Schwab Fourth Quarter Net Income of $935 Million Caps Record Year

2018 Revenues Rise 18% to $10.1 Billion, Net Income Grows 49% to $3.5 Billion, Both Records

Core Net New Assets Reach a Record $227.8 Billion, up 15%

Wednesday, January 16, 2019 5:45 am PST

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2018 was $935 million, up 57% from $597 million for the fourth quarter of 2017. Net income for the twelve months ended December 31, 2018 was $3.5 billion, up 49% year-over-year.

       

Three Months Ended
December 31,

%

Twelve Months Ended
December 31,

%
Financial Highlights   2018   2017   Change   2018   2017   Change
   
Net revenues (in millions) $ 2,669 $ 2,242 19 % $ 10,132 $ 8,618 18 %
Net income (in millions) $ 935 $ 597 57 % $ 3,507 $ 2,354 49 %
Diluted earnings per common share $ .65 $ .41 59 % $ 2.45 $ 1.61 52 %
Pre-tax profit margin 45.3 % 42.5 % 45.0 % 42.4 %

Return on average common stockholders’ equity (annualized)

20 % 14 % 19 % 15 %
 
Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
 

CEO Walt Bettinger said, “Our ability to build stronger client relationships and set financial records through a volatile environment reaffirmed the power of Schwab’s ‘Virtuous Cycle’ in 2018. While the year began with strong market momentum, February saw a surge of volatility, including the largest-ever one-day increase in the Cboe Volatility Index®. After a relatively stable summer, the S&P 500® reached an all-time high in September, before dropping 580 points to ultimately end the year 6% lower than month-end December 2017. Throughout these ups and downs, disciplined execution of our ‘Through Clients’ Eyes’ strategy helped us succeed with clients – households new to Retail rose 20% compared to 2017, with 53% of those new clients under the age of 40. Another measure of our success is the willingness of new and existing clients to trust us with their hard-earned assets. Both of our primary businesses posted record inflows in 2018, with Retail and Advisor Services net new assets rising 37% and 7%, respectively. Altogether, investors rewarded Schwab with a record $227.8 billion in core net new assets, up 15% from the previous record in 2017 and more than twice the 2008 total – clear evidence of our asset gathering capabilities. These impressive flows were driven, in part, by our ability to win in a competitive marketplace as we continued attracting more than two dollars of inflow for every dollar out in 2018. Our strong net new assets largely offset lower market valuations and we ended the year at $3.25 trillion in total client assets.”

Mr. Bettinger continued, “We remain well-positioned to continue driving robust business growth; with less than 10% market share, we still have ample opportunity ahead of us even as our client base reaches new highs. Last year, clients opened a record 1.6 million new brokerage accounts, up 9% from the previous year. Record client activity and help from the broader environment contributed to our sixth straight year of record revenues, which totaled $10.1 billion, up 18% from 2017. Our ratio of expenses to client assets, a key measure of our efficiency and one of our core competitive advantages, remained at our all-time low of 16 basis points – the best we’ve seen among public investment services firms. By balancing near-term profitability with long-term investments for growth and efficiency, along with support from a more favorable tax rate, we achieved the fifth consecutive year of record net income, up 49% to $3.5 billion. These results were made possible by our employees’ commitment to championing our clients’ goals every day, and in the fourth quarter we rewarded our non-officer employees with a one-time stock award totaling $36 million.”

Mr. Bettinger added, “We seek to offer a ‘no trade-offs’ approach to investors and are dedicated to sharing the benefits of our scale with them. We expanded access to investing in the fourth quarter by removing minimums for individual U.S. brokerage and retirement accounts. We also lowered the operating expense ratios on five market cap index mutual funds, removed investment minimums, and consolidated share classes across a variety of our mutual funds. During 2018, we enhanced our product line-up, adding 23 ETFs to Schwab ETF OneSource™ to total 265 ETFs covering 70 Morningstar categories. Additionally, consistent with our focus on improving transparency in investing, we introduced order-by-order price improvement reporting, enabling our clients to see how much they save on their equity trades. As we continue to seek ways to enhance our value proposition, product offering, and transparency, we are also striving to serve our clients where and how they choose. Throughout the year we hired over 500 client-facing employees, relocated or renovated 21 company-owned branches, and expanded the number of independent branches from 40 to 53. And we were honored to receive the ‘Highest in Investor Satisfaction with Full Service Brokerage Firms’ by J.D. Power* for the third consecutive year. We see this recognition as an affirmation of the importance of building trust and loyalty with our clients. We know when we do right by them they will reward us by bringing their assets to Schwab, fueling our growth well into the future.”

CFO Peter Crawford commented, “Schwab’s 2018 record financial performance once again demonstrates the effectiveness of the company’s financial formula. By focusing on our clients’ needs, we attract assets, and then we translate that business growth into solid revenue growth while at the same time exercising expense discipline – all of which leads to enhanced bottom-line performance. With an organic asset growth rate of 7% and a supportive environment for much of the year, we crossed the $10 billion revenue mark for the first time, producing 18% growth over 2017. Net interest revenue set a record at $5.8 billion, up 36% year-over-year, due to the Fed’s rate normalization and higher interest-earning assets, which reflect growth from both client cash allocations and the transfer of sweep money market funds to bank and broker-dealer sweep. As we progressed with these transfers, the corresponding money fund revenue naturally declined, yet positive flows in our advice solutions kept asset management and administration fees at $3.2 billion, down just 5% from last year. Record trading activity from our clients resulted in trading revenue reaching $763 million, up 17% from 2017. Our 12% increase in expenses encompasses our expected investments to support and fuel our business growth, including additional client-facing employees and our 2018 priorities – Application Modernization, Business Process Transformation, and Digital Accelerator. Our spending also reflects our late-year decisions to increase marketing and reward our employees, somewhat offset by the elimination of the FDIC surcharge. Overall, we delivered a 550 basis point gap between revenue and expense growth and produced a record 45.0% pre-tax profit margin, a 260 basis point expansion over last year.”

Mr. Crawford concluded, “Throughout 2018 we effectively managed our balance sheet to drive a 19% return on equity – the company’s highest annual level in ten years. We grew our consolidated balance sheet 22% to end the year at $297 billion, reflecting client cash allocations through the year – including a December surge in the midst of heightened market volatility – and $72 billion of sweep transfers. We ended the year with $30 billion remaining in sweep money market fund balances. Even with these transfers, we continued to generate more than enough capital to support our ongoing business growth and began accelerating returns to our stockholders. During 2018, our Board of Directors raised the quarterly cash dividend 63% and authorized a $1 billion Share Repurchase Program in October, which we completed by year-end; our preliminary Tier 1 Leverage Ratio was 7.1% at December 31st, just above our operating objective of 6.75%-7%. We will continue to utilize capital, as necessary, to fund and support balance sheet growth. At the same time, we are working with our Board to implement an approach for returning excess capital to stockholders, as Schwab’s story evolves to include both strong business growth and more meaningful capital returns.”

Supporting schedules and selected balances are either attached or located at: http://www.aboutschwab.com/investor-relations/financial-reports .

*Disclaimer: Charles Schwab received the highest numerical score in the J.D. Power 2016-2018 Full Service Investor Satisfaction Study. 2018 study based on 4,419 total responses from 18 firms measuring opinions of investors who used full service investment institutions, surveyed November-December 2017. Your experiences may vary. Visit jdpower.com/awards.

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: http://www.aboutschwab.com/investor-relations/cfo-commentary . The most recent commentary, which provides perspective on crossing the $250 billion consolidated asset threshold for heightened regulatory requirements, was posted on August 14, 2018.

Business Update

The company has scheduled a Business Update for institutional investors on Tuesday, February 5, 2019. The Update is scheduled to run from approximately 8:30 a.m. - 12:15 p.m. PT, 11:30 a.m. - 3:15 p.m. ET. Participants will include members of the company’s executive management. A simultaneous webcast of this Update will be accessible to the public at http://schwabevents.com/corporation .

Forward-Looking Statements

This press release contains forward-looking statements relating to growth in the client base, accounts and assets; growth in revenues, earnings and profits; expenses; capital returns to stockholders; Tier 1 Leverage Ratio operating objective; and balance sheet growth. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the company’s ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; general market conditions, including the level of interest rates, equity valuations, and trading activity; competitive pressures on pricing, including deposit rates; the company’s ability to develop and launch new products, services, infrastructure and capabilities in a timely and successful manner; client use of the company’s advisory solutions and other products and services; level of client assets, including cash balances; capital and liquidity needs and management; client sensitivity to interest rates; the company’s ability to manage expenses; the timing and amount of transfers to bank sweep; and other factors set forth in the company’s most recent report on Form 10-K.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 355 offices and 11.6 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.3 million banking accounts, and $3.25 trillion in client assets as of December 31, 2018. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, asset management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org ), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com .

 

THE CHARLES SCHWAB CORPORATION

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

 
  Three Months Ended
December 31,
  Twelve Months Ended
December 31,
    2018   2017   2018   2017
Net Revenues    
Interest revenue $ 1,914 $ 1,266 $ 6,680 $ 4,624
Interest expense (288 ) (119 ) (857 ) (342 )
Net interest revenue 1,626 1,147 5,823 4,282
Asset management and administration fees 755 863 3,229 3,392
Trading revenue 206 154 763 654
Other   82     78     317     290  
Total net revenues   2,669     2,242     10,132     8,618  
Expenses Excluding Interest
Compensation and benefits 805 711 3,057 2,737
Professional services 178 151 654 580
Occupancy and equipment 128 113 496 436
Advertising and market development 93 63 313 268
Communications 63 60 242 231
Depreciation and amortization 80 69 306 269
Regulatory fees and assessments 31 46 189 179
Other   81     76     313     268  
Total expenses excluding interest   1,459     1,289     5,570     4,968  
Income before taxes on income 1,210 953 4,562 3,650
Taxes on income (1)   275     356     1,055     1,296  
Net Income   935     597     3,507     2,354  
Preferred stock dividends and other   50     47     178     174  
Net Income Available to Common Stockholders   $ 885     $ 550     $ 3,329     $ 2,180  
Weighted-Average Common Shares Outstanding:
Basic 1,343 1,343 1,348 1,339
Diluted   1,354     1,358     1,361     1,353  
Earnings Per Common Shares Outstanding:
Basic $ .66 $ .41 $ 2.47 $ 1.63
Diluted   $ .65     $ .41     $ 2.45     $ 1.61  
 
(1)   Taxes on income were increased by approximately $46 million in December 2017 due to the enactment of the Tax Cuts and Jobs Act.
 
 
THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
                   
 

Q4-18 % change

  2018 2017
vs.   vs. Fourth Third Second First Fourth
(In millions, except per share amounts and as noted) Q4-17 Q3-18   Quarter   Quarter   Quarter   Quarter   Quarter
Net Revenues
Net interest revenue 42 % 6 % $ 1,626 $ 1,527 $ 1,407 $ 1,263 $ 1,147
Asset management and administration fees (13 )%

(7

)%

755 809 814 851 863
Trading revenue 34 % 17 % 206 176 180 201 154
Other 5 % 22 %   82     67     85     83     78  
Total net revenues 19 % 3 %   2,669     2,579     2,486     2,398     2,242  
Expenses Excluding Interest
Compensation and benefits 13 % 9 % 805 737 745 770 711
Professional services 18 % 9 % 178 164 156 156 151
Occupancy and equipment 13 % 3 % 128 124 122 122 113
Advertising and market development 48 % 33 % 93 70 77 73 63
Communications 5 % 7 % 63 59 58 62 60
Depreciation and amortization 16 % 3 % 80 78 75 73 69
Regulatory fees and assessments (33 )% (46 )% 31 57 50 51 46
Other 7 % 14 %   81     71     72     89     76  
Total expenses excluding interest 13 % 7 %   1,459     1,360     1,355     1,396     1,289  
Income before taxes on income 27 % (1 )% 1,210 1,219 1,131 1,002 953
Taxes on income (23 )% (7 )%   275     296     265     219     356  
Net Income 57 % 1 %   $ 935     $ 923     $ 866     $ 783     $ 597  
Preferred stock dividends and other 6 % 32 %   50     38     53     37     47  
Net Income Available to Common Stockholders 61 %   $ 885     $ 885     $ 813     $ 746     $ 550  
Earnings per common share:
Basic 61 % $ .66 $ .66 $ .60 $ .55 $ .41
Diluted 59 % $ .65 $ .65 $ .60 $ .55 $ .41
Dividends declared per common share 63 % $ .13 $ .13 $ .10 $ .10 $ .08
Weighted-average common shares outstanding:
Basic (1 )% 1,343 1,351 1,350 1,347 1,343
Diluted (1 )%   1,354     1,364     1,364     1,362     1,358  
Performance Measures
Pre-tax profit margin 45.3 % 47.3 % 45.5 % 41.8 % 42.5 %
Return on average common stockholders’ equity (annualized) (1)   20 %   20 %   19 %   18 %   14 %
Financial Condition (at quarter end, in billions)
Cash and investments segregated (10 )% 60 % $ 13.6 $ 8.5 $ 11.0 $ 12.8 $ 15.1
Receivables from brokerage clients — net 5 % (3 )%

 

21.7 22.4 22.4 21.2 20.6
Bank loans — net 1 % 16.6 16.6 16.6 16.4 16.5
Total assets 22 % 9 % 296.5 272.1 261.9 248.3 243.3
Bank deposits 36 % 8 % 231.4 213.4 199.9 190.2 169.7
Payables to brokerage clients 5 % 17 % 32.7 27.9 30.3 31.1 31.2
Short-term borrowings (100 )% 15.0
Long-term debt 44 % 19 % 6.9 5.8 5.8 4.1 4.8
Stockholders’ equity 12 %   20.7     20.8     20.1     19.3     18.5  
Other
Full-time equivalent employees (at quarter end, in thousands) 11 % 2 % 19.5 19.1 18.7 18.2 17.6

Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)

13 % 2 % $ 159 $ 156 $ 126 $ 135 $ 141

Expenses excluding interest as a percentage of average client assets (annualized)

  0.17 %   0.15 %   0.16 %   0.17 %   0.16 %
Clients’ Daily Average Trades (in thousands)
Revenue trades (2) 35 % 22 % 466 382 376 462 345
Asset-based trades (3) 57 % 46 % 188 129 149 139 120
Other trades (4) 31 % 24 %   213     172     179     211     163  
Total 38 % 27 %   867     683     704     812     628  
Average Revenue Per Revenue Trade (2) (3 )% (2 )%   $ 7.13     $ 7.27     $ 7.30     $ 7.24     $ 7.33  
         
 
(1)   Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(2) Includes all client trades that generate trading revenue (i.e., commission revenue or principal transaction revenue); also known as DART.
(3) Includes eligible trades executed by clients who participate in one or more of the company’s asset-based pricing relationships.
(4) Includes all commission-free trades, including Schwab Mutual Fund OneSource® funds and ETFs, and other proprietary products.
 
 

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions)

(Unaudited)

 

  Three Months Ended
December 31,
    Twelve Months Ended
December 31,
2018     2017 2018     2017
  Average
Balance
  Interest
Revenue/
Expense
  Average
Yield/
Rate
Average
Balance
  Interest
Revenue/
Expense
  Average
Yield/
Rate
Average
Balance
  Interest
Revenue/
Expense
  Average
Yield/
Rate
Average
Balance
  Interest
Revenue/
Expense
  Average
Yield/
Rate
Interest-earning assets                
Cash and cash equivalents $ 22,590 $ 131 2.27 % $ 11,582 $ 37 1.27 % $ 17,783 $ 348 1.93 % $ 9,931 $ 109 1.10 %
Cash and investments segregated 9,854 57 2.28 % 15,307 46 1.19 % 11,461 206 1.78 % 18,525 166 0.90 %
Broker-related receivables 241 2 3.99 % 438 1 0.91 % 303 6 2.09 % 430 3 0.70 %
Receivables from brokerage clients 20,584 230 4.38 % 17,478 160 3.63 % 19,870 830 4.12 % 16,269 575 3.53 %
Available for sale securities (1) 59,720 382 2.52 % 47,016 200 1.69 % 54,542 1,241 2.26 % 53,040 815 1.54 %
Held to maturity securities 138,629 928 2.66 % 115,694 663 2.27 % 131,794 3,348 2.53 % 103,599 2,354 2.27 %
Bank loans 16,649     149     3.55 % 16,378     125     3.03 % 16,554     559     3.37 % 15,919     472     2.97 %
Total interest-earning assets 268,267     1,879     2.77 % 223,893     1,232     2.18 % 252,307     6,538     2.57 % 217,713     4,494     2.06 %
Other interest revenue     35           34           142           130      
Total interest-earning assets $ 268,267     $ 1,914     2.82 % $ 223,893     $ 1,266     2.24 % $ 252,307     $ 6,680     2.63 % $ 217,713     $ 4,624     2.12 %
Funding sources
Bank deposits $ 217,325 $ 206 0.38 % $ 165,552 $ 50 0.12 % $ 199,139 $ 545 0.27 % $ 163,998 $ 148 0.09 %
Payables to brokerage clients 19,953 19 0.38 % 23,038 5 0.09 % 21,178 56 0.27 % 25,403 16 0.06 %
Short-term borrowings (2) 5 1.69 % 9,520 30 1.25 % 3,359 54 1.59 % 3,503 41 1.17 %
Long-term debt 6,524     59     3.59 % 3,671     30     3.24 % 5,423     190     3.50 % 3,431     119     3.47 %
Total interest-bearing liabilities 243,807     284     0.46 % 201,781     115     0.23 % 229,099     845     0.37 % 196,335     324     0.17 %
Non-interest-bearing funding sources 24,460 22,112 23,208 21,378
Other interest expense     4           4           12           18      
Total funding sources $ 268,267     $ 288     0.43 % $ 223,893     $ 119     0.21 % $ 252,307     $ 857     0.34 % $ 217,713     $ 342     0.15 %
Net interest revenue     $ 1,626     2.39 %     $ 1,147     2.03 %     $ 5,823     2.29 %     $ 4,282     1.97 %
 
(1)   Amounts have been calculated based on amortized cost.
(2) Interest expense was less than $500,000 in the period presented.
 
 

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions)

(Unaudited)

 
  Three Months Ended
December 31,
    Twelve Months Ended
December 31,
2018     2017 2018     2017
    Average
Client
Assets
  Revenue   Average
Fee
Average
Client
Assets
  Revenue   Average
Fee
Average
Client
Assets
  Revenue   Average
Fee
Average
Client
Assets
  Revenue   Average
Fee
Schwab money market funds before fee waivers $ 137,541   $ 117   0.34 % $ 162,249   $ 200   0.49 % $ 141,018   $ 568   0.40 % $ 160,735   $ 875   0.54 %
Fee waivers                                     (10 )    
Schwab money market funds 137,541 117 0.34 % 162,249 200 0.49 % 141,018 568 0.40 % 160,735 865 0.54 %
Schwab equity and bond funds and ETFs 211,367 63 0.12 % 179,764 60 0.13 % 207,385 258 0.12 % 158,625 223 0.14 %

Mutual Fund OneSource® and other non-transaction fee funds

191,620 156 0.32 % 219,157 178 0.32 % 210,429 680 0.32 % 215,333 706 0.33 %
Other third-party mutual funds and ETFs (1)   325,497     71     0.09 % 309,007     69     0.09 % 328,150     287     0.09 % 286,111     251     0.09 %
Total mutual funds and ETFs (2)   $ 866,025     407     0.19 % $ 870,177     507     0.23 % $ 886,982     1,793     0.20 % $ 820,804     2,045     0.25 %
Advice solutions (2)
Fee-based $ 226,184 280 0.49 % $ 216,546 278 0.51 % $ 227,790 1,139 0.50 % $ 203,794 1,043 0.51 %
Non-fee-based   64,085           55,368           62,813           48,936          
Total advice solutions   $ 290,269     280     0.38 % $ 271,914     278     0.41 % $ 290,603     1,139     0.39 % $ 252,730     1,043     0.41 %
Other balance-based fees (3) 380,193 59 0.06 % 451,310 66 0.06 % 398,495 250 0.06 % 417,659 258 0.06 %
Other (4)       9           12           47           46      
Total asset management and administration fees       $ 755           $ 863           $ 3,229           $ 3,392      
 
(1)   Includes Schwab ETF OneSource.
(2) Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private Client, Schwab Managed Portfolios, Managed Account Select®, Schwab Advisor Network®, Windhaven® Strategies, ThomasPartners® Strategies, Schwab Index Advantage® advised retirement plan balances, Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, and Schwab Intelligent Advisory®, launched in March 2017; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Beginning the fourth quarter of 2017, a prospective change was made to add non-fee based average assets from managed portfolios. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above. For the total end of period view, please see the Monthly Activity Report.
(3) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(4) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.
 
 

THE CHARLES SCHWAB CORPORATION

Growth in Client Assets and Accounts

(Unaudited)

   
 

Q4-18 % Change

    2018   2017
vs.   vs.   Fourth   Third   Second   First Fourth
(In billions, at quarter end, except as noted) Q4-17 Q3-18   Quarter   Quarter   Quarter   Quarter   Quarter
Assets in client accounts
Schwab One®, certain cash equivalents and bank deposits 32 % 9 % $ 261.2 $ 239.5 $ 228.2 $ 219.4 $ 198.6
Proprietary mutual funds (Schwab Funds® and Laudus Funds®)
Money market funds (1) (6 )% 19 % 153.5 128.5 134.2 145.0 163.6
Equity and bond funds (2) (3 )% (13 )%   79.9     91.7     86.6     83.4     82.5  
Total proprietary mutual funds (5 )% 6 %   233.4     220.2     220.8     228.4     246.1  
Mutual Fund Marketplace® (3)
Mutual Fund OneSource® and other non-transaction fee funds (20 )% (15 )% 180.5 212.6 212.5 221.6 225.2
Mutual fund clearing services (38 )% (10 )% 164.4 182.2 175.3 178.3 265.4
Other third-party mutual funds (5 )% (12 )%   650.4     740.1     716.1     693.4     682.6  
Total Mutual Fund Marketplace (15 )% (12 )%   995.3     1,134.9     1,103.9     1,093.3     1,173.2  
Total mutual fund assets (13 )% (9 )%   1,228.7     1,355.1     1,324.7     1,321.7     1,419.3  
Exchange-traded funds (ETFs)
Proprietary ETFs (2) 16 % (8 )% 115.2 125.2 114.8 104.5 99.1
Schwab ETF OneSource™ (3) 7 % (8 )% 30.6 33.3 30.8 29.8 28.7
Other third-party ETFs (8 )%   309.9     338.6     322.1     314.7     308.8  
Total ETF assets 4 % (8 )%   455.7     497.1     467.7     449.0     436.6  
Equity and other securities (6 )% (15 )% 1,019.8 1,202.4 1,121.7 1,075.9 1,080.0
Fixed income securities 25 % 5 % 306.1 290.4 275.1 258.8 245.6
Margin loans outstanding 5 % (7 )%   (19.3 )   (20.8 )   (20.4 )   (19.4 )   (18.3 )
Total client assets (3 )% (9 )%   $ 3,252.2     $ 3,563.7     $ 3,397.0     $ 3,305.4     $ 3,361.8  
Client assets by business
Investor Services (6 )% (9 )% $ 1,701.7 $ 1,876.9 $ 1,784.8 $ 1,740.8 $ 1,810.9
Advisor Services (8 )%   1,550.5     1,686.8     1,612.2     1,564.6     1,550.9  
Total client assets (3 )% (9 )%   $ 3,252.2     $ 3,563.7     $ 3,397.0     $ 3,305.4     $ 3,361.8  
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services (4) (38 )% 3 % $ 28.7 $ 27.8 $ 13.7 $ (50.8 ) $ 46.4
Advisor Services (16 )% 4 %   26.6     25.7     30.2     32.0     31.7  
Total net new assets (29 )% 3 %   $ 55.3     $ 53.5     $ 43.9     $ (18.8 )   $ 78.1  
Net market (losses) gains N/M N/M   (366.8 )   113.2     47.7     (37.6 )   102.5  
Net (decline) growth N/M N/M   $ (311.5 )   $ 166.7     $ 91.6     $ (56.4 )   $ 180.6  
New brokerage accounts (in thousands, for the quarter ended) (2 )% 3 % 380 369 384 443 386
Client Accounts (in thousands)
Active Brokerage Accounts (5) 8 % 1 % 11,593 11,423 11,202 11,005 10,755
Banking Accounts 9 % 1 % 1,302 1,283 1,250 1,221 1,197
Corporate Retirement Plan Participants 6 % 2 %   1,655     1,627     1,599     1,594     1,568  
         
 
(1)  

Total client assets in purchased money market funds are located at: https://www.aboutschwab.com/investor-relations.

(2) Includes proprietary equity and bond funds and ETFs held on and off the Schwab platform. As of December 31, 2018, off-platform equity and bond funds and ETFs were $10.4 billion and $30.1 billion, respectively.
(3) Excludes all proprietary mutual funds and ETFs.
(4) Second quarter of 2018 includes outflows of $9.5 billion from certain mutual fund clearing services clients. First quarter of 2018 includes outflows of $84.4 billion from certain mutual fund clearing services clients. Fourth quarter of 2017 includes an inflow of $16.2 billion from a mutual fund clearing services client.
(5) In September 2018, the definition of active brokerage accounts was standardized across all account types as accounts with activity within the preceding 270 days. This change increased active accounts by approximately 63,000.

N/M Not meaningful.

 
 

The Charles Schwab Corporation Monthly Activity Report For December 2018

 
  2017   2018                          

Change

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Mo.

 

Yr.

Market Indices (at month end)
Dow Jones Industrial Average 24,719 26,149 25,029 24,103 24,163 24,416 24,271 25,415 25,965 26,458 25,116 25,538 23,327 (9 )% (6 )%
Nasdaq Composite 6,903 7,411 7,273 7,063 7,066 7,442 7,510 7,672 8,110 8,046 7,306 7,331 6,635 (9 )% (4 )%
Standard & Poor’s 500 2,674 2,824 2,714 2,641 2,648 2,705 2,718 2,816 2,902 2,914 2,712 2,760 2,507 (9 )% (6 )%
Client Assets (in billions of dollars) (1)
Beginning Client Assets 3,318.8 3,361.8 3,480.5 3,328.8 3,305.4 3,312.1 3,378.1 3,397.0 3,447.9 3,555.9 3,563.7 3,388.1 3,431.9
Net New Assets (1) 27.0 11.5 (50.5 ) 20.2 0.4 19.4 24.1 16.3 20.8 16.4 14.9 15.6 24.8 59 % (8 )%
Net Market Gains (Losses) 16.0     107.2     (101.2 )   (43.6 )   6.3     46.6     (5.2 )   64.6     57.2     (8.6 )   (190.5 )   28.2   (204.5 )
Total Client Assets (at month end) 3,361.8     3,480.5     3,328.8     3,305.4     3,312.1     3,378.1     3,397.0     3,477.9     3,555.9     3,563.7     3,388.1     3,431.9   3,252.2   (5 )% (3 )%
Core Net New Assets (2) 27.0 18.7 21.3 25.6 9.9 19.4 24.1 16.3 20.8 16.4 14.9 15.6 24.8 59 % (8 )%
Receiving Ongoing Advisory Services (at month end)
Investor Services 268.7 278.6 273.0 273.2 274.7 279.1 280.0 287.0 292.0 292.7 280.3 284.7 272.4 (4 )% 1 %
Advisor Services (3) 1,431.1 1,483.7 1,449.5 1,444.4 1,451.6 1,478.0 1,488.7 1,525.5 1,555.3 1,559.2 1,485.8 1,510.1 1,436.1 (5 )%
Client Accounts (at month end, in thousands)
Active Brokerage Accounts (4) 10,755 10,858 10,936 11,005 11,081 11,145 11,202 11,243 11,310 11,423 11,479 11,529 11,593 1 % 8 %
Banking Accounts 1,197 1,210 1,218 1,221 1,230 1,240 1,250 1,262 1,274 1,283 1,289 1,297 1,302 9 %
Corporate Retirement Plan Participants 1,568 1,580 1,580 1,594 1,599 1,599 1,599 1,611 1,621 1,627 1,634 1,639 1,655 1 % 6 %
Client Activity
New Brokerage Accounts (in thousands) 147 165 138 140 141 122 121 118 132 119 133 115 132 15 % (10 )%
Inbound Calls (in thousands) 2,046 2,303 2,005 2,145 2,034 1,852 1,814 1,849 1,964 1,715 1,976 1,681 1,839 9 % (10 )%
Web Logins (in thousands) 54,486 64,488 60,830 58,906 55,980 56,234 56,491 57,137 62,797 53,923 59,261 54,654 53,920 (1 )% (1 )%
Client Cash as a Percentage of Client Assets (5) 10.8 % 10.4 % 10.9 % 11.0 % 10.9 % 10.6 % 10.7 % 10.5 % 10.4 % 10.3 % 11.1 % 11.2 % 12.8 % 160 bp 200 bp

Mutual Fund and Exchange-Traded Fund Net Buys (Sells) (6, 7) (in millions of dollars)

Large Capitalization Stock 1,023 496 715 (158 ) 410 953 981 486 918 311 308 331 717
Small / Mid Capitalization Stock 274 (125 ) (167 ) 130 359 753 1,195 768 (186 ) 151 (1,344 ) (456 ) (1,414 )
International 1,852 4,306 2,685 1,546 809 372 (498 ) (529 ) 186 (88 ) (109 ) (418 ) (2,163 )
Specialized 424 1,569 187 326 122 (19 ) 383 520 (245 ) 73 (914 ) (397 ) (2,105 )
Hybrid 307 978 (88 ) 529 (541 ) (241 ) (288 ) (548 ) (678 ) (324 ) (1,313 ) (1,248 ) (2,985 )
Taxable Bond 2,561 3,284 155 2,117 1,661 1,002 928 879 965 1,371 (351 ) (836 ) (4,342 )
Tax-Free Bond 341 1,247 211 247 (113 ) 449 588 306 559 262 (591 ) (407 ) (409 )
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds (6) 775 4,843 (417 ) 1,976 (36 ) (88 ) 555 (522 ) (1,936 ) (1,538 ) (5,734 ) (7,955 ) (21,372 )
Exchange-Traded Funds (7) 6,007 6,912 4,115 2,761 2,743 3,357 2,734 2,404 3,455 3,294 1,420 4,524 8,671
Money Market Funds 2,968 (5,730 ) (4,292 ) (9,100 ) (4,156 ) (2,245 ) (4,919 ) (4,801 ) 704 (1,933 ) 2,546 8,515 13,548

Average Interest-Earning Assets (8) (in millions of dollars)

228,540 234,619 239,922 241,049 239,833 242,584 249,432 254,211 259,137 261,741 264,156 265,648 274,913   3 % 20 %
 
(1)   April, March, February, and January 2018 include outflows of $9.5 billion, $5.4 billion, $71.8 billion, and $7.2 billion, respectively, from certain mutual fund clearing services clients.
(2) Net new assets before significant one-time inflows or outflows, such as acquisitions/divestitures or extraordinary flows (generally greater than $10 billion) relating to a specific client. These flows may span multiple reporting periods.
(3) Excludes Retirement Business Services.
(4) In September 2018, the definition of active brokerage accounts was standardized across all account types as accounts with activity within the preceding 270 days. This change increased active accounts by approximately 63,000.
(5) Schwab One®, certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets.
(6) Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.
(7) Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
(8) Represents average total interest-earning assets on the company’s balance sheet.
 

Contact:

MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525

INVESTORS/ANALYSTS:
Rich Fowler
Charles Schwab
Phone: 415-667-1841

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