Schwab Reports Strong First Quarter Results
04/17/2023 - 08:00 AM
Client And Business Momentum Continued; Organic Asset Growth Exceeded 7%
10% Year-over-Year Revenue Growth; GAAP Pre-Tax Profit Margin of 41.2% ; 45.8% Adjusted (1)
WESTLAKE, Texas --(BUSINESS WIRE)--
The Charles Schwab Corporation announced today that its net income for the first quarter of 2023 was $1.6 billion 14% from $1.4 billion
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Three Months Ended March 31 ,
%
Financial Highlights (1)
2023
2022
Change
Net revenues (in millions)
$
5,116
$
4,672
10
%
Net income (in millions)
GAAP
$
1,603
$
1,402
14
%
Adjusted (1)
$
1,780
$
1,591
12
%
Diluted earnings per common share
GAAP
$
.83
$
.67
24
%
Adjusted (1)
$
.93
$
.77
21
%
Pre-tax profit margin
GAAP
41.2
%
39.4
%
Adjusted (1)
45.8
%
44.7
%
Return on average common
stockholders’ equity (annualized)
23
%
12
%
Return on tangible
common equity (annualized) (1)
83
%
26
%
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 10-11 of this release.
Co-Chairman and CEO Walt Bettinger commented, “When I drafted my first letter to stockholders 15 years ago in the middle of the financial crisis, I outlined four factors that helped distinguish Schwab from other financial institutions during a very challenging time for global markets: a strong financial foundation, a client-centric strategy, a disciplined operating approach, and a diversified business model. These characteristics remain every bit as relevant to our story today. We continue to consistently manage the business in a conservative manner, with an unwavering long-term orientation. Our ongoing commitment to this consistency of mission, including our “Through Clients’ Eyes” strategy, highlights why we maintain the ability to meet the needs of individual investors and the advisors who serve them through various environments.”
“The first quarter presented clients with a mixed macroeconomic backdrop,” Mr. Bettinger noted. “While equity markets rebounded from year-end 2022 levels, investor sentiment remained bearish – especially following the onset of the banking industry turmoil in early March. Fixed income markets also reflected growing fears of an economic downturn as the 10-year U.S. Treasury yield declined approximately 50 basis points from its intra-quarter peak to end March just under 3.50% . Through the various ups and downs to start the year, Schwab remained a trusted partner to investors. During the quarter, clients opened over 1 million new brokerage accounts and entrusted us with $132 billion $53 billion Investor Services gathered approximately $60 billion $71 billion 7% and helped push total client assets to $7.58 trillion
Mr. Bettinger continued, “Our top priority this quarter was to stay connected to our clients – to help them understand what is happening in the marketplace – and empower them with the tools and support to navigate the current environment. I believe our robust asset gathering speaks to our success on this front. Amidst all that was happening around us, we further advanced our key strategic initiatives of scale and efficiency, win-win monetization, and segmentation. Completing the Ameritrade integration will unlock sizeable opportunities across all three of those areas and we took a meaningful step towards achieving that goal with the completion of the first client transition group in February. The successful conversion of this initial group was made possible by the efforts of our dedicated employees and further validates our roadmap for the remaining client transition groups. During the quarter, we also announced several enhancements to Schwab Personalized Indexing™ (SPI), including new tools that expand the personalization options available to clients. We also evolved SPI’s digital experience to streamline the onboarding process and bolster real-time reporting analytics. We continue to see a tremendous opportunity in meeting the advice needs of both Schwab and legacy Ameritrade clients. As investors sought out advice amidst a more challenging environment, net flows into our Managed Investing solutions grew 26% from the prior year – totaling $8.9 billion The Family Wealth Alliance which, in conjunction with our industry-leading Advisor Services capabilities, will bring industry-wide relationships, thought leadership resources, and technology to help enable success for advisors serving the needs of ultra-high net worth individuals.
“It was an honor to be ranked #1 in Investor Satisfaction with Full-Service Wealth Management Firms by J.D. Power ,” Mr. Bettinger concluded. “The combination of our sustained business momentum and third-party recognition highlights the fact that our “no trade-offs” approach continues to resonate with investors. At the same time, it is a testament to the intentional evolution of the company since its inception almost 50 years ago. Over those many decades, we have continuously enhanced our business while seeking to better serve investors’ needs through the thoughtful transformation of our platform from a pioneer in the discount brokerage space to a leader in full-service wealth management. Looking ahead, we intend to continue pressing our competitive advantages as we seek to gain share by emphasizing our attractive value proposition, award-winning service experience, commitment to transparency, and role as a trusted leader in the marketplace.”
CFO Peter Crawford stated, “Our first quarter revenue picture reflected the company’s sustained business momentum and the benefits of rising interest rates, partially offset by clients’ asset allocation decisions. Total revenue was up 10% year-over-year and exceeded $5 billion 11% versus the prior year-end as clients realigned their allocations across our expansive selection of transaction and investment cash solutions, we observed a decline in the average daily pace of bank sweep movements from January to March – even when allowing for a temporary spike in activity at the onset of the banking system turmoil. Concurrently, we benefited from higher asset yields resulting from the Federal Reserve’s pronounced tightening program. This helped expand net interest margin by 81 basis points from the first quarter of 2022 – growing net interest revenue by 27% to $2.8 billion $97 million
Mr. Crawford proceeded, “GAAP expenses rose 6% from a year ago to $3.0 billion $98 million $135 million (1) increased 7% versus the first quarter of 2022. Our combination of top-line growth, coupled with disciplined expense management, yielded a pre-tax margin of 41.2% – 45.8% adjusted (1) – levels achieved by few other financial services firms.”
“Maintaining the capital and liquidity required to support Schwab’s long-term growth remains our primary balance sheet objective,” Mr. Crawford concluded. “We increased our quarterly common dividend by 14% to $.25 per share and returned capital via common and preferred stock repurchases. Even with the accelerated capital return during the first two months of the quarter, our Tier 1 Leverage Ratio finished at 7.1% . In light of recent events within the U.S. banking sector, and the resulting regulatory uncertainty, we have decided to pause our active buyback program. That being said, opportunistic capital return is still an important component of our ‘through the cycle’ financial formula. Ultimately, we believe the current headwinds will prove transitory and we remain well positioned to deliver long-term value to our stockholders.”
(1) Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 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 the dynamics of the BDA was posted on January 18, 2023 .
Spring Business Update
The company will host its Spring 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 the 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; Ameritrade integration; opportunities; business momentum; market share; capital and liquidity; growth; capital return; positioning; and stockholder 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 develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; successfully implement integration strategies and plans; attract and retain clients and independent investment advisors and grow those relationships and client assets; hire and retain talent; support client activity levels; monetize client assets; and manage expenses. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including equity valuations and the level of interest rates; client cash allocation decisions; client sensitivity to rates; level of client assets, including cash balances; competitive pressures on pricing; capital and liquidity needs and management; balance sheet positioning relative to changes in interest rates; interest earning asset mix and growth; the migration of bank deposit account balances; the level and mix of client trading activity; market volatility; margin loan balances; securities lending; legislative or regulatory changes; 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 34.1 million active brokerage accounts, 2.4 million corporate retirement plan participants, 1.7 million banking accounts, and $7.58 trillion 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
March 31 ,
2023
2022
Net Revenues
Interest revenue
$
4,016
$
2,319
Interest expense
(1,246
)
(136
)
Net interest revenue
2,770
2,183
Asset management and administration fees (1)
1,118
1,068
Trading revenue
892
963
Bank deposit account fees
151
294
Other
185
164
Total net revenues
5,116
4,672
Expenses Excluding Interest
Compensation and benefits
1,638
1,546
Professional services
258
244
Occupancy and equipment
299
269
Advertising and market development
88
102
Communications
146
144
Depreciation and amortization
177
150
Amortization of acquired intangible assets
135
154
Regulatory fees and assessments
83
68
Other
182
156
Total expenses excluding interest
3,006
2,833
Income before taxes on income
2,110
1,839
Taxes on income
507
437
Net Income
1,603
1,402
Preferred stock dividends and other
70
124
Net Income Available to Common Stockholders
$
1,533
$
1,278
Weighted-Average Common Shares Outstanding:
Basic
1,834
1,894
Diluted
1,842
1,905
Earnings Per Common Shares Outstanding (2) :
Basic
$
.84
$
.67
Diluted
$
.83
$
.67
(1)
No fee waivers were recognized for the three months ended March 31, 2023 . Includes fee waivers of $54 million March 31, 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)
Q1-23 % change
2023
2022
vs.
vs.
First
Fourth
Third
Second
First
(In millions, except per share amounts and as noted)
Q1-22
Q4-22
Quarter
Quarter
Quarter
Quarter
Quarter
Net Revenues
Net interest revenue
27
%
(9
) %
$
2,770
$
3,029
$
2,926
$
2,544
$
2,183
Asset management and administration fees
5
%
7
%
1,118
1,049
1,047
1,052
1,068
Trading revenue
(7
) %
—
892
895
930
885
963
Bank deposit account fees
(49
) %
(57
) %
151
350
413
352
294
Other
13
%
6
%
185
174
184
260
164
Total net revenues
10
%
(7
) %
5,116
5,497
5,500
5,093
4,672
Expenses Excluding Interest
Compensation and benefits
6
%
10
%
1,638
1,488
1,476
1,426
1,546
Professional services
6
%
(3
) %
258
266
264
258
244
Occupancy and equipment
11
%
(7
) %
299
320
292
294
269
Advertising and market development
(14
) %
(28
) %
88
123
89
105
102
Communications
1
%
1
%
146
144
131
169
144
Depreciation and amortization
18
%
1
%
177
176
167
159
150
Amortization of acquired intangible assets
(12
) %
(1
) %
135
136
152
154
154
Regulatory fees and assessments
22
%
34
%
83
62
65
67
68
Other
17
%
(1
) %
182
184
187
187
156
Total expenses excluding interest
6
%
4
%
3,006
2,899
2,823
2,819
2,833
Income before taxes on income
15
%
(19
) %
2,110
2,598
2,677
2,274
1,839
Taxes on income
16
%
(20
) %
507
630
657
481
437
Net Income
14
%
(19
) %
1,603
1,968
2,020
1,793
1,402
Preferred stock dividends and other
(44
) %
(52
) %
70
147
136
141
124
Net Income Available to Common Stockholders
20
%
(16
) %
$
1,533
$
1,821
$
1,884
$
1,652
$
1,278
Earnings per common share (1) :
Basic
25
%
(14
) %
$
.84
$
.98
$
1.00
$
.87
$
.67
Diluted
24
%
(14
) %
$
.83
$
.97
$
.99
$
.87
$
.67
Dividends declared per common share
25
%
14
%
$
.25
$
.22
$
.22
$
.20
$
.20
Weighted-average common shares outstanding:
Basic
(3
) %
(2
) %
1,834
1,864
1,887
1,896
1,894
Diluted
(3
) %
(2
) %
1,842
1,873
1,895
1,904
1,905
Performance Measures
Pre-tax profit margin
41.2
%
47.3
%
48.7
%
44.6
%
39.4
%
Return on average common stockholders’ equity (annualized) (2)
23
%
27
%
25
%
19
%
12
%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents
(46
) %
22
%
$
49.2
$
40.2
$
46.5
$
64.6
$
91.1
Cash and investments segregated
(43
) %
(28
) %
31.0
43.0
44.1
53.5
54.4
Receivables from brokerage clients — net
(25
) %
(5
) %
63.2
66.6
73.9
76.1
84.1
Available for sale securities
(48
) %
(4
) %
141.3
147.9
236.5
265.3
272.0
Held to maturity securities
61
%
(2
) %
169.9
173.1
96.3
100.1
105.3
Bank loans — net
8
%
(1
) %
40.0
40.5
40.4
39.6
37.2
Total assets
(21
) %
(3
) %
535.6
551.8
577.6
637.6
681.0
Bank deposits
(30
) %
(11
) %
325.7
366.7
395.7
442.0
465.8
Payables to brokerage clients
(30
) %
(10
) %
87.6
97.4
110.0
114.9
125.3
Other short-term borrowings (3)
69
%
51
%
7.1
4.7
0.5
1.4
4.2
Federal Home Loan Bank borrowings (3)
N/M
N/M
45.6
12.4
—
—
—
Long-term debt
(9
) %
(4
) %
20.0
20.8
20.8
21.1
21.9
Stockholders’ equity
(25
) %
(1
) %
36.3
36.6
37.0
44.5
48.1
Other
Full-time equivalent employees (at quarter end, in thousands)
5
%
2
%
36.0
35.3
35.2
35.2
34.2
Capital expenditures — purchases of equipment, office facilities,
and property, net (in millions)
(11
) %
(11
) %
$
187
$
211
$
193
$
339
$
209
Expenses excluding interest as a percentage of average client assets
(annualized)
0.17
%
0.16
%
0.16
%
0.16
%
0.15
%
Clients’ Daily Average Trades (DATs) (in thousands)
(10
) %
9
%
5,895
5,389
5,523
6,227
6,578
Number of Trading Days
—
(1
) %
62.0
62.5
64.0
62.0
62.0
Revenue Per Trade (4)
3
%
(8
) %
$
2.44
$
2.66
$
2.63
$
2.29
$
2.36
(1)
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.
(2)
Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(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)
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
March 31 ,
2023
2022
Average
Balance
Interest
Revenue/
Expense
Average
Yield/
Rate
Average
Balance
Interest
Revenue/
Expense
Average
Yield/
Rate
Interest-earning assets
Cash and cash equivalents
$
37,056
$
413
4.46
%
$
72,465
$
34
0.19
%
Cash and investments segregated
40,068
432
4.31
%
51,913
15
0.11
%
Receivables from brokerage clients
60,543
1,084
7.16
%
84,204
626
2.97
%
Available for sale securities (1,2)
155,791
825
2.12
%
284,526
947
1.33
%
Held to maturity securities
170,889
746
1.75
%
103,416
378
1.46
%
Bank loans
40,248
391
3.92
%
35,852
187
2.10
%
Total interest-earning assets
504,595
3,891
3.09
%
632,376
2,187
1.38
%
Securities lending revenue
112
129
Other interest revenue
13
3
Total interest-earning assets
$
504,595
$
4,016
3.19
%
$
632,376
$
2,319
1.47
%
Funding sources
Bank deposits
$
343,105
$
618
0.73
%
$
452,692
$
16
0.01
%
Payables to brokerage clients
77,169
75
0.39
%
105,929
2
0.01
%
Other short-term borrowings (3)
6,917
86
5.05
%
4,717
4
0.33
%
Federal Home Loan Bank borrowings (3,4)
24,458
304
5.05
%
—
—
—
Long-term debt
20,290
139
2.74
%
19,864
108
2.18
%
Total interest-bearing liabilities
471,939
1,222
1.05
%
583,202
130
0.09
%
Non-interest-bearing funding sources
32,656
49,174
Securities lending expense
22
7
Other interest expense
2
(1
)
Total funding sources
$
504,595
$
1,246
1.00
%
$
632,376
$
136
0.09
%
Net interest revenue
$
2,770
2.19
%
$
2,183
1.38
%
(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
THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
Three Months Ended
March 31 ,
2023
2022
Average
Client
Assets
Revenue
Average
Fee
Average
Client
Assets
Revenue
Average
Fee
Schwab money market funds before fee
waivers
$
316,391
$
213
0.27
%
$
144,732
$
102
0.29
%
Fee waivers
—
(54
)
Schwab money market funds
316,391
213
0.27
%
144,732
48
0.13
%
Schwab equity and bond funds, exchange-traded funds (ETFs), and
collective trust funds (CTFs)
450,581
91
0.08
%
456,326
97
0.09
%
Mutual Fund OneSource® and other
no-transaction-fee funds
222,437
148
0.27
%
212,641
165
0.31
%
Other third-party mutual funds and ETFs
676,344
133
0.08
%
872,212
179
0.08
%
Total mutual funds, ETFs, and CTFs (1)
$
1,665,753
585
0.14
%
$
1,685,911
489
0.12
%
Advice solutions (1)
Fee-based
$
443,027
453
0.41
%
$
469,325
496
0.43
%
Non-fee-based
94,469
—
—
90,335
—
—
Total advice solutions
$
537,496
453
0.34
%
$
559,660
496
0.36
%
Other balance-based fees (2)
561,788
62
0.04
%
616,679
67
0.04
%
Other (3)
18
16
Total asset management and administration fees
$
1,118
$
1,068
(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)
Q1-23 % Change
2023
2022
vs.
vs.
First
Fourth
Third
Second
First
(In billions, at quarter end, except as noted)
Q1-22
Q4-22
Quarter
Quarter
Quarter
Quarter
Quarter
Assets in client accounts
Schwab One ® , certain cash equivalents and bank deposits
(30
) %
(11
) %
$
408.5
$
459.4
$
501.4
$
552.5
$
584.3
Bank deposit account balances
(31
) %
(16
) %
106.5
126.6
139.6
155.6
154.8
Proprietary mutual funds (Schwab Funds® and Laudus Funds® ) and CTFs
Money market funds (1)
150
%
28
%
357.8
278.9
211.1
159.2
143.1
Equity and bond funds and CTFs (2)
(7
) %
6
%
163.1
153.6
141.5
149.5
175.8
Total proprietary mutual funds and CTFs
63
%
20
%
520.9
432.5
352.6
308.7
318.9
Mutual Fund Marketplace ® (3)
Mutual Fund OneSource® and other no-transaction-fee funds
4
%
4
%
244.3
235.7
181.5
196.6
235.5
Mutual fund clearing services
(14
) %
6
%
201.7
191.1
175.3
184.4
235.4
Other third-party mutual funds (4)
(19
) %
4
%
1,123.6
1,077.1
1,105.7
1,189.4
1,383.3
Total Mutual Fund Marketplace
(15
) %
4
%
1,569.6
1,503.9
1,462.5
1,570.4
1,854.2
Total mutual fund assets
(4
) %
8
%
2,090.5
1,936.4
1,815.1
1,879.1
2,173.1
Exchange-traded funds
Proprietary ETFs (2)
5
%
8
%
280.6
259.3
232.2
237.7
268.5
Other third-party ETFs
2
%
7
%
1,297.5
1,208.4
1,094.6
1,129.0
1,270.6
Total ETF assets
3
%
8
%
1,578.1
1,467.7
1,326.8
1,366.7
1,539.1
Equity and other securities
(11
) %
10
%
2,772.2
2,529.4
2,451.3
2,548.5
3,131.1
Fixed income securities
90
%
15
%
684.7
593.4
481.5
403.5
360.7
Margin loans outstanding
(25
) %
(4
) %
(60.5
)
(63.1
)
(71.5
)
(73.4
)
(81.0
)
Total client assets
(4
) %
8
%
$
7,580.0
$
7,049.8
$
6,644.2
$
6,832.5
$
7,862.1
Client assets by business
Investor Services
(6
) %
9
%
$
4,001.9
$
3,682.1
$
3,508.1
$
3,598.7
$
4,235.5
Advisor Services
(1
) %
6
%
3,578.1
3,367.7
3,136.1
3,233.8
3,626.6
Total client assets
(4
) %
8
%
$
7,580.0
$
7,049.8
$
6,644.2
$
6,832.5
$
7,862.1
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services (5)
45
%
23
%
$
79.4
$
64.3
$
55.1
$
8.8
$
54.6
Advisor Services
8
%
11
%
71.3
64.1
59.5
34.6
65.9
Total net new assets
25
%
17
%
$
150.7
$
128.4
$
114.6
$
43.4
$
120.5
Net market gains (losses)
379.5
277.2
(302.9
)
(1,073.0
)
(396.4
)
Net growth (decline)
$
530.2
$
405.6
$
(188.3
)
$
(1,029.6
)
$
(275.9
)
New brokerage accounts (in thousands, for the quarter ended)
(13
) %
12
%
1,042
931
897
1,014
1,202
Client accounts (in thousands)
Active brokerage accounts (6)
2
%
1
%
34,120
33,758
33,875
33,896
33,577
Banking accounts
6
%
2
%
1,746
1,716
1,696
1,669
1,641
Corporate retirement plan participants
6
%
1
%
2,379
2,351
2,305
2,275
2,246
(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 March 31, 2023 , off-platform equity and bond funds, CTFs, and ETFs were $25.6 billion $4.7 billion $108.3 billion
(3)
Excludes all proprietary mutual funds and ETFs.
(4)
As of March 31, 2023 , third-party money funds were $2.9 billion
(5)
First quarter of 2023 includes inflows of $19.0 billion $20.8 billion
(6)
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 March 2023
2022
2023
Change
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Mo.
Yr.
Market Indices (at month end)
Dow Jones Industrial Average®
34,678
32,977
32,990
30,775
32,845
31,510
28,726
32,733
34,590
33,147
34,086
32,657
33,274
2
%
(4
) %
Nasdaq Composite®
14,221
12,335
12,081
11,029
12,391
11,816
10,576
10,988
11,468
10,466
11,585
11,456
12,222
7
%
(14
) %
Standard & Poor’s® 500
4,530
4,132
4,132
3,785
4,130
3,955
3,586
3,872
4,080
3,840
4,077
3,970
4,109
4
%
(9
) %
Client Assets (in billions of dollars)
Beginning Client Assets
7,686.6
7,862.1
7,284.4
7,301.7
6,832.5
7,304.8
7,127.6
6,644.2
7,004.6
7,320.6
7,049.8
7,480.6
7,380.2
Net New Assets (1)
46.3
(9.2
)
32.8
19.8
31.5
43.3
39.8
42.0
33.1
53.3
36.1
41.7
72.9
75
%
57
%
Net Market Gains (Losses)
129.2
(568.5
)
(15.5
)
(489.0
)
440.8
(220.5
)
(523.2
)
318.4
282.9
(324.1
)
394.7
(142.1
)
126.9
Total Client Assets (at month end)
7,862.1
7,284.4
7,301.7
6,832.5
7,304.8
7,127.6
6,644.2
7,004.6
7,320.6
7,049.8
7,480.6
7,380.2
7,580.0
3
%
(4
) %
Core Net New Assets (2)
46.3
(9.2
)
32.8
40.6
31.5
43.3
39.8
42.0
33.1
53.3
36.1
41.7
53.9
29
%
16
%
Receiving Ongoing Advisory Services (at month end)
Investor Services
538.9
509.3
513.0
483.8
514.8
499.2
466.6
487.3
514.0
499.8
524.6
515.5
526.2
2
%
(2
) %
Advisor Services (3)
3,404.6
3,190.5
3,213.8
3,040.4
3,222.5
3,150.5
2,950.9
3,106.0
3,270.5
3,173.4
3,345.4
3,289.6
3,369.3
2
%
(1
) %
Client Accounts (at month end, in thousands)
Active Brokerage Accounts (4)
33,577
33,759
33,822
33,896
33,934
33,984
33,875
33,896
33,636
33,758
33,878
34,010
34,120
—
2
%
Banking Accounts
1,641
1,652
1,658
1,669
1,680
1,690
1,696
1,706
1,705
1,716
1,729
1,733
1,746
1
%
6
%
Corporate Retirement Plan Participants
2,246
2,261
2,275
2,275
2,267
2,285
2,305
2,322
2,336
2,351
2,369
2,384
2,379
—
6
%
Client Activity
New Brokerage Accounts (in thousands)
420
386
323
305
278
332
287
298
303
330
344
320
378
18
%
(10
) %
Client Cash as a Percentage of Client Assets (5)
11.4
%
11.9
%
12.0
%
12.8
%
12.0
%
12.1
%
12.9
%
12.2
%
11.5
%
12.3
%
11.6
%
11.7
%
11.6
%
(10) bp
20 bp
Derivative Trades as a Percentage of Total Trades
22.4
%
21.9
%
22.6
%
22.3
%
24.2
%
23.3
%
23.6
%
24.1
%
24.6
%
23.2
%
23.0
%
23.5
%
22.8
%
(70) bp
40 bp
Selected Average Balances (in millions of dollars)
Average Interest-Earning Assets (6)
644,768
636,668
620,157
614,100
605,751
586,154
568,351
552,631
527,019
520,100
512,893
503,122
497,627
(1
) %
(23
) %
Average Margin Balances
81,526
83,762
78,841
74,577
72,177
72,855
73,224
69,188
66,011
64,759
60,211
60,575
60,848
—
(25
) %
Average Bank Deposit Account Balances (7)
155,657
152,653
154,669
155,306
154,542
148,427
141,198
136,036
130,479
126,953
122,387
115,816
109,392
(6
) %
(30
) %
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells) (8,9) (in millions of dollars)
Equities
14,177
(786
)
1,889
(1,586
)
5,589
10,465
(2,662
)
3,984
3,777
(1,837
)
7,236
5,850
(3,234
)
Hybrid
(497
)
(529
)
(1,718
)
(1,054
)
(2,041
)
(783
)
(938
)
(1,380
)
(2,052
)
(1,595
)
(433
)
47
(1,641
)
Bonds
(7,851
)
(6,933
)
(6,121
)
(5,631
)
729
(141
)
(5,801
)
(7,218
)
(3,721
)
(3,260
)
5,646
4,281
6,158
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds (8)
(11,888
)
(16,657
)
(20,761
)
(16,258
)
(8,674
)
(7,117
)
(15,200
)
(18,473
)
(17,143
)
(21,851
)
552
(2,338
)
(7,423
)
Exchange-Traded Funds (9)
17,717
8,409
14,811
7,987
12,951
16,658
5,799
13,859
15,147
15,159
11,897
12,516
8,706
Money Market Funds
(1,344
)
(3,430
)
7,106
11,544
13,711
19,702
17,018
21,542
16,929
27,778
24,285
23,347
27,106
Note: Certain supplemental details related to the information above can be found at: https://www.aboutschwab.com/financial-reports .
(1)
March 2023 includes inflows of $19.0 billion March 31,2023 . June 2022 includes an outflow of $20.8 billion
(2)
Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion
(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)
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.
(7)
Represents average clients’ uninvested cash sweep account balances held in deposit accounts at third-party financial institutions.
(8)
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.
(9)
Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s first 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.
Non-GAAP Adjustment or Measure
Definition
Usefulness to Investors and Uses by Management
Acquisition and integration-related costs and amortization of acquired intangible assets
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, 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 and amortization of acquired intangible assets 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.
Acquisition and integration-related costs fluctuate based on the timing of acquisitions and integration 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.
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 CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)
The tables below present reconciliations of GAAP measures to non-GAAP measures:
Three Months Ended March 31 ,
2023
2022
Total
Interest
Net
Total
Interest
Net
Total expenses excluding interest (GAAP),
Net income (GAAP)
$
3,006
$
1,603
$
2,833
$
1,402
Acquisition and integration-related costs (1)
(98
)
98
(96
)
96
Amortization of acquired intangible assets
(135
)
135
(154
)
154
Income tax effects (2)
N/A
(56
)
N/A
(61
)
Adjusted total expenses (non-GAAP),
Adjusted net income (non-GAAP)
$
2,773
$
1,780
$
2,583
$
1,591
(1)
Acquisition and integration-related costs for the three months ended March 31, 2023 primarily consist of $58 million $33 million $4 million March 31, 2022 primarily consist of $56 million $31 million $4 million
(2)
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 and amortization of acquired intangible assets on an after-tax basis.
N/A Not applicable.
Three Months Ended March 31 ,
2023
2022
Amount
% of
Amount
% of
Income before taxes on income (GAAP),
$
2,110
41.2
%
$
1,839
39.4
%
Acquisition and integration-related costs
98
1.9
%
96
2.1
%
Amortization of acquired intangible assets
135
2.7
%
154
3.2
%
Adjusted income before taxes on income (non-GAAP),
$
2,343
45.8
%
$
2,089
44.7
%
Three Months Ended March 31 ,
2023
2022
Amount
Diluted
Amount
Diluted
Net income available to common stockholders (GAAP),
$
1,533
$
.83
$
1,278
$
.67
Acquisition and integration-related costs
98
.05
96
.05
Amortization of acquired intangible assets
135
.07
154
.08
Income tax effects
(56
)
(.02
)
(61
)
(.03
)
Adjusted net income available to common stockholders
$
1,710
$
.93
$
1,467
$
.77
Three Months Ended March 31 ,
2023
2022
Return on average common stockholders’ equity (GAAP)
23
%
12
%
Average common stockholders’ equity
$
27,028
$
41,856
Less: Average goodwill
(11,951
)
(11,952
)
Less: Average acquired intangible assets — net
(8,724
)
(9,303
)
Plus: Average deferred tax liabilities related to goodwill
1,842
1,886
Average tangible common equity
$
8,195
$
22,487
Adjusted net income available to common stockholders (1)
$
1,710
$
1,467
Return on tangible common equity (non-GAAP)
83
%
26
%
(1)
See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).
View source version on businesswire.com : https://www.businesswire.com/news/home/20230417005253/en/
MEDIA:
Mayura Hooper
INVESTORS/ANALYSTS:
Jeff Edwards
Source: The Charles Schwab Corporation
