SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2022

Summary

Charles Schwab Corporation reported solid financial results for the third quarter and first nine months of 2022, demonstrating resilience amidst a challenging macroeconomic environment characterized by rising inflation and aggressive monetary policy. Despite a 13% year-over-year decrease in client assets to $6.64 trillion due to market valuation declines, the company's strategic focus on client relationships and a broad range of services continued to drive revenue growth. Total net revenues increased by 20% year-over-year to $5.5 billion for the quarter, largely fueled by a significant 44% surge in net interest revenue, benefiting from higher market interest rates. This robust performance, coupled with expense discipline, resulted in a 32% increase in net income to $2.0 billion for the quarter and a 22% increase for the nine-month period to $5.2 billion. The company also highlighted continued progress in the integration of TD Ameritrade, projecting its completion in 2023 with updated cost estimates. Furthermore, Schwab demonstrated a strong commitment to returning capital to shareholders through a 10% dividend increase and a substantial $15 billion share repurchase authorization. The company's capital and liquidity positions remain strong, with a consolidated Tier 1 Leverage Ratio of 6.8% at quarter-end, slightly above its revised operating objective.

Key Highlights

• 1Total net revenues grew 20% year-over-year to $5.5 billion in Q3 2022, driven by a 44% increase in net interest revenue due to higher market interest rates.
• 2Net income increased 32% year-over-year to $2.0 billion in Q3 2022, reflecting strong revenue growth and expense management.
• 3Client assets decreased 13% year-over-year to $6.64 trillion due to market declines, yet core net new client assets remained substantial at $114.6 billion for the quarter.
• 4The integration of TD Ameritrade is progressing, with most client conversions now expected in 2023, and total acquisition and integration-related costs estimated between $2.4 billion and $2.5 billion.
• 5The company increased its common dividend by 10% and announced a $15 billion share repurchase authorization, demonstrating a commitment to shareholder returns.
• 6The consolidated Tier 1 Leverage Ratio stood at 6.8% as of September 30, 2022, indicating a strong capital position.
• 7Despite market volatility, active brokerage accounts increased 4% year-over-year to 33.875 million.

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