$115 Billion in Core Net New Assets Represents
a 7% Annualized Growth Rate Revenues Rise 20% Year-Over-Year to
$5.5 Billion; Net Income Reaches $2.0 Billion, up 32% Record GAAP
Earnings Per Share of $.99, $1.10 Adjusted (1) as Company Delivers
Growth Plus Capital Return
The Charles Schwab Corporation announced today that its net
income for the third quarter of 2022 was a record $2.0 billion
compared with $1.8 billion for the second quarter of 2022, and $1.5
billion for the third quarter of 2021. Net income for the nine
months ended September 30, 2022 was $5.2 billion, compared with
$4.3 billion for the year-earlier period.
This press release features multimedia. View
the full release here:
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Three Months Ended September
30,
%
Nine Months Ended September
30,
%
Financial Highlights (1)
2022
2021
Change
2022
2021
Change
Net revenues (in millions)
$
5,500
$
4,570
20
%
$
15,265
$
13,812
11
%
Net income (in millions)
GAAP
$
2,020
$
1,526
32
%
$
5,215
$
4,275
22
%
Adjusted (1)
$
2,211
$
1,722
28
%
$
5,783
$
4,895
18
%
Diluted earnings per common share (2)
GAAP
$
.99
$
.74
34
%
$
2.53
$
2.06
23
%
Adjusted (1)
$
1.10
$
.84
31
%
$
2.83
$
2.39
18
%
Pre-tax profit margin
GAAP
48.7
%
44.0
%
44.5
%
41.2
%
Adjusted (1)
53.3
%
49.6
%
49.4
%
47.2
%
Return on average common stockholders’
equity (annualized)
25
%
12
%
18
%
11
%
Return on tangible common equity
(annualized) (1)
74
%
23
%
42
%
21
%
(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.
(2)
All per-share results are rounded to the
nearest cent, based on weighted-average diluted common shares
outstanding.
Co-Chairman and CEO Walt Bettinger said, “Schwab’s performance
during the third quarter reflected the continued success of our
'Through Clients’ Eyes' strategy and our contemporary full-service
approach to helping clients achieve their financial goals. As we
assisted investors with navigating persistent macroeconomic
headwinds, we continued to drive robust business growth. Bolstered
by record third quarter retail inflows, core net new assets equaled
$115 billion for the period – a 7% annualized growth rate. Total
client assets were $6.6 trillion at quarter-end, down 13% from a
year ago, as robust asset gathering was more than offset by the
$1.4 trillion impact of lower market valuations on client
portfolios over the past 12 months. At the same time, our success
in attracting and retaining clients supported a 4% year-over-year
rise in active brokerage accounts – we ended the quarter at
approximately 34 million.”
“Our modern wealth management approach provides a wide array of
investing and financial capabilities to support investors through a
range of market conditions – particularly in difficult times like
these,” Mr. Bettinger continued. “Equity markets remained under
pressure throughout the quarter – including the largest percentage
drop for a September since 2008 – with the S&P 500® extending
its year-to-date losses to 25%. The Federal Reserve assumed an
increasingly hawkish stance, tightening monetary policy at the
fastest rate in four decades, as it wrestled with elevated
inflation and lingering effects from the global pandemic.
Additionally, the continued war in Ukraine, along with increasing
challenges across other major global economies weighed on overall
market sentiment. That being said, clients remained engaged – with
daily average trading volume of 5.5 million essentially flat versus
the third quarter of last year, including net buying activity
across both equities and fixed income securities.”
“Given our four decades of experience assisting individual
investors and the advisors who serve them, we know prolonged
environmental challenges can impact clients’ financial confidence,
reinforcing the importance of continued investment across our three
strategic initiatives: scale and efficiency, client segmentation,
and win-win monetization,” Mr. Bettinger added. “Schwab’s extensive
suite of advisory solutions, along with the recently introduced
personalized investing capabilities, are designed to help clients
achieve their evolving goals throughout their financial lives. This
suite includes Wasmer SchroederTM Strategies, which offers
investors a range of tax-exempt and taxable fixed income solutions.
This team’s expertise, along with an attractive value proposition,
increasing client demand for income solutions, and rising interest
rates has helped these strategies attract over $5 billion in net
flows over the last two years, including $1 billion during the
third quarter of 2022 alone. Another example of win-win
monetization is the recent steps we have taken to bolster our fund
offering for RIAs by expanding our institutional no transaction fee
(INTF) mutual fund platform to include over 800 additional highly
rated equity and bond funds across 15 leading third-party asset
managers.”
Mr. Bettinger concluded, “Through consistent strategic focus and
disciplined execution, we believe we can drive sustained business
momentum while continuing to deliver a high-quality wealth
experience for clients and to build long-term value for
stockholders.”
CFO Peter Crawford noted, “Schwab’s diversified financial model
and a significant benefit from higher rates helped us convert
ongoing success with clients into record total revenues of $5.5
billion, up 20% on a year-over-year basis. Net interest revenue
increased by 44% to $2.9 billion, as rising rates helped our net
interest margin to expand sequentially by 35 basis points to 1.97%.
This movement more than offset the 6% contraction in
interest-earning assets driven by clients’ cash sorting behavior
and their continued market engagement. Asset management and
administration fees decreased 5% to $1.0 billion as the challenging
equity markets weighed on client asset balances. Trading revenue
also declined slightly to $930 million primarily due to a mix shift
within client trading activity.”
Mr. Crawford continued, “Driven largely by ongoing investments
in our people and technology, GAAP expenses for the quarter
increased 10% year-over-year to $2.8 billion. This amount includes
$101 million in acquisition and integration-related costs and $152
million in amortization of acquired intangibles. Exclusive of these
items, adjusted total expenses (1) were up 12% versus the third
quarter of 2021 – consistent with our planned spending in 2022. Our
pre-tax profit margin expanded to 48.7%, or 53.3% on an adjusted
basis (1) – both all-time highs.”
“Diligent balance sheet management keeps us positioned to
navigate a rapidly evolving environment while concurrently
enhancing our financial performance and returning excess capital to
our owners,” added Mr. Crawford. “In late July, the board of
directors approved a 10% increase in our common dividend and a $15
billion stock repurchase authorization. During the third quarter,
we repurchased 21.9 million shares for $1.5 billion. We’ve also
announced the redemption of the $400 million Series A Preferred
stock effective November 1. Inclusive of these actions, the
company’s preliminary Tier 1 Leverage Ratio at quarter-end was
6.8%, above our recently updated operating objective of 6.50% –
6.75%. This quarter’s record overall results further demonstrate
the durability of our all-weather model and its ability to deliver
both profitable growth and meaningful return of excess capital
through the cycle.”
(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 recent repurchase of
nonvoting common stock, was posted on August 1, 2022.
Fall Business Update
The company has scheduled a Fall Business Update for
institutional investors on Thursday, October 27, 2022. The Update,
which will be held via webcast, is scheduled to run from
approximately 10:00 a.m. - 11:00 a.m. PT, 1:00 p.m. - 2:00 p.m. ET.
Registration for this Update is accessible at
https://www.aboutschwab.com/schwabevents.
Forward-Looking Statements
This press release contains forward-looking statements relating
to success with clients; strategic initiatives; investments to
attract and retain talent, improve service and the client
experience, expand products, services and offerings to meet client
needs, diversify revenues, and drive scale and efficiency; business
momentum; stockholder value; balance sheet management; financial
performance; returning excess capital to stockholders; Tier 1
Leverage Ratio operating objective; and all-weather model. 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; 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 equity
valuations and the level of interest rates; the level and mix of
client trading activity; market volatility; margin loan balances;
securities lending; competitive pressures on pricing; client cash
sorting; client sensitivity to rates; level of client assets,
including cash balances; 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; 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 33.9 million active brokerage
accounts, 2.3 million corporate retirement plan participants, 1.7
million banking accounts, and $6.64 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,
2022
2021
2022
2021
Net Revenues
Interest revenue
$
3,357
$
2,153
$
8,386
$
6,236
Interest expense
(431
)
(123
)
(733
)
(348
)
Net interest revenue
2,926
2,030
7,653
5,888
Asset management and administration fees
(1)
1,047
1,101
3,167
3,164
Trading revenue
930
964
2,778
3,135
Bank deposit account fees
413
323
1,059
1,011
Other
184
152
608
614
Total net revenues
5,500
4,570
15,265
13,812
Expenses Excluding Interest
Compensation and benefits
1,476
1,303
4,448
4,051
Professional services
264
250
766
723
Occupancy and equipment
292
246
855
722
Advertising and market development
89
119
296
363
Communications
131
144
444
457
Depreciation and amortization
167
140
476
404
Amortization of acquired intangible
assets
152
153
460
461
Regulatory fees and assessments
65
64
200
208
Other
187
140
530
733
Total expenses excluding interest
2,823
2,559
8,475
8,122
Income before taxes on income
2,677
2,011
6,790
5,690
Taxes on income
657
485
1,575
1,415
Net Income
2,020
1,526
5,215
4,275
Preferred stock dividends and other
136
120
401
364
Net Income Available to Common
Stockholders
$
1,884
$
1,406
$
4,814
$
3,911
Weighted-Average Common Shares
Outstanding:
Basic
1,887
1,888
1,892
1,885
Diluted
1,895
1,898
1,901
1,895
Earnings Per Common Shares
Outstanding (2):
Basic
$
1.00
$
.74
$
2.54
$
2.07
Diluted
$
.99
$
.74
$
2.53
$
2.06
(1)
No fee waivers were recognized for the
three months ended September 30, 2022. Includes fee waivers of $57
million for the nine months ended September 30, 2022, and $83
million and $246 million for the three and nine months ended
September 30, 2021, respectively.
(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)
Q3-22 %
change
2022
2021
vs.
vs.
Third
Second
First
Fourth
Third
(In millions, except per share amounts and
as noted)
Q3-21
Q2-22
Quarter
Quarter
Quarter
Quarter
Quarter
Net Revenues
Net interest revenue
44
%
15
%
$
2,926
$
2,544
$
2,183
$
2,142
$
2,030
Asset management and administration
fees
(5
) %
—
1,047
1,052
1,068
1,110
1,101
Trading revenue
(4
) %
5
%
930
885
963
1,017
964
Bank deposit account fees
28
%
17
%
413
352
294
304
323
Other
21
%
(29
) %
184
260
164
135
152
Total net revenues
20
%
8
%
5,500
5,093
4,672
4,708
4,570
Expenses Excluding Interest
Compensation and benefits
13
%
4
%
1,476
1,426
1,546
1,399
1,303
Professional services
6
%
2
%
264
258
244
271
250
Occupancy and equipment
19
%
(1
) %
292
294
269
254
246
Advertising and market development
(25
) %
(15
) %
89
105
102
122
119
Communications
(9
) %
(22
) %
131
169
144
130
144
Depreciation and amortization
19
%
5
%
167
159
150
145
140
Amortization of acquired intangibles
assets
(1
) %
(1
) %
152
154
154
154
153
Regulatory fees and assessments
2
%
(3
) %
65
67
68
67
64
Other
34
%
—
187
187
156
143
140
Total expenses excluding interest
10
%
—
2,823
2,819
2,833
2,685
2,559
Income before taxes on income
33
%
18
%
2,677
2,274
1,839
2,023
2,011
Taxes on income
35
%
37
%
657
481
437
443
485
Net Income
32
%
13
%
$
2,020
$
1,793
$
1,402
$
1,580
$
1,526
Preferred stock dividends and other
13
%
(4
) %
136
141
124
131
120
Net Income Available to Common
Stockholders
34
%
14
%
$
1,884
$
1,652
$
1,278
$
1,449
$
1,406
Earnings per common share (1):
Basic
35
%
15
%
$
1.00
$
.87
$
.67
$
.77
$
.74
Diluted
34
%
14
%
$
.99
$
.87
$
.67
$
.76
$
.74
Dividends declared per common share
22
%
10
%
$
.22
$
.20
$
.20
$
.18
$
.18
Weighted-average common shares
outstanding:
Basic
—
—
1,887
1,896
1,894
1,892
1,888
Diluted
—
—
1,895
1,904
1,905
1,902
1,898
Performance Measures
Pre-tax profit margin
48.7
%
44.6
%
39.4
%
43.0
%
44.0
%
Return on average common stockholders’
equity (annualized) (2)
25
%
19
%
12
%
12
%
12
%
Financial Condition (at quarter
end, in billions)
Cash and cash equivalents
36
%
(28
) %
$
46.5
$
64.6
$
91.1
$
63.0
$
34.3
Cash and investments segregated
4
%
(18
) %
44.1
53.5
54.4
53.9
42.3
Receivables from brokerage clients —
net
(15
) %
(3
) %
73.9
76.1
84.1
90.6
86.6
Available for sale securities (3)
(37
) %
(11
) %
236.5
265.3
272.0
390.1
377.0
Held to maturity securities (3)
N/M
(4
) %
96.3
100.1
105.3
—
—
Bank loans — net
28
%
2
%
40.4
39.6
37.2
34.6
31.6
Total assets
(5
) %
(9
) %
577.6
637.6
681.0
667.3
607.5
Bank deposits
—
(10
) %
395.7
442.0
465.8
443.8
395.3
Payables to brokerage clients
(3
) %
(4
) %
110.0
114.9
125.3
125.7
113.1
Short-term borrowings
(83
) %
(64
) %
0.5
1.4
4.2
4.9
3.0
Long-term debt
7
%
(1
) %
20.8
21.1
21.9
18.9
19.5
Stockholders’ equity
(36
) %
(17
) %
37.0
44.5
48.1
56.3
57.4
Other
Full-time equivalent employees (at quarter
end, in thousands)
9
%
—
35.2
35.2
34.2
33.4
32.4
Capital expenditures — purchases of
equipment, office facilities, and property, net (in millions)
10
%
(43
) %
$
193
$
339
$
209
$
431
$
176
Expenses excluding interest as a
percentage of average client assets (annualized)
0.16
%
0.16
%
0.15
%
0.13
%
0.13
%
Clients’ Daily Average Trades
(DATs) (in thousands)
—
(11
) %
5,523
6,227
6,578
6,102
5,549
Number of Trading Days
—
3
%
64.0
62.0
62.0
63.5
64.0
Revenue Per Trade (4)
(3
) %
15
%
$
2.63
$
2.29
$
2.36
$
2.62
$
2.71
(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)
In January 2022, the Company transferred a
portion of its investment securities designated as available for
sale to the held to maturity category, as described in Part I –
Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2022.
(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
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
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
$
53,127
$
294
2.16
%
$
38,732
$
11
0.12
%
$
63,598
$
461
0.95
%
$
39,848
$
27
0.09
%
Cash and investments segregated
49,554
214
1.69
%
42,617
5
0.04
%
50,891
308
0.80
%
43,914
19
0.06
%
Receivables from brokerage clients
72,751
912
4.91
%
80,873
628
3.04
%
78,630
2,244
3.76
%
74,831
1,800
3.17
%
Available for sale securities (1,2)
273,968
1,161
1.69
%
362,204
1,187
1.30
%
281,897
3,196
1.51
%
348,477
3,381
1.29
%
Held to maturity securities (2)
97,568
345
1.41
%
—
—
—
100,890
1,062
1.40
%
—
—
—
Bank loans
39,984
300
2.99
%
30,235
161
2.12
%
38,238
717
2.50
%
27,336
448
2.18
%
Total interest-earning assets
586,952
3,226
2.17
%
554,661
1,992
1.42
%
614,144
7,988
1.73
%
534,406
5,675
1.41
%
Securities lending revenue
124
159
383
557
Other interest revenue
7
2
15
4
Total interest-earning assets
$
586,952
$
3,357
2.26
%
$
554,661
$
2,153
1.54
%
$
614,144
$
8,386
1.81
%
$
534,406
$
6,236
1.55
%
Funding sources
Bank deposits
$
420,132
$
241
0.23
%
$
384,561
$
14
0.01
%
$
440,801
$
285
0.09
%
$
371,974
$
40
0.01
%
Payables to brokerage clients
96,802
41
0.17
%
92,498
3
0.01
%
101,472
47
0.06
%
89,087
7
0.01
%
Short-term borrowings
708
4
1.95
%
3,485
3
0.34
%
2,656
12
0.60
%
2,617
6
0.32
%
Long-term debt
21,024
131
2.49
%
19,030
99
2.10
%
20,673
363
2.34
%
17,225
281
2.18
%
Total interest-bearing liabilities
538,666
417
0.31
%
499,574
119
0.09
%
565,602
707
0.17
%
480,903
334
0.09
%
Non-interest-bearing funding sources
48,286
55,087
48,542
53,503
Securities lending expense
13
4
28
16
Other interest expense
1
—
(2
)
(2
)
Total funding sources
$
586,952
$
431
0.29
%
$
554,661
$
123
0.09
%
$
614,144
$
733
0.16
%
$
534,406
$
348
0.09
%
Net interest revenue
$
2,926
1.97
%
$
2,030
1.45
%
$
7,653
1.65
%
$
5,888
1.46
%
(1)
Amounts have been calculated based on
amortized cost.
(2)
In January 2022, the Company transferred a
portion of its investment securities designated as available for
sale to the held to maturity category, as described in Part I –
Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the
quarter ended June 30, 2022.
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,
2022
2021
2022
2021
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
$
184,834
$
132
0.28
%
$
149,508
$
112
0.30
%
$
158,525
$
340
0.29
%
$
158,749
$
348
0.29
%
Fee waivers
—
(83
)
(57
)
(246
)
Schwab money market funds
184,834
132
0.28
%
149,508
29
0.08
%
158,525
283
0.24
%
158,749
102
0.09
%
Schwab equity and bond funds, ETFs,
and
collective trust funds (CTFs)
422,711
89
0.08
%
441,344
99
0.09
%
436,928
278
0.09
%
411,312
279
0.09
%
Mutual Fund OneSource® and other
non-transaction fee funds
183,019
139
0.30
%
234,582
188
0.32
%
196,032
453
0.31
%
228,643
540
0.32
%
Other third-party mutual funds and
ETFs
747,676
160
0.08
%
918,363
187
0.08
%
805,204
510
0.08
%
888,003
533
0.08
%
Total mutual funds, ETFs, and CTFs (1)
$
1,538,240
520
0.13
%
$
1,743,797
503
0.11
%
$
1,596,689
1,524
0.13
%
$
1,686,707
1,454
0.12
%
Advice solutions (1)
Fee-based
$
431,276
452
0.42
%
$
463,827
511
0.44
%
$
446,979
1,409
0.42
%
$
445,521
1,469
0.44
%
Non-fee-based
85,567
—
—
90,649
—
—
87,528
—
—
87,758
—
—
Total advice solutions
$
516,843
452
0.35
%
$
554,476
511
0.37
%
$
534,507
1,409
0.35
%
$
533,279
1,469
0.37
%
Other balance-based fees (2)
537,809
58
0.04
%
632,806
68
0.04
%
573,733
186
0.04
%
604,995
195
0.04
%
Other (3)
17
19
48
46
Total asset management and
administration fees
$
1,047
$
1,101
$
3,167
$
3,164
(1)
Advice solutions include managed
portfolios, specialized strategies, and customized investment
advice such as Schwab Wealth AdvisoryTM, Schwab Managed
PortfoliosTM, 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)
Q3-22 %
Change
2022
2021
vs.
vs.
Third
Second
First
Fourth
Third
(In billions, at quarter end, except as
noted)
Q3-21
Q2-22
Quarter
Quarter
Quarter
Quarter
Quarter
Assets in client accounts
Schwab One®, certain cash equivalents and
bank deposits
—
(9
) %
$
501.4
$
552.5
$
584.3
$
566.1
$
503.9
Bank deposit account balances
(9
) %
(10
) %
139.6
155.6
154.8
158.5
153.3
Proprietary mutual funds (Schwab Funds®
and Laudus Funds®) and CTFs
Money market funds (1)
43
%
33
%
211.1
159.2
143.1
146.5
147.7
Equity and bond funds and CTFs (2)
(15
) %
(5
) %
141.5
149.5
175.8
183.1
167.4
Total proprietary mutual funds and
CTFs
12
%
14
%
352.6
308.7
318.9
329.6
315.1
Mutual Fund Marketplace® (3)
Mutual Fund OneSource® and other
non-transaction fee funds
(23
) %
(8
) %
181.5
196.6
235.5
234.9
234.7
Mutual fund clearing services
(36
) %
(5
) %
175.3
184.4
235.4
254.2
271.9
Other third-party mutual funds (4)
(24
) %
(7
) %
1,105.7
1,189.4
1,383.3
1,497.7
1,450.1
Total Mutual Fund Marketplace
(25
) %
(7
) %
1,462.5
1,570.4
1,854.2
1,986.8
1,956.7
Total mutual fund assets
(20
) %
(3
) %
1,815.1
1,879.1
2,173.1
2,316.4
2,271.8
Exchange-traded funds (ETFs)
Proprietary ETFs (2)
(8
) %
(2
) %
232.2
237.7
268.5
271.8
251.6
Other third-party ETFs
(8
) %
(3
) %
1,094.6
1,129.0
1,270.6
1,296.4
1,183.7
Total ETF assets
(8
) %
(3
) %
1,326.8
1,366.7
1,539.1
1,568.2
1,435.3
Equity and other securities
(18
) %
(4
) %
2,451.3
2,548.5
3,131.1
3,259.8
2,976.7
Fixed income securities
35
%
19
%
481.5
403.5
360.7
356.4
356.8
Margin loans outstanding
(15
) %
(3
) %
(71.5
)
(73.4
)
(81.0
)
(87.4
)
(83.8
)
Total client assets
(13
) %
(3
) %
$
6,644.2
$
6,832.5
$
7,862.1
$
8,138.0
$
7,614.0
Client assets by business
Investor Services
(15
) %
(3
) %
$
3,508.1
$
3,598.7
$
4,235.5
$
4,400.7
$
4,137.7
Advisor Services
(10
) %
(3
) %
3,136.1
3,233.8
3,626.6
3,737.3
3,476.3
Total client assets
(13
) %
(3
) %
$
6,644.2
$
6,832.5
$
7,862.1
$
8,138.0
$
7,614.0
Net growth in assets in client
accounts (for the quarter ended)
Net new assets by business
Investor Services (5)
(5
) %
N/M
$
55.1
$
8.8
$
54.6
$
33.4
$
57.9
Advisor Services
(27
) %
72
%
59.5
34.6
65.9
101.2
81.1
Total net new assets
(18
) %
164
%
$
114.6
$
43.4
$
120.5
$
134.6
$
139.0
Net market gains (losses)
(302.9
)
(1,073.0
)
(396.4
)
389.4
(99.8
)
Net growth (decline)
$
(188.3
)
$
(1,029.6
)
$
(275.9
)
$
524.0
$
39.2
New brokerage accounts (in
thousands, for the quarter ended)
(24
) %
(12
) %
897
1,014
1,202
1,318
1,178
Client accounts (in thousands)
Active brokerage accounts (6)
4
%
—
33,875
33,896
33,577
33,165
32,675
Banking accounts
7
%
2
%
1,696
1,669
1,641
1,614
1,580
Corporate retirement plan participants
4
%
1
%
2,305
2,275
2,246
2,200
2,207
(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, 2022, off-platform equity and
bond funds, CTFs, and ETFs were $20.7 billion, $4.5 billion, and
$89.6 billion, respectively.
(3)
Excludes all proprietary mutual funds and
ETFs.
(4)
As of September 30, 2022, third-party
money funds were $3.6 billion.
(5)
Second quarter of 2022 includes an outflow
of $20.8 billion from a mutual fund clearing services client.
Fourth quarter of 2021 includes outflows of $27.6 billion from
mutual fund clearing services clients.
(6)
Third quarter of 2022 includes the
company-initiated closure of approximately 152 thousand low-balance
accounts.
N/M Not meaningful. Percentage changes
greater than 200% are presented as not meaningful.
The Charles Schwab Corporation
Monthly Activity Report For September 2022
2021
2022
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®
33,844
35,820
34,484
36,338
35,132
33,893
34,678
32,977
32,990
30,775
32,845
31,510
28,726
(9
)%
(15
)%
Nasdaq Composite®
14,449
15,498
15,538
15,645
14,240
13,751
14,221
12,335
12,081
11,029
12,391
11,816
10,576
(10
)%
(27
)%
Standard & Poor’s® 500
4,308
4,605
4,567
4,766
4,516
4,374
4,530
4,132
4,132
3,785
4,130
3,955
3,586
(9
)%
(17
)%
Client Assets (in billions of
dollars)
Beginning Client Assets
7,838.2
7,614.0
7,982.3
7,918.3
8,138.0
7,803.8
7,686.6
7,862.1
7,284.4
7,301.7
6,832.5
7,304.8
7,127.6
Net New Assets (1)
42.9
22.9
31.4
80.3
33.6
40.6
46.3
(9.2
)
32.8
19.8
31.5
43.3
39.8
(8
)%
(7
)%
Net Market Gains (Losses)
(267.1
)
345.4
(95.4
)
139.4
(367.8
)
(157.8
)
129.2
(568.5
)
(15.5
)
(489.0
)
440.8
(220.5
)
(523.2
)
Total Client Assets (at month end)
7,614.0
7,982.3
7,918.3
8,138.0
7,803.8
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
)%
(13
)%
Core Net New Assets (2)
42.9
36.8
45.1
80.3
33.6
40.6
46.3
(9.2
)
32.8
40.6
31.5
43.3
39.8
(8
)%
(7
)%
Receiving Ongoing Advisory Services (at
month end)
Investor Services
530.1
548.3
543.1
559.2
541.9
533.7
538.9
509.3
513.0
483.8
514.8
499.2
466.6
(7
)%
(12
)%
Advisor Services (3)
3,253.2
3,399.8
3,374.3
3,505.2
3,382.4
3,342.5
3,404.6
3,190.5
3,213.8
3,040.4
3,222.5
3,150.5
2,950.9
(6
)%
(9
)%
Client Accounts (at month end, in
thousands)
Active Brokerage Accounts (4)
32,675
32,796
32,942
33,165
33,308
33,421
33,577
33,759
33,822
33,896
33,934
33,984
33,875
—
4
%
Banking Accounts
1,580
1,593
1,608
1,614
1,628
1,641
1,641
1,652
1,658
1,669
1,680
1,690
1,696
—
7
%
Corporate Retirement Plan Participants
2,207
2,213
2,198
2,200
2,216
2,235
2,246
2,261
2,275
2,275
2,267
2,285
2,305
1
%
4
%
Client Activity
New Brokerage Accounts (in thousands)
374
397
448
473
426
356
420
386
323
305
278
332
287
(14
)%
(23
)%
Client Cash as a Percentage of Client
Assets (5)
10.8
%
10.4
%
10.5
%
10.9
%
11.3
%
11.5
%
11.4
%
11.9
%
12.0
%
12.8
%
12.0
%
12.1
%
12.9
%
80 bp
210 bp
Derivative Trades as a Percentage of Total
Trades
23.1
%
22.5
%
23.4
%
23.0
%
22.4
%
24.0
%
22.4
%
21.9
%
22.6
%
22.3
%
24.2
%
23.3
%
23.6
%
30 bp
50 bp
Selected Average Balances (in millions
of dollars)
Average Interest-Earning Assets (6)
565,379
574,181
584,362
605,709
622,997
629,042
644,768
636,668
620,157
614,100
605,751
586,154
568,351
(3
)%
1
%
Average Margin Balances
81,705
83,835
87,311
88,328
86,737
84,354
81,526
83,762
78,841
74,577
72,177
72,855
73,224
1
%
(10
)%
Average Bank Deposit Account Balances
(7)
152,330
154,040
153,877
154,918
157,706
153,824
155,657
152,653
154,669
155,306
154,542
148,427
141,198
(5
)%
(7
)%
Mutual Fund and Exchange-Traded
Fund
Net Buys (Sells) (8,9) (in millions of
dollars)
Equities
7,596
8,840
13,099
11,519
7,384
9,371
14,177
(786
)
1,889
(1,586
)
5,589
10,465
(2,662
)
Hybrid
335
81
308
(1,207
)
(367
)
(478
)
(497
)
(529
)
(1,718
)
(1,054
)
(2,041
)
(783
)
(938
)
Bonds
6,232
4,425
4,097
5,600
1,804
(1,973
)
(7,851
)
(6,933
)
(6,121
)
(5,631
)
729
(141
)
(5,801
)
Net Buy (Sell) Activity (in millions of
dollars)
Mutual Funds (8)
(308
)
302
189
(2,859
)
(4,961
)
(6,318
)
(11,888
)
(16,657
)
(20,761
)
(16,258
)
(8,674
)
(7,117
)
(15,200
)
Exchange-Traded Funds (9)
14,471
13,044
17,315
18,771
13,782
13,238
17,717
8,409
14,811
7,987
12,951
16,658
5,799
Money Market Funds
(1,512
)
(451
)
(1,725
)
(144
)
(1,984
)
(1,086
)
(1,344
)
(3,430
)
7,106
11,544
13,711
19,702
17,018
Note: Certain supplemental details related
to the information above can be found at: https://www.aboutschwab.com/financial-reports.
(1)
June 2022 includes an outflow of $20.8
billion from a mutual fund clearing services client. November 2021
includes an outflow of $13.7 billion from a mutual fund clearing
services client. October 2021 includes an outflow of $13.9 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. These flows may span multiple reporting
periods.
(3)
Excludes Retirement Business Services.
(4)
September 2022 includes the
company-initiated closure of approximately 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.
(7)
Represents average TD Ameritrade 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) (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.
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
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)
$
2,823
$
2,020
$
2,559
$
1,526
$
8,475
$
5,215
$
8,122
$
4,275
Acquisition and integration-related costs
(1)
(101
)
101
(104
)
104
(291
)
291
(367
)
367
Amortization of acquired intangible
assets
(152
)
152
(153
)
153
(460
)
460
(461
)
461
Income tax effects (2)
N/A
(62
)
N/A
(61
)
N/A
(183
)
N/A
(208
)
Adjusted total expenses
(non-GAAP),
Adjusted net income (non-GAAP)
$
2,570
$
2,211
$
2,302
$
1,722
$
7,724
$
5,783
$
7,294
$
4,895
(1)
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.
Acquisition and integration-related costs for the three and six
months ended September 30, 2021 primarily consist of $58 million
and $227 million of compensation and benefits, $35 million and $99
million of professional services, and $7 million and $30 million of
occupancy and equipment.
(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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
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)
$
2,677
48.7
%
$
2,011
44.0
%
$
6,790
44.5
%
$
5,690
41.2
%
Acquisition and integration-related
costs
101
1.8
%
104
2.3
%
291
1.9
%
367
2.7
%
Amortization of acquired intangible
assets
152
2.8
%
153
3.3
%
460
3.0
%
461
3.3
%
Adjusted income before taxes on income
(non-GAAP),
Adjusted pre-tax profit margin
(non-GAAP)
$
2,930
53.3
%
$
2,268
49.6
%
$
7,541
49.4
%
$
6,518
47.2
%
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
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)
$
1,884
$
.99
$
1,406
$
.74
$
4,814
$
2.53
$
3,911
$
2.06
Acquisition and integration-related
costs
101
.05
104
.05
291
.15
367
.19
Amortization of acquired intangible
assets
152
.08
153
.08
460
.24
461
.24
Income tax effects
(62
)
(.02
)
(61
)
(.03
)
(183
)
(.09
)
(208
)
(.10
)
Adjusted net income available to common
stockholders
(non-GAAP), Adjusted diluted EPS
(non-GAAP)
$
2,075
$
1.10
$
1,602
$
.84
$
5,382
$
2.83
$
4,531
$
2.39
Three Months Ended September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Return on average common stockholders’
equity (GAAP)
25
%
12
%
18
%
11
%
Average common stockholders’ equity
$
30,282
$
47,492
$
36,526
$
47,908
Less: Average goodwill
(11,951
)
(11,952
)
(11,952
)
(11,952
)
Less: Average acquired intangible assets —
net
(8,999
)
(9,609
)
(9,151
)
(9,762
)
Plus: Average deferred tax liabilities
related to goodwill
and acquired intangible assets — net
1,848
1,895
1,867
1,913
Average tangible common equity
$
11,180
$
27,826
$
17,290
$
28,107
Adjusted net income available to common
stockholders (1)
$
2,075
$
1,602
$
5,382
$
4,531
Return on tangible common equity
(non-GAAP)
74
%
23
%
42
%
21
%
(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/20221017005243/en/
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