10-KPeriod: FY2021

SCHWAB CHARLES CORP Annual Report, Year Ended Dec 31, 2021

Filed February 24, 2022For Securities:SCHWSCHW-PDSCHW-PJ

Summary

Charles Schwab Corporation (SCHW) reported strong financial performance for the fiscal year ended December 31, 2021, demonstrating significant growth driven by the successful integration of TD Ameritrade and a generally supportive macroeconomic environment. The company saw a substantial increase in net revenues, up 58% year-over-year, reaching $18.5 billion, with net income soaring by 77% to $5.9 billion. This growth was fueled by broad-based increases across key revenue streams, including net interest revenue, asset management and administration fees, and trading revenue, which nearly tripled due to the full-year inclusion of TD Ameritrade's results and robust client trading activity. Client assets under management grew by 22% to $8.14 trillion, with active brokerage accounts increasing by 12% to 33.2 million. The company made significant progress on its TD Ameritrade integration, aiming for client conversion within 30-36 months of the acquisition. Despite facing challenges related to heightened client activity impacting service levels early in the year, Schwab implemented measures to improve client experience and managed expenses effectively. The company's capital position remained strong, with a Tier 1 Leverage Ratio of 6.2% at year-end 2021, reflecting a disciplined approach to balance sheet management.

Financial Highlights

41 data points
Beta

Revenue

$18.52B

Net Income

$5.86M

0.0% Net Margin

EPS (Diluted)

$2.83

Total Assets

$667.27B

Cash & Equivalents

$62.98B

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$18.52B
Interest Expense$476.00M
Net Income$5.86M
EPS (Basic)$2.84
EPS (Diluted)$2.83
Shares Outstanding (Basic)1.89B
Shares Outstanding (Diluted)1.90B

Key Highlights

  • 1Net revenues increased by 58% to $18.5 billion, driven by the full-year inclusion of TD Ameritrade and strong client activity.
  • 2Net income grew by 77% to $5.9 billion, with diluted EPS reaching $2.83.
  • 3Client assets under management increased by 22% to $8.14 trillion.
  • 4Active brokerage accounts grew by 12% to 33.2 million.
  • 5The integration of TD Ameritrade is progressing as planned, with client conversion expected within 30-36 months.
  • 6Total expenses excluding interest increased by 46%, largely due to the inclusion of TD Ameritrade and investments in headcount and infrastructure.
  • 7The company maintained a strong capital position, with a Tier 1 Leverage Ratio of 6.2% at year-end 2021.

Frequently Asked Questions

The acquisition of TD Ameritrade significantly boosted Schwab's financial performance in 2021. It contributed to a 58% increase in total net revenues to $18.5 billion and a 77% rise in net income to $5.9 billion. The integration of TD Ameritrade's operations, client base, and revenue streams was a primary driver for the company's growth across most financial metrics.

Schwab experienced robust client asset growth in 2021, with client assets under management increasing by 22% to $8.14 trillion. This growth was supported by strong net new client asset inflows and an increase in the number of active brokerage accounts, which rose by 12% to 33.2 million.

The integration of TD Ameritrade is progressing well, with client conversion anticipated within 30 to 36 months from the acquisition date in October 2020. Schwab expects to realize significant cost synergies and operational efficiencies from the integration. The company is investing in technology and infrastructure to support the combined client base and enhance the client experience.

Revenue growth was driven by several factors: the full-year inclusion of TD Ameritrade's operations and client assets, strong client engagement in financial markets leading to increased trading activity (especially in commissions and order flow revenue), and continued growth in asset management and administration fees from rising balances in advisory solutions and fund offerings. Net interest revenue also grew, supported by increased interest-earning assets, although partially offset by lower average yields.