5

 

560.6

 

552.2

 

533.0

 

(3

)%

14

%

Advisor Services (3)

2,950.9

 

3,106.0

 

3,270.5

 

3,173.4

 

3,345.4

 

3,289.6

 

3,369.3

 

3,394.9

 

3,377.8

 

3,527.8

 

3,619.8

 

3,554.2

 

3,448.0

 

(3

)%

17

%

Client Accounts (at month end, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Brokerage Accounts (4)

33,875

 

33,896

 

33,636

 

33,758

 

33,878

 

34,010

 

34,120

 

34,248

 

34,311

 

34,382

 

34,434

 

34,440

 

34,540

 

 

2

%

Banking Accounts

1,696

 

1,706

 

1,705

 

1,716

 

1,729

 

1,733

 

1,746

 

1,757

 

1,768

 

1,781

 

1,792

 

1,798

 

1,799

 

 

6

%

Corporate Retirement Plan Participants

2,305

 

2,322

 

2,336

 

2,351

 

2,369

 

2,384

 

2,379

 

2,391

 

2,401

 

2,443

 

2,458

 

2,458

 

2,463

 

 

7

%

Client Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Brokerage Accounts (in thousands)

287

 

298

 

303

 

330

 

344

 

320

 

378

 

331

 

314

 

315

 

303

 

311

 

280

 

(10

)%

(2

)%

Client Cash as a Percentage of Client Assets (5,6)

12.9

%

12.2

%

11.5

%

12.2

%

11.5

%

11.6

%

11.2

%

10.8

%

10.9

%

10.5

%

10.2

%

10.4

%

10.8

%

40 bp

(210) bp

Derivative Trades as a Percentage of Total Trades

23.6

%

24.1

%

24.6

%

23.2

%

23.0

%

23.5

%

22.8

%

23.4

%

23.5

%

23.9

%

23.0

%

24.4

%

24.2

%

(20) bp

60 bp

Selected Average Balances (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Interest-Earning Assets (7)

568,351

 

552,631

 

527,019

 

520,100

 

512,893

 

503,122

 

497,627

 

493,215

 

483,438

 

479,752

 

466,659

 

449,483

 

444,864

 

(1

)%

(22

)%

Average Margin Balances

73,224

 

69,188

 

66,011

 

64,759

 

60,211

 

60,575

 

60,848

 

60,338

 

60,250

 

61,543

 

63,040

 

64,226

 

64,014

 

 

(13

)%

Average Bank Deposit Account Balances (8)

141,198

 

136,036

 

130,479

 

126,953

 

122,387

 

115,816

 

109,392

 

104,775

 

103,149

 

102,917

 

102,566

 

101,928

 

100,404

 

(1

)%

(29

)%

Mutual Fund and Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Buys (Sells) (9,10) (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equities

(2,662

)

3,984

 

3,777

 

(1,837

)

7,236

 

5,850

 

(3,234

)

1,126

 

(1,366

)

9,190

 

7,423

 

(278

)

675

 

 

 

Hybrid

(938

)

(1,380

)

(2,052

)

(1,595

)

(433

)

47

 

(1,641

)

(462

)

(889

)

(903

)

(407

)

(1,037

)

(828

)

 

 

Bonds

(5,801

)

(7,218

)

(3,721

)

(3,260

)

5,646

 

4,281

 

6,158

 

2,575

 

2,029

 

3,302

 

2,515

 

4,696

 

2,723

 

 

 

Net Buy (Sell) Activity (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds (9)

(15,200

)

(18,473

)

(17,143

)

(21,851

)

552

 

(2,338

)

(7,423

)

(4,904

)

(7,157

)

(4,485

)

(3,333

)

(6,476

)

(5,853

)

 

 

Exchange-Traded Funds (10)

5,799

 

13,859

 

15,147

 

15,159

 

11,897

 

12,516

 

8,706

 

8,143

 

6,931

 

16,074

 

12,864

 

9,857

 

8,423

 

 

 

Money Market Funds

17,018

 

21,542

 

16,929

 

27,778

 

24,285

 

23,347

 

27,106

 

6,291

 

15,256

 

9,112

 

7,911

 

16,869

 

13,388

 

 

 

Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports.

(1)

Unless otherwise noted, differences between net new assets and core net new assets are net flows from off-platform Schwab Bank Retail CDs – including March 2023 which reflects inflows of $19.0 billion from off-platform Schwab Bank Retail CDs issued year-to-date through March 31, 2023. September 2023 also includes an outflow of $0.8 billion from an international relationship. April 2023 also includes an inflow of $12.0 billion from a mutual fund clearing services client.

(2)

Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client, and activity from off-platform Schwab Bank Retail CDs. These flows may span multiple reporting periods.

(3)

Excludes Retirement Business Services.

(4)

November 2022 includes the Company-initiated closure of approximately 350 thousand low-balance accounts. September 2022 includes the Company-initiated closure of 152 thousand low-balance accounts.

(5)

Schwab One®, certain cash equivalents, bank deposits, third-party bank deposit accounts, and money market fund balances as a percentage of total client assets.

(6)

Beginning July 2023, client cash as a percentage of client assets excludes brokered CDs issued by Charles Schwab Bank. Prior periods have been recast to reflect this change.

(7)

Represents average total interest-earning assets on the Company’s balance sheet. November 2022 includes the impact of transferring certain investment securities from the available for sale category to the held-to-maturity category.

(8)

Represents average clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.

(9)

Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.

(10)

Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.

N/M - Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION

Non-GAAP Financial Measures

(In millions, except ratios and per share amounts)

(Unaudited)

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s third quarter earnings release contains references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide useful supplemental information about the financial performance of the Company, and facilitate meaningful comparison of Schwab’s results in the current period to both historic and future results. These non-GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may not be comparable to non-GAAP financial measures presented by other companies.

Schwab’s use of non-GAAP measures is reflective of certain adjustments made to GAAP financial measures as described below. Beginning in the third quarter of 2023, these adjustments also include restructuring costs, which the Company began incurring in connection with its previously announced plans to streamline its operations to prepare for post-integration of TD Ameritrade. See Part I – Item 1 – Note 10 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 for additional information.

Non-GAAP Adjustment or Measure

Definition

Usefulness to Investors and Uses by Management

Acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs

Schwab adjusts certain GAAP financial measures to exclude the impact of acquisition and integration-related costs incurred as a result of the Company’s acquisitions, amortization of acquired intangible assets, restructuring costs, and, where applicable, the income tax effect of these expenses.

 

Adjustments made to exclude amortization of acquired intangible assets are reflective of all acquired intangible assets, which were recorded as part of purchase accounting. These acquired intangible assets contribute to the Company’s revenue generation. Amortization of acquired intangible assets will continue in future periods over their remaining useful lives.

We exclude acquisition and integration-related costs, amortization of acquired intangible assets, and restructuring costs for the purpose of calculating certain non-GAAP measures because we believe doing so provides additional transparency of Schwab’s ongoing operations, and is useful in both evaluating the operating performance of the business and facilitating comparison of results with prior and future periods.

 

Costs related to acquisition and integration or restructuring fluctuate based on the timing of acquisitions, integration and restructuring activities, thereby limiting comparability of results among periods, and are not representative of the costs of running the Company’s ongoing business. Amortization of acquired intangible assets is excluded because management does not believe it is indicative of the Company’s underlying operating performance.

Return on tangible common equity

Return on tangible common equity represents annualized adjusted net income available to common stockholders as a percentage of average tangible common equity. Tangible common equity represents common equity less goodwill, acquired intangible assets — net, and related deferred tax liabilities.

Acquisitions typically result in the recognition of significant amounts of goodwill and acquired intangible assets. We believe return on tangible common equity may be useful to investors as a supplemental measure to facilitate assessing capital efficiency and returns relative to the composition of Schwab’s balance sheet.

Adjusted Tier 1 Leverage Ratio

Adjusted Tier 1 Leverage Ratio represents the Tier 1 Leverage Ratio as prescribed by bank regulatory guidance for the consolidated company and for CSB, adjusted to reflect the inclusion of accumulated other comprehensive income (AOCI) in the ratio.

Inclusion of the impacts of AOCI in the Company’s Tier 1 Leverage Ratio provides additional information regarding the Company’s current capital position. We believe Adjusted Tier 1 Leverage Ratio may be useful to investors as a supplemental measure of the Company’s capital levels.

 

The Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.

The tables below present reconciliations of GAAP measures to non-GAAP measures:

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

Total Expenses Excluding Interest

 

Net Income

 

Total Expenses Excluding Interest

 

Net Income

 

Total Expenses Excluding Interest

 

Net Income

 

Total Expenses Excluding Interest

 

Net Income

Total expenses excluding interest (GAAP), Net income (GAAP)

$

3,223

 

$

1,125

 

$

2,823

 

$

2,020

 

$

9,194

 

$

4,022

 

$

8,475

 

$

5,215

 

Acquisition and integration-related costs (1)

 

(106

)

 

106

 

 

(101

)

 

101

 

 

(334

)

 

334

 

 

(291

)

 

291

 

Amortization of acquired intangible assets

 

(135

)

 

135

 

 

(152

)

 

152

 

 

(404

)

 

404

 

 

(460

)

 

460

 

Restructuring costs (2)

 

(279

)

 

279

 

 

 

 

 

 

(279

)

 

279

 

 

 

 

 

Income tax effects (3)

 

N/A

 

 

(127

)

 

N/A

 

 

(62

)

 

N/A

 

 

(247

)

 

N/A

 

 

(183

)

Adjusted total expenses (non-GAAP), Adjusted net income (non-GAAP)

$

2,703

 

$

1,518

 

$

2,570

 

$

2,211

 

$

8,177

 

$

4,792

 

$

7,724

 

$

5,783

 

(1)

Acquisition and integration-related costs for the three and nine months ended September 30, 2023 primarily consist of $52 million and $158 million of compensation and benefits, $37 million and $111 million of professional services, $7 million and $21 million of occupancy and equipment, and $4 million and $26 million of other. Acquisition and integration-related costs for the three and nine months ended September 30, 2022 primarily consist of $57 million and $166 million of compensation and benefits, $36 million and $102 million of professional services, and $6 million and $14 million of occupancy and equipment.

(2)

Restructuring costs for the three and nine months ended September 30, 2023 primarily consist of $276 million of compensation and benefits. There were no restructuring costs for the three and nine months ended September 30, 2022.

(3)

The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs, amortization of acquired intangible assets and restructuring costs on an after-tax basis.

N/A Not applicable.

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

Amount

 

% of Total Net Revenues

 

Amount

 

% of Total Net Revenues

 

Amount

 

% of Total Net Revenues

 

Amount

 

% of Total Net Revenues

Income before taxes on income (GAAP), Pre-tax profit margin (GAAP)

$

1,383

30.0

%

$

2,677

48.7

%

$

5,184

36.1

%

$

6,790

44.5

%

Acquisition and integration-related costs

 

106

2.3

%

 

101

1.8

%

 

334

2.3

%

 

291

1.9

%

Amortization of acquired intangible assets

 

135

2.9

%

 

152

2.8

%

 

404

2.8

%

 

460

3.0

%

Restructuring costs

 

279

6.1

%

 

 

 

279

1.9

%

 

 

Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP)

$

1,903

41.3

%

$

2,930

53.3

%

$

6,201

43.1

%

$

7,541

49.4

%

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

 

Amount

 

Diluted EPS

 

Amount

 

Diluted EPS

 

Amount

 

Diluted EPS

 

Amount

 

Diluted EPS

Net income available to common stockholders (GAAP), Earnings per common share — diluted (GAAP)

$

1,017

 

$

.56

 

$

1,884

 

$

.99

 

$

3,723

 

$

2.03

 

$

4,814

 

$

2.53

 

Acquisition and integration-related costs

 

106

 

 

.06

 

 

101

 

 

.05

 

 

334

 

 

.18

 

 

291

 

 

.15

 

Amortization of acquired intangible assets

 

135

 

 

.07

 

 

152

 

 

.08

 

 

404

 

 

.22

 

 

460

 

 

.24

 

Restructuring costs

 

279

 

 

.15

 

 

 

 

 

 

279

 

 

.15

 

 

 

 

 

Income tax effects

 

(127

)

 

(.07

)

 

(62

)

 

(.02

)

 

(247

)

 

(.13

)

 

(183

)

 

(.09

)

Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)

$

1,410

 

$

.77

 

$

2,075

 

$

1.10

 

$

4,493

 

$

2.45

 

$

5,382

 

$

2.83

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2023

 

2022

 

2023

 

2022

Return on average common stockholders’ equity (GAAP)

 

14

%

 

25

%

 

18

%

 

18

%

Average common stockholders’ equity

$

28,274

 

$

30,282

 

$

27,747

 

$

36,526

 

Less: Average goodwill

 

(11,951

)

 

(11,951

)

 

(11,951

)

 

(11,952

)

Less: Average acquired intangible assets — net

 

(8,457

)

 

(8,999

)

 

(8,589

)

 

(9,151

)

Plus: Average deferred tax liabilities related to goodwill

and acquired intangible assets — net

 

1,822

 

 

1,848

 

 

1,830

 

 

1,867

 

Average tangible common equity

$

9,688

 

$

11,180

 

$

9,037

 

$

17,290

 

Adjusted net income available to common stockholders (1)

$

1,410

 

$

2,075

 

$

4,493

 

$

5,382

 

Return on tangible common equity (non-GAAP)

 

58

%

 

74

%

 

66

%

 

42

%

(1)

See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

 

 

September 30, 2023

 

CSC

CSB

Tier 1 Leverage Ratio (GAAP)

 

8.2

%

 

9.6

%

Tier 1 Capital

$

39,971

 

$

31,764

 

Plus: AOCI adjustment

 

(20,752

)

 

(18,143

)

Adjusted Tier 1 Capital

 

19,219

 

 

13,621

 

Average assets with regulatory adjustments

 

488,627

 

 

330,908

 

Plus: AOCI adjustment

 

(20,033

)

 

(17,950

)

Adjusted average assets with regulatory adjustments

$

468,594

 

$

312,958

 

Adjusted Tier 1 Leverage Ratio (non-GAAP)

 

4.1

%

 

4.4

%

 

Contacts

MEDIA:

Mayura Hooper

Charles Schwab

Phone: 415-667-1525



INVESTORS/ANALYSTS:

Jeff Edwards

Charles Schwab

Phone: 415-667-1524

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