10-QPeriod: Q3 FY2024

SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2024

Filed November 8, 2024For Securities:SCHWSCHW-PDSCHW-PJ

Summary

Charles Schwab Corporation (SCHW) reported solid results for the third quarter of 2024, demonstrating resilience and growth driven by strong client engagement and favorable market conditions. Total net revenues increased by 5% year-over-year to $4.8 billion, primarily boosted by a 21% rise in asset management and administration fees, reflecting higher balances in money market funds and advice solutions. Net income saw a significant 25% increase to $1.4 billion, translating to diluted earnings per share (EPS) of $0.71, up 27% from the prior year. The company also completed the final client account conversions from the Ameritrade integration, a major milestone, while managing expenses effectively, with total expenses excluding interest down 7% year-over-year. The company continued to strengthen its balance sheet, with total client assets reaching $9.92 trillion, up 27%. Core net new client assets in the quarter were $95.3 billion, a substantial 109% increase compared to the previous year, indicating strong organic growth. Schwab also made progress in reducing its supplemental funding, paying down $8.9 billion during the quarter. Capital ratios remain robust, with the consolidated Tier 1 Leverage Ratio increasing to 9.7%, and the company is actively working towards its adjusted Tier 1 Leverage Ratio operating objective. Overall, Schwab delivered strong operational and financial performance, benefiting from market tailwinds and successful integration efforts.

Financial Highlights

36 data points
Beta

Revenue

$4.85B

Net Income

$1.41B

29.0% Net Margin

EPS (Diluted)

$0.71

Total Assets

$466.06B

Cash & Equivalents

$34.85B

Free Cash Flow

$18.97B

Financial Statements
Beta
Revenue$4.85B
Interest Expense$1.71B
Net Income$1.41B
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)1.83B
Shares Outstanding (Diluted)1.83B

Key Highlights

  • 1Total net revenues increased 5% to $4.8 billion, driven by a 21% surge in asset management and administration fees.
  • 2Net income rose 25% to $1.4 billion, with diluted EPS up 27% to $0.71.
  • 3Total client assets reached $9.92 trillion, a 27% increase year-over-year.
  • 4Core net new client assets surged 109% to $95.3 billion in the quarter, signaling strong organic growth.
  • 5Expenses excluding interest decreased 7% to $3.0 billion, aided by lower restructuring and integration costs.
  • 6The company completed the final client account conversions from the Ameritrade integration.
  • 7Consolidated Tier 1 Leverage Ratio improved to 9.7%.

Frequently Asked Questions

The primary driver of revenue growth was a significant 21% increase in asset management and administration fees, fueled by higher balances in money market funds and a strong performance in advice solutions, alongside positive equity market performance.

Schwab successfully completed the final client account conversions from the Ameritrade integration in May 2024, a significant milestone. The company continues to realize cost synergies and expects to achieve the remaining estimated cost synergies by the end of 2024.

The company noted a deceleration in client cash realignment activity, with clients continuing to shift cash into higher-yielding investment solutions due to the elevated interest rate environment. While this has impacted net interest revenue, the company's net interest margin improved due to better yields on interest-earning assets.

Schwab is actively managing its balance sheet, which saw total assets increase by 4% to $466.1 billion. The company reduced its bank supplemental funding by $8.9 billion in the quarter and its consolidated Tier 1 Leverage Ratio improved to 9.7%. Schwab continues to work towards its adjusted Tier 1 Leverage Ratio operating objective of 6.75%-7.00%.