SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2016

Summary

Charles Schwab Corporation (SCHW) reported strong financial performance for the third quarter and the first nine months of 2016, demonstrating significant growth in net revenues and net income. This growth was primarily driven by an increase in client assets, which reached $2.73 trillion, and the positive impact of rising short-term interest rates on net interest revenue. The company successfully attracted new clients and deepened relationships with existing ones, evidenced by a 13% year-over-year increase in total client assets and a 14% rise in assets receiving ongoing advisory services. Operational efficiency remained a focus, with expenses excluding interest growing at a slower pace than net revenues, leading to improved pre-tax profit margins. The company also continued to manage its capital effectively, maintaining robust regulatory capital ratios well above requirements. A subsequent event includes the successful issuance of Series E Preferred Stock, raising $591 million to support balance sheet growth and the migration of client balances to Schwab Bank.

Key Highlights

• 1Total client assets grew 13% year-over-year to $2.73 trillion by September 30, 2016.
• 2Net revenues increased by 20% and 17% for the three and nine months ended September 30, 2016, respectively, compared to the prior year.
• 3Pre-tax profit margin improved to 41.5% in Q3 2016 from 36.5% in Q3 2015.
• 4Net income available to common stockholders increased by 29% for both the three and nine months ended September 30, 2016, compared to the prior year.
• 5The company ended the quarter with 10.0 million active brokerage accounts, a 4% increase year-over-year.
• 6Schwab Bank saw a significant increase in deposits, growing to $149.6 billion from $129.5 billion at the end of 2015.
• 7The company maintained strong regulatory capital ratios, with Schwab Bank considered well-capitalized and CSC exceeding capital buffer requirements.

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