01—Abstract
Summary
Summary of the 10-Q filed August 7, 2019. Cited figures are marked; the original filing is the authoritative source.
Charles Schwab Corporation (SCHW) reported solid financial results for the quarter ending June 30, 2019, demonstrating continued growth and client asset accumulation.
Total net revenues saw an 8% increase year-over-year, reaching $2.68 billiona, driven primarily by a significant 14% rise in net interest revenue. This growth in net interest revenue was bolstered by an increase in interest-earning assets, partly due to the strategic transfer of sweep money market fund balances to bank and broker-dealer sweeps, and also benefiting from the Federal Reserve's rate hikes in the prior year. Client assets under management reached $3.70 trillion, a 9% increase compared to the same period in the previous year, highlighting the company's success in attracting and retaining client assets.
Despite a challenging market environment, Schwab maintained strong profitability with net income available to common stockholders growing by 9% to $887 millionb, translating to diluted earnings per share of $0.66, a 10% increase. The company also demonstrated a commitment to shareholder returns by repurchasing $1.2 billion of common stock during the quarter.
02—Key points
Key Highlights
- Total net revenues increased by 8% to $2.68 billion in Q2 2019 compared to Q2 2018.
- Net interest revenue grew by 14% to $1.61 billion in Q2 2019, a key driver of overall revenue growth.
- Client assets reached $3.70 trillion by quarter-end, up 9% year-over-year, indicating strong client asset growth.
- Net income available to common stockholders increased by 9% to $887 million.
- Diluted earnings per share (EPS) rose by 10% to $0.66.
- The company repurchased $1.2 billion of its common stock during the quarter, demonstrating a commitment to returning capital to shareholders.
- Schwab announced a definitive agreement to acquire USAA's Investment Management Company assets for $1.8 billion, expected to close in 2020, significantly expanding its client base and assets under management.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed August 7, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Revenue | $2.68B$2.49B | +7.8% |
| Interest Expense | $318.00M$183.00M | +73.8% |
| Net Income | $937.00M$866.00M | +8.2% |
| EPS (Basic) | $0.67$0.60 | +11.7% |
| EPS (Diluted) | $0.66$0.60 | +10.0% |
| Shares Outstanding (Basic) | 1.33B1.35B | −1.6% |
| Shares Outstanding (Diluted) | 1.34B1.36B | −2.0% |
05—Questions
Frequently Asked Questions
What was the primary driver of revenue growth in the quarter?
The primary driver of revenue growth was net interest revenue, which increased by 14% year-over-year. This was attributed to higher interest rates from prior Federal Reserve hikes and an increase in interest-earning assets, partly due to the strategic shift of client cash balances from money market funds to bank and broker-dealer sweeps.
How did client asset growth perform in the quarter?
Client assets grew by 9% year-over-year, reaching $3.70 trillion by the end of the second quarter of 2019. This demonstrates the company's continued ability to attract and retain client assets.
What is the significance of the announced acquisition of USAA's Investment Management Company assets?
The announced acquisition of USAA's Investment Management Company assets for $1.8 billion is a significant strategic move. It will add over one million brokerage and managed portfolio accounts and approximately $90 billion in client assets. It also includes a long-term referral agreement, making Schwab the exclusive wealth management and brokerage provider for USAA members, which is expected to drive substantial future growth.
How is the company managing expenses?
The company demonstrated disciplined expense management, with total expenses excluding interest increasing by 7% in the second quarter, which was lower than the revenue growth. This focus on efficiency is reflected in a consistent expense ratio to client assets.
06—Continue