10-QPeriod: Q3 FY2015

SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 5, 2015For Securities:SCHWSCHW-PDSCHW-PJ

Summary

Charles Schwab Corporation (SCHW) reported its third-quarter 2015 results, demonstrating resilience amidst market volatility. The company saw a 3% increase in net revenues year-over-year for the quarter, reaching $1.6 billion, driven by growth in asset management and administration fees, as well as net interest revenue. Despite market fluctuations, total client assets remained strong, ending the quarter at $2.42 trillion. Key operational highlights include an 11% increase in new brokerage accounts and a notable 57% surge in accounts enrolling in advisory solutions, underscoring client demand for guidance during uncertain economic times. The company's financial health remains robust, with a pre-tax profit margin of 36.5% for the quarter and a continued focus on expense management, with expenses excluding interest decreasing by 2% year-over-year. Management anticipates continued growth, supported by client momentum and strategic investments in technology.

Financial Highlights

38 data points
Beta

Revenue

$1.60B

Net Income

$376.00M

23.5% Net Margin

EPS (Diluted)

$0.28

Total Assets

$170.40B

Cash & Equivalents

$10.37B

Free Cash Flow

$1.01B

Financial Statements
Beta
Revenue$1.60B
Interest Expense$34.00M
Net Income$376.00M
EPS (Basic)$0.28
EPS (Diluted)$0.28
Shares Outstanding (Basic)1.32B
Shares Outstanding (Diluted)1.33B

Key Highlights

  • 1Net revenues increased by 3% to $1.6 billion in Q3 2015 compared to Q3 2014, driven by asset management and net interest revenues.
  • 2Total client assets remained stable at $2.42 trillion, reflecting continued client engagement despite market volatility.
  • 3New brokerage accounts grew by 11% year-over-year, indicating strong client acquisition.
  • 4Accounts enrolling in advisory solutions increased by 57% year-over-year, highlighting a growing demand for financial guidance.
  • 5Expenses excluding interest decreased by 2% in Q3 2015, demonstrating effective cost management.
  • 6Pre-tax profit margin improved to 36.5% in Q3 2015 from 33.4% in Q3 2014.
  • 7The company continues to strengthen its capital position, with total financial capital increasing by 17% from the end of 2014.

Frequently Asked Questions

While market volatility, particularly in August 2015, impacted equity valuations, Schwab demonstrated resilience. Net revenues saw a modest increase, and client assets remained largely stable. The company also noted increased client interest in advisory services, suggesting clients sought guidance during uncertain times.

Revenue growth was primarily driven by increases in asset management and administration fees (up 2% to $663 million) and net interest revenue (up 11% to $635 million). Trading revenue also saw an increase of 9% to $228 million, supported by higher trade volumes.

The company anticipates that continued low short-term interest rates will constrain net interest revenue. However, growth in average balances of interest-earning assets is expected to partially offset this. The company's net interest revenue simulation indicates a positive sensitivity to rising interest rates.

Schwab demonstrated effective expense management. Expenses excluding interest decreased by 2% year-over-year in the third quarter of 2015, primarily due to a favorable comparison with a severance charge in the prior year period, along with strategic investments in technology and facilities.