Schwab Reports 4Q Earnings Per Share of $.62 and a Record $2.67 For 2019

Full Year Revenues and Net Income Grow 6% to $10.7 Billion and $3.7 Billion, Respectively, Both Records

Core Net New Assets Total $211.7 Billion, Representing a 7% Organic Growth Rate

Thursday, January 16, 2020 5:45 am PST

Dateline:

SAN FRANCISCO

Public Company Information:

NYSE:
SCHW
"prompted us to take a number of bold steps that further enhance our offer to clients and help position Schwab to build value for our stakeholders – clients, employees, and stockholders – over the long-term"

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2019 was $852 million, down 9% from $935 million for the fourth quarter of 2018. Net income for the twelve months ended December 31, 2019 was a record $3.7 billion, up 6% year-over-year. The company’s financial results for the fourth quarter and full-year 2019 include acquisition-related expenses and severance charges described below.

 

 

Three Months Ended
December 31,

 

%

 

Twelve Months Ended
December 31,

 

%

Financial Highlights

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues (in millions)

 

$

2,606

 

 

$

2,669

 

 

(2)%

 

$

10,721

 

 

$

10,132

 

 

6%

Net income (in millions)

 

$

852

 

 

$

935

 

 

(9)%

 

$

3,704

 

 

$

3,507

 

 

6%

Diluted earnings per common share

 

$

.62

 

 

$

.65

 

 

(5)%

 

$

2.67

 

 

$

2.45

 

 

9%

Pre-tax profit margin

 

42.7

%

 

45.3

%

 

 

 

45.2

%

 

45.0

%

 

 

Return on average common stockholders’ equity (annualized)

 

17

%

 

20

%

 

 

 

19

%

 

19

%

 

 

EPS Impact of Certain Items

$25 million in expenses relating to pending acquisitions (1)

 

$

(.01

)

 

 

 

 

 

$

(.01

)

 

 

 

 

$62 million charge relating to position eliminations (2)

 

$

 

 

 

 

 

 

$

(.04

)

 

 

 

 

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

(1)

The pre-tax acquisition-related expenses associated with the pending USAA and TD Ameritrade transactions include $17 million in the fourth quarter and $25 million for the year. These expenses reduced fourth quarter and full-year earnings per share by $.01, and are primarily included in professional services expense.

(2)

The pre-tax severance charges related to position eliminations in the third quarter of 2019, which reduced quarterly earnings per share by $.04, are included in compensation and benefits expense.

CEO Walt Bettinger said, “In 2019, we stayed true to our heritage of challenging the status quo to benefit individual investors and the independent advisors who serve them. Throughout the year, investor sentiment reflected a complex market environment that included ongoing global trade negotiations, the Brexit debate, and an uncertain economic outlook at home. The Federal Reserve reversed course on monetary policy, cutting the Fed Funds target three times in 2019, and the yield on 10-year Treasury notes hit a low of 1.47% before rebounding to average 2.14% for the year – leaving the rate environment significantly lower than our initial expectations. At the same time, stocks continued their steady march upward, with the S&P 500 rising 29% in the year to record levels. Both of our primary businesses contributed to core net new assets of $211.7 billion, which included record fourth quarter core net new assets of $66.2 billion and represented a 7% full-year organic growth rate, as well as our second consecutive year over $200 billion. Altogether, our robust asset gathering plus strong market returns drove total client assets to surpass the $4 trillion mark to a record $4.04 trillion at December 31st, closing the year up 24%.”

“During 2019 our commitment to seeing “through clients’ eyes” prompted us to take a number of bold steps that further enhance our offer to clients and help position Schwab to build value for our stakeholders – clients, employees, and stockholders – over the long-term,” Mr. Bettinger continued. “We shared the benefits of the scale we have worked so hard to achieve and removed the final barrier to investing by eliminating commissions for stocks, ETFs, and options listed on U.S. or Canadian exchanges, across all mobile and web trading channels. We also announced two significant acquisitions. In July, we agreed to acquire certain assets of USAA’s Investment Management Company while also entering into a long-term referral arrangement. We are honored to have the opportunity to serve the financial needs of USAA members and remain on track for closing in mid-2020. In late November, we entered into a definitive agreement to acquire TD Ameritrade. As we work towards a second half 2020 close and subsequent integration, our challenger mindset will guide us to ensure we leverage each organization’s strengths, including a common client-centric focus and a unique passion for breaking down barriers for investors and advisors alike.”

Mr. Bettinger concluded, “Last year we also focused on deepening our capabilities around innovative solutions and offering clients greater choice and value in meeting their investment needs. In the first quarter, we replaced Schwab Intelligent Advisory® with Schwab Intelligent Portfolios PremiumTM, the industry’s first subscription-based, automated investing solution with unlimited access to a planning professional. In December, we took action to meet the unfilled needs of millions of Americans by introducing Schwab Intelligent IncomeTM, a low-cost solution designed to offer a simple, modern way to generate income from existing investment portfolios. Additionally, in December, we lowered operating expense ratios on five fixed income ETFs, making each among the lowest OERs in their respective Morningstar categories. Last year also marked the 10th anniversary of our first proprietary ETF. Since that launch, we’ve added 24 more ETFs and $164 billion in assets. For our independent advisor clients, we are investing in a variety of technologies to best serve firms of all sizes and complexity. Since its April release, Schwab Advisor Portfolio Connect® – our modern portfolio management solution, available free of charge – has been delivering core capabilities and features to over 700 firms with an average AUM of $40 million. As part of our ongoing digital transformation work, we recently made enhancements to our status request experience including dynamic search functionality, more robust review capabilities, and increased flexibility to update pending requests. With these enhancements, status-related call volume has declined approximately 15% in our advisor business. Chuck Schwab, the Board, and I are all proud of the Schwab team’s many accomplishments in 2019 and we remain dedicated to helping investors reach their financial goals as we create an even stronger, more capable firm in the years ahead.”

CFO Peter Crawford commented, “We achieved impressive financial results in 2019 given the somewhat more challenging than expected macroeconomic backdrop and our own pricing decisions. We delivered a record $10.7 billion in total revenue, up 6% year-over-year, which was just shy of the range we outlined at the beginning of the year. Net interest revenue increased 12% from the prior year to $6.5 billion, driven by higher average investment yields – even after the Fed’s rate cuts – and an increase in client cash balances held at our bank and brokerage subsidiaries. While trading revenue declined 19% to $617 million due to our pricing actions, asset management and administration fees of $3.2 billion remained essentially flat year-over-year. Rising balances in third-party mutual funds, along with growing enrollment in our advisory solutions, helped to largely offset declines in Mutual Fund OneSource® and lower money market fund revenue due to sweep transfers to our balance sheet. In response to the environment, we carefully managed our overall 2019 spending to $5.9 billion for the year, including $62 million in severance charges associated with a 3% reduction in our workforce and $25 million in costs relating to our two aforementioned acquisitions. Together, these items contributed roughly a third of our 5% overall expense growth, and we finished the year significantly below our initial 6%-7% outlook. Reflecting our commitment to balancing long-term profitability with reinvesting for growth, we achieved a record 45.2% pre-tax profit margin and a 19% return on equity for the year – our second consecutive year of at least 45% and 19%, respectively.”

Mr. Crawford added, “Disciplined balance sheet management remains core to our strategy as we continue to support business growth and meaningful capital returns across a range of conditions. We entered 2019 with a $4 billion share repurchase authorization, and through year end we had repurchased more than 55 million shares for $2.2 billion –including 6.4 million shares for approximately $230 million during the fourth quarter. By month-end December, our balance sheet assets reached $294 billion, up 5% from month-end September, and down 1% from a year ago; our preliminary consolidated Tier 1 Leverage Ratio was 7.3%. As we look forward to continuing to build Schwab both organically and through our pending transactions, our intent to return excess capital above our long-term operating objective of 6.75%-7.00% remains in place. Overall, our 2019 results emphasize the enduring nature of Schwab’s financial model, which allows us to consistently invest in our capabilities and our clients while building value for stockholders through the business cycle.”

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: https://www.aboutschwab.com/cfo-commentary . The most recent commentary, which provides perspective on our decision to reduce online trade commissions for U.S. and Canadian-listed equities, ETFs, and options to $0, was posted on October 1, 2019.

Forward-Looking Statements

This press release contains forward-looking statements relating to building value for stakeholders; the company’s (i) acquisition of certain assets of USAA’s Investment Management Company (IMCO) and entering into a referral agreement with USAA and (ii) acquisition and subsequent integration of TD Ameritrade, including the timing of closing those acquisitions; balancing long-term profitability with reinvesting for growth; balance sheet management; business growth; capital returns to stockholders; and Tier 1 Leverage Ratio operating objective. 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, general market conditions, including the level of interest rates, equity valuations, and trading activity; the company’s ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; competitive pressures on pricing, including deposit rates; the company’s ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure, in a timely and successful manner; client use of the company’s advisory solutions and other products and services; client sensitivity to rates; level of client assets, including cash balances; capital and liquidity needs and management; the company’s ability to manage expenses; failure of the parties to satisfy the closing conditions in the USAA IMCO purchase agreement and the TD Ameritrade merger agreement in a timely manner or at all, including regulatory approvals, stockholder approvals (for TD Ameritrade) and the implementation of conversion plans (for USAA IMCO); 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 360 offices and 12.3 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.4 million banking accounts, and $4.04 trillion in client assets as of December 31, 2019. 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, https://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 https://www.schwab.com and https://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,

 

2019

 

2018

 

2019

 

2018

Net Revenues

 

 

 

 

 

 

 

Interest revenue

$

1,763

 

 

$

1,914

 

 

$

7,580

 

 

$

6,680

 

Interest expense

(168

)

 

(288

)

 

(1,064

)

 

(857

)

Net interest revenue

1,595

 

 

1,626

 

 

6,516

 

 

5,823

 

Asset management and administration fees

845

 

 

755

 

 

3,211

 

 

3,229

 

Trading revenue

86

 

 

206

 

 

617

 

 

763

 

Other

80

 

 

82

 

 

377

 

 

317

 

Total net revenues

2,606

 

 

2,669

 

 

10,721

 

 

10,132

 

Expenses Excluding Interest

 

 

 

 

 

 

 

Compensation and benefits

806

 

 

805

 

 

3,320

 

 

3,057

 

Professional services

186

 

 

178

 

 

702

 

 

654

 

Occupancy and equipment

151

 

 

128

 

 

559

 

 

496

 

Advertising and market development

90

 

 

93

 

 

307

 

 

313

 

Communications

66

 

 

63

 

 

253

 

 

242

 

Depreciation and amortization

94

 

 

80

 

 

349

 

 

306

 

Regulatory fees and assessments

30

 

 

31

 

 

122

 

 

189

 

Other

71

 

 

81

 

 

261

 

 

313

 

Total expenses excluding interest

1,494

 

 

1,459

 

 

5,873

 

 

5,570

 

Income before taxes on income

1,112

 

 

1,210

 

 

4,848

 

 

4,562

 

Taxes on income

260

 

 

275

 

 

1,144

 

 

1,055

 

Net Income

852

 

 

935

 

 

3,704

 

 

3,507

 

Preferred stock dividends and other

51

 

 

50

 

 

178

 

 

178

 

Net Income Available to Common Stockholders

$

801

 

 

$

885

 

 

$

3,526

 

 

$

3,329

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

1,284

 

 

1,343

 

 

1,311

 

 

1,348

 

Diluted

1,293

 

 

1,354

 

 

1,320

 

 

1,361

 

Earnings Per Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

$

.62

 

 

$

.66

 

 

$

2.69

 

 

$

2.47

 

Diluted

$

.62

 

 

$

.65

 

 

$

2.67

 

 

$

2.45

 

THE CHARLES SCHWAB CORPORATION

Financial and Operating Highlights

(Unaudited)

 

Q4-19 % change

 

 

2019

 

2018

 

vs.

 

vs.

 

 

Fourth

 

Third

 

Second

 

First

 

Fourth

(In millions, except per share amounts and as noted)

Q4-18

 

Q3-19

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Net Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest revenue

(2

)%

 

(2

)%

 

 

$

1,595

 

 

$

1,631

 

 

$

1,609

 

 

$

1,681

 

 

$

1,626

 

Asset management and administration fees

12

%

 

2

%

 

 

845

 

 

825

 

 

786

 

 

755

 

 

755

 

Trading revenue

(58

)%

 

(50

)%

 

 

86

 

 

172

 

 

174

 

 

185

 

 

206

 

Other

(2

)%

 

(4

)%

 

 

80

 

 

83

 

 

112

 

 

102

 

 

82

 

Total net revenues

(2

)%

 

(4

)%

 

 

2,606

 

 

2,711

 

 

2,681

 

 

2,723

 

 

2,669

 

Expenses Excluding Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

(6

)%

 

 

806

 

 

857

 

 

807

 

 

850

 

 

805

 

Professional services

4

%

 

11

%

 

 

186

 

 

168

 

 

178

 

 

170

 

 

178

 

Occupancy and equipment

18

%

 

5

%

 

 

151

 

 

144

 

 

133

 

 

131

 

 

128

 

Advertising and market development

(3

)%

 

27

%

 

 

90

 

 

71

 

 

77

 

 

69

 

 

93

 

Communications

5

%

 

5

%

 

 

66

 

 

63

 

 

62

 

 

62

 

 

63

 

Depreciation and amortization

18

%

 

7

%

 

 

94

 

 

88

 

 

84

 

 

83

 

 

80

 

Regulatory fees and assessments

(3

)%

 

 

 

 

30

 

 

30

 

 

30

 

 

32

 

 

31

 

Other

(12

)%

 

31

%

 

 

71

 

 

54

 

 

74

 

 

62

 

 

81

 

Total expenses excluding interest

2

%

 

1

%

 

 

1,494

 

 

1,475

 

 

1,445

 

 

1,459

 

 

1,459

 

Income before taxes on income

(8

)%

 

(10

)%

 

 

1,112

 

 

1,236

 

 

1,236

 

 

1,264

 

 

1,210

 

Taxes on income

(5

)%

 

(9

)%

 

 

260

 

 

285

 

 

299

 

 

300

 

 

275

 

Net Income

(9

)%

 

(10

)%

 

 

$

852

 

 

$

951

 

 

$

937

 

 

$

964

 

 

$

935

 

Preferred stock dividends and other

2

%

 

34

%

 

 

51

 

 

38

 

 

50

 

 

39

 

 

50

 

Net Income Available to Common Stockholders

(9

)%

 

(12

)%

 

 

$

801

 

 

$

913

 

 

$

887

 

 

$

925

 

 

$

885

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(6

)%

 

(11

)%

 

 

$

.62

 

 

$

.70

 

 

$

.67

 

 

$

.69

 

 

$

.66

 

Diluted

(5

)%

 

(11

)%

 

 

$

.62

 

 

$

.70

 

 

$

.66

 

 

$

.69

 

 

$

.65

 

Dividends declared per common share

31

%

 

 

 

 

$

.17

 

 

$

.17

 

 

$

.17

 

 

$

.17

 

 

$

.13

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(4

)%

 

(1

)%

 

 

1,284

 

 

1,300

 

 

1,328

 

 

1,333

 

 

1,343

 

Diluted

(5

)%

 

(1

)%

 

 

1,293

 

 

1,308

 

 

1,337

 

 

1,344

 

 

1,354

 

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax profit margin

 

 

 

 

 

42.7

%

 

45.6

%

 

46.1

%

 

46.4

%

 

45.3

%

Return on average common stockholders’ equity (annualized) (1)

 

 

 

 

 

17

%

 

20

%

 

19

%

 

20

%

 

20

%

Financial Condition (at quarter end, in billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

5

%

 

44

%

 

 

$

29.3

 

 

$

20.3

 

 

$

24.2

 

 

$

32.6

 

 

$

27.9

 

Cash and investments segregated

51

%

 

27

%

 

 

20.5

 

 

16.2

 

 

14.1

 

 

13.9

 

 

13.6

 

Receivables from brokerage clients — net

 

 

3

%

 

 

21.8

 

 

21.1

 

 

21.4

 

 

20.5

 

 

21.7

 

Available for sale securities

(8

)%

 

9

%

 

 

61.4

 

 

56.5

 

 

54.6

 

 

60.0

 

 

66.6

 

Held to maturity securities

(6

)%

 

(4

)%

 

 

134.7

 

 

140.2

 

 

138.3

 

 

132.4

 

 

144.0

 

Bank loans — net

10

%

 

8

%

 

 

18.2

 

 

16.9

 

 

16.6

 

 

16.5

 

 

16.6

 

Total assets

(1

)%

 

5

%

 

 

294.0

 

 

279.0

 

 

276.3

 

 

282.8

 

 

296.5

 

Bank deposits

(5

)%

 

5

%

 

 

220.1

 

 

209.3

 

 

208.4

 

 

219.5

 

 

231.4

 

Payables to brokerage clients

20

%

 

10

%

 

 

39.2

 

 

35.6

 

 

31.0

 

 

29.7

 

 

32.7

 

Long-term debt

7

%

 

 

 

 

7.4

 

 

7.4

 

 

7.4

 

 

6.8

 

 

6.9

 

Stockholders’ equity

5

%

 

1

%

 

 

21.7

 

 

21.4

 

 

21.3

 

 

21.6

 

 

20.7

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-time equivalent employees (at quarter end, in thousands)

1

%

 

(1

)%

 

 

19.7

 

 

19.8

 

 

20.5

 

 

20.0

 

 

19.5

 

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

31

%

 

10

%

 

 

$

209

 

 

$

190

 

 

$

173

 

 

$

181

 

 

$

159

 

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

 

 

 

 

 

0.15

%

 

0.16

%

 

0.16

%

 

0.17

%

 

0.17

%

Clients’ Daily Average Trades (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue trades (2)

(68

)%

 

(62

)%

 

 

151

 

 

395

 

 

392

 

 

418

 

 

466

 

Asset-based trades (3)

(27

)%

 

12

%

 

 

138

 

 

123

 

 

138

 

 

149

 

 

188

 

Other trades (4)

133

%

 

148

%

 

 

496

 

 

200

 

 

186

 

 

210

 

 

213

 

Total

(9

)%

 

9

%

 

 

785

 

 

718

 

 

716

 

 

777

 

 

867

 

Average Revenue Per Revenue Trade (2)

28

%

 

32

%

 

 

$

9.13

 

 

$

6.94

 

 

$

6.94

 

 

$

7.19

 

 

$

7.13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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. Effective October 7, 2019, CS&Co eliminated online trading commissions for U.S. and Canadian-listed stocks and ETFs, as well as the base charge on options.

(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,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

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

$

20,563

 

 

$

86

 

 

1.64

%

 

 

$

22,590

 

 

$

131

 

 

2.27

%

 

 

$

23,512

 

 

$

518

 

 

2.17

%

 

 

$

17,783

 

 

$

348

 

 

1.93

%

Cash and investments segregated

18,434

 

 

81

 

 

1.71

%

 

 

9,854

 

 

57

 

 

2.28

%

 

 

15,694

 

 

345

 

 

2.17

%

 

 

11,461

 

 

206

 

 

1.78

%

Broker-related receivables

828

 

 

3

 

 

1.60

%

 

 

241

 

 

2

 

 

3.99

%

 

 

376

 

 

7

 

 

1.87

%

 

 

303

 

 

6

 

 

2.09

%

Receivables from brokerage clients

19,241

 

 

185

 

 

3.77

%

 

 

20,584

 

 

230

 

 

4.38

%

 

 

19,270

 

 

821

 

 

4.20

%

 

 

19,870

 

 

830

 

 

4.12

%

Available for sale securities (1)

56,528

 

 

357

 

 

2.51

%

 

 

59,720

 

 

382

 

 

2.52

%

 

 

58,181

 

 

1,560

 

 

2.67

%

 

 

54,542

 

 

1,241

 

 

2.26

%

Held to maturity securities

136,717

 

 

870

 

 

2.53

%

 

 

138,629

 

 

928

 

 

2.66

%

 

 

134,708

 

 

3,591

 

 

2.65

%

 

 

131,794

 

 

3,348

 

 

2.53

%

Bank loans

17,457

 

 

141

 

 

3.22

%

 

 

16,649

 

 

149

 

 

3.55

%

 

 

16,832

 

 

584

 

 

3.47

%

 

 

16,554

 

 

559

 

 

3.37

%

Total interest-earning assets

269,768

 

 

1,723

 

 

2.53

%

 

 

268,267

 

 

1,879

 

 

2.77

%

 

 

268,573

 

 

7,426

 

 

2.75

%

 

 

252,307

 

 

6,538

 

 

2.57

%

Other interest revenue

 

 

40

 

 

 

 

 

 

 

35

 

 

 

 

 

 

 

154

 

 

 

 

 

 

 

142

 

 

 

Total interest-earning assets

$

269,768

 

 

$

1,763

 

 

2.59

%

 

 

$

268,267

 

 

$

1,914

 

 

2.82

%

 

 

$

268,573

 

 

$

7,580

 

 

2.80

%

 

 

$

252,307

 

 

$

6,680

 

 

2.63

%

Funding sources

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank deposits

$

211,172

 

 

$

84

 

 

0.16

%

 

 

$

217,325

 

 

$

206

 

 

0.38

%

 

 

$

212,605

 

 

$

700

 

 

0.33

%

 

 

$

199,139

 

 

$

545

 

 

0.27

%

Payables to brokerage clients

27,051

 

 

11

 

 

0.16

%

 

 

19,953

 

 

19

 

 

0.38

%

 

 

24,353

 

 

79

 

 

0.33

%

 

 

21,178

 

 

56

 

 

0.27

%

Short-term borrowings (2)

11

 

 

 

 

1.72

%

 

 

5

 

 

 

 

1.69

%

 

 

17

 

 

 

 

2.36

%

 

 

3,359

 

 

54

 

 

1.59

%

Long-term debt

7,428

 

 

66

 

 

3.54

%

 

 

6,524

 

 

59

 

 

3.59

%

 

 

7,199

 

 

258

 

 

3.58

%

 

 

5,423

 

 

190

 

 

3.50

%

Total interest-bearing liabilities

245,662

 

 

161

 

 

0.26

%

 

 

243,807

 

 

284

 

 

0.46

%

 

 

244,174

 

 

1,037

 

 

0.42

%

 

 

229,099

 

 

845

 

 

0.37

%

Non-interest-bearing funding sources

24,106

 

 

 

 

 

 

 

24,460

 

 

 

 

 

 

 

24,399

 

 

 

 

 

 

 

23,208

 

 

 

 

 

Other interest expense

 

 

7

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

27

 

 

 

 

 

 

 

12

 

 

 

Total funding sources

$

269,768

 

 

$

168

 

 

0.25

%

 

 

$

268,267

 

 

$

288

 

 

0.43

%

 

 

$

268,573

 

 

$

1,064

 

 

0.39

%

 

 

$

252,307

 

 

$

857

 

 

0.34

%

Net interest revenue

 

 

$

1,595

 

 

2.34

%

 

 

 

 

$

1,626

 

 

2.39

%

 

 

 

 

$

6,516

 

 

2.41

%

 

 

 

 

$

5,823

 

 

2.29

%

(1)

Amounts have been calculated based on amortized cost.

(2)

Interest revenue or expense was less than $500,000 in the period or periods presented.

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions)

(Unaudited)

 

 

Three Months Ended
December 31,

 

 

Twelve Months Ended
December 31,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

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

$

196,074

 

 

$

147

 

 

0.30

%

 

 

$

137,541

 

 

$

117

 

 

0.34

%

 

 

$

173,558

 

 

$

525

 

 

0.30

%

 

 

$

141,018

 

 

$

568

 

 

0.40

%

Schwab equity and bond funds, ETFs, and collective trust funds (CTFs) (1)

288,750

 

 

79

 

 

0.11

%

 

 

225,869

 

 

73

 

 

0.13

%

 

 

267,213

 

 

298

 

 

0.11

%

 

 

222,830

 

 

302

 

 

0.14

%

Mutual Fund OneSource® and other non-transaction fee funds

193,665

 

 

154

 

 

0.32

%

 

 

191,620

 

 

156

 

 

0.32

%

 

 

191,552

 

 

606

 

 

0.32

%

 

 

210,429

 

 

680

 

 

0.32

%

Other third-party mutual funds and ETFs (2)

462,466

 

 

80

 

 

0.07

%

 

 

325,497

 

 

71

 

 

0.09

%

 

 

478,037

 

 

318

 

 

0.07

%

 

 

328,150

 

 

287

 

 

0.09

%

Total mutual funds, ETFs, and CTFs (3)

$

1,140,955

 

 

460

 

 

0.16

%

 

 

$

880,527

 

 

417

 

 

0.19

%

 

 

$

1,110,360

 

 

1,747

 

 

0.16

%

 

 

$

902,427

 

 

1,837

 

 

0.20

%

Advice solutions (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based

$

262,516

 

 

320

 

 

0.48

%

 

 

$

226,184

 

 

280

 

 

0.49

%

 

 

$

246,888

 

 

1,198

 

 

0.49

%

 

 

$

227,790

 

 

1,139

 

 

0.50

%

Non-fee-based

73,356

 

 

 

 

 

 

 

64,085

 

 

 

 

 

 

 

70,191

 

 

 

 

 

 

 

62,813

 

 

 

 

 

Total advice solutions

$

335,872

 

 

320

 

 

0.38

%

 

 

$

290,269

 

 

280

 

 

0.38

%

 

 

$

317,079

 

 

1,198

 

 

0.38

%

 

 

$

290,603

 

 

1,139

 

 

0.39

%

Other balance-based fees (1,4)

443,814

 

 

54

 

 

0.05

%

 

 

365,691

 

 

49

 

 

0.05

%

 

 

432,613

 

 

216

 

 

0.05

%

 

 

383,050

 

 

206

 

 

0.05

%

Other (5)

 

 

11

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

50

 

 

 

 

 

 

 

47

 

 

 

Total asset management and administration fees

 

 

$

845

 

 

 

 

 

 

 

$

755

 

 

 

 

 

 

 

$

3,211

 

 

 

 

 

 

 

$

3,229

 

 

 

(1)

Beginning in the first quarter of 2019, a change was made to move CTFs from other balance-based fees. Prior periods have been recast to reflect this change.

(2)

Beginning in the fourth quarter of 2019, Schwab ETF OneSourceTM was discontinued as a result of the elimination of online trading commissions for U.S. and Canadian-listed ETFs.

(3)

Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private ClientTM, Schwab Managed PortfoliosTM, 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 Portfolios PremiumTM; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. 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.

(4)

Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.

(5)

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)

 

 

Q4-19 % Change

 

 

2019

 

2018

 

vs.

 

vs.

 

 

Fourth

 

Third

 

Second

 

First

 

Fourth

(In billions, at quarter end, except as noted)

Q4-18

 

Q3-19

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Assets in client accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schwab One®, certain cash equivalents and bank deposits

(2

)%

 

6

%

 

 

$

256.7

 

 

$

242.9

 

 

$

237.3

 

 

$

247.0

 

 

$

261.2

 

Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

31

%

 

7

%

 

 

200.8

 

 

187.0

 

 

168.1

 

 

159.7

 

 

153.5

 

Equity and bond funds and CTFs (2,3)

30

%

 

9

%

 

 

122.5

 

 

112.4

 

 

110.9

 

 

106.2

 

 

94.3

 

Total proprietary mutual funds and CTFs

30

%

 

8

%

 

 

323.3

 

 

299.4

 

 

279.0

 

 

265.9

 

 

247.8

 

Mutual Fund Marketplace® (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Fund OneSource® and other non-transaction fee funds

12

%

 

4

%

 

 

202.1

 

 

194.7

 

 

197.8

 

 

195.1

 

 

180.5

 

Mutual fund clearing services

32

%

 

10

%

 

 

217.4

 

 

197.2

 

 

192.9

 

 

182.7

 

 

164.4

 

Other third-party mutual funds

27

%

 

6

%

 

 

824.5

 

 

776.8

 

 

767.3

 

 

737.2

 

 

650.4

 

Total Mutual Fund Marketplace

25

%

 

6

%

 

 

1,244.0

 

 

1,168.7

 

 

1,158.0

 

 

1,115.0

 

 

995.3

 

Total mutual fund assets

26

%

 

7

%

 

 

1,567.3

 

 

1,468.1

 

 

1,437.0

 

 

1,380.9

 

 

1,243.1

 

Exchange-traded funds (ETFs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary ETFs (3)

42

%

 

9

%

 

 

163.8

 

 

150.8

 

 

143.6

 

 

134.7

 

 

115.2

 

Schwab ETF OneSource™ (4,5)

N/M

 

N/M

 

 

 

 

94.1

 

 

88.1

 

 

82.5

 

 

30.6

 

Other third-party ETFs (5)

47

%

 

42

%

 

 

457.0

 

 

321.6

 

 

315.7

 

 

303.7

 

 

309.9

 

Total ETF assets

36

%

 

10

%

 

 

620.8

 

 

566.5

 

 

547.4

 

 

520.9

 

 

455.7

 

Equity and other securities (2)

28

%

 

9

%

 

 

1,286.4

 

 

1,178.0

 

 

1,168.3

 

 

1,131.3

 

 

1,005.4

 

Fixed income securities

7

%

 

(2

)%

 

 

327.1

 

 

332.3

 

 

332.1

 

 

324.1

 

 

306.1

 

Margin loans outstanding

1

%

 

1

%

 

 

(19.5

)

 

(19.4

)

 

(19.7

)

 

(18.8

)

 

(19.3

)

Total client assets

24

%

 

7

%

 

 

$

4,038.8

 

 

$

3,768.4

 

 

$

3,702.4

 

 

$

3,585.4

 

 

$

3,252.2

 

Client assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

25

%

 

8

%

 

 

$

2,131.0

 

 

$

1,978.7

 

 

$

1,946.5

 

 

$

1,886.7

 

 

$

1,701.7

 

Advisor Services

23

%

 

7

%

 

 

1,907.8

 

 

1,789.7

 

 

1,755.9

 

 

1,698.7

 

 

1,550.5

 

Total client assets

24

%

 

7

%

 

 

$

4,038.8

 

 

$

3,768.4

 

 

$

3,702.4

 

 

$

3,585.4

 

 

$

3,252.2

 

Net growth in assets in client accounts (for the quarter ended)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

50

%

 

70

%

 

 

$

43.1

 

 

$

25.4

 

 

$

17.9

 

 

$

29.2

 

 

$

28.7

 

Advisor Services

29

%

 

10

%

 

 

34.2

 

 

31.2

 

 

19.3

 

 

22.5

 

 

26.6

 

Total net new assets

40

%

 

37

%

 

 

$

77.3

 

 

$

56.6

 

 

$

37.2

 

 

$

51.7

 

 

$

55.3

 

Net market gains (losses)

N/M

 

N/M

 

 

193.1

 

 

9.4

 

 

79.8

 

 

281.5

 

 

(366.8

)

Net growth (decline)

N/M

 

N/M

 

 

$

270.4

 

 

$

66.0

 

 

$

117.0

 

 

$

333.2

 

 

$

(311.5

)

New brokerage accounts (in thousands, for the quarter ended)

14

%

 

19

%

 

 

433

 

 

363

 

 

386

 

 

386

 

 

380

 

Client accounts (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active brokerage accounts

6

%

 

2

%

 

 

12,333

 

 

12,118

 

 

11,967

 

 

11,787

 

 

11,593

 

Banking accounts

7

%

 

2

%

 

 

1,390

 

 

1,361

 

 

1,336

 

 

1,300

 

 

1,302

 

Corporate retirement plan participants

6

%

 

2

%

 

 

1,748

 

 

1,718

 

 

1,698

 

 

1,684

 

 

1,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

(2)

Beginning in the first quarter of 2019, a change was made to move CTFs from equity and other securities. Prior periods have been recast to reflect this change.

(3)

Includes balances held on and off the Schwab platform. As of December 31, 2019, off-platform equity and bond funds, CTFs, and ETFs were $14.0 billion, $5.0 billion, and $45.1 billion, respectively.

(4)

Excludes all proprietary mutual funds and ETFs.

(5)

Beginning in the fourth quarter of 2019, Schwab ETF OneSource™ was discontinued. These assets are now included with other third-party ETFs.

N/M Not meaningful.

The Charles Schwab Corporation Monthly Activity Report For December 2019

 

 

2018

2019

 

 

 

 

 

 

 

 

 

 

 

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

23,327

 

25,000

 

25,916

 

25,929

 

26,593

 

24,815

 

26,600

 

26,864

 

26,403

 

26,917

 

27,046

 

28,051

 

28,538

 

2

%

22

%

Nasdaq Composite

6,635

 

7,282

 

7,533

 

7,729

 

8,095

 

7,453

 

8,006

 

8,175

 

7,963

 

7,999

 

8,292

 

8,665

 

8,973

 

4

%

35

%

Standard & Poor’s 500

2,507

 

2,704

 

2,784

 

2,834

 

2,946

 

2,752

 

2,942

 

2,980

 

2,926

 

2,977

 

3,038

 

3,141

 

3,231

 

3

%

29

%

Client Assets (in billions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Client Assets

3,431.9

 

3,252.2

 

3,447.7

 

3,533.0

 

3,585.4

 

3,668.5

 

3,530.6

 

3,702.4

 

3,746.7

 

3,716.5

 

3,768.4

 

3,854.6

 

3,942.2

 

 

 

Net New Assets (1)

24.8

 

15.1

 

18.3

 

18.3

 

(0.3

)

17.3

 

20.2

 

19.3

 

19.9

 

17.4

 

35.2

 

12.0

 

30.1

 

151

%

21

%

Net Market (Losses) Gains

(204.5

)

180.4

 

67.0

 

34.1

 

83.4

 

(155.2

)

151.6

 

25.0

 

(50.1

)

34.5

 

51.0

 

75.6

 

66.5

 

 

 

Total Client Assets (at month end)

3,252.2

 

3,447.7

 

3,533.0

 

3,585.4

 

3,668.5

 

3,530.6

 

3,702.4

 

3,746.7

 

3,716.5

 

3,768.4

 

3,854.6

 

3,942.2

 

4,038.8

 

2

%

24

%

Core Net New Assets (2)

24.8

 

15.1

 

18.3

 

18.3

 

(0.3

)

17.3

 

20.2

 

19.3

 

19.9

 

17.4

 

24.1

 

12.0

 

30.1

 

151

%

21

%

Receiving Ongoing Advisory Services (at month end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

272.4

 

286.9

 

294.2

 

298.4

 

305.7

 

298.5

 

311.6

 

314.8

 

314.2

 

318.5

 

324.6

 

330.8

 

337.1

 

2

%

24

%

Advisor Services (3)

1,436.1

 

1,514.2

 

1,551.6

 

1,572.8

 

1,608.0

 

1,554.6

 

1,626.6

 

1,646.1

 

1,635.7

 

1,659.4

 

1,691.6

 

1,728.2

 

1,769.7

 

2

%

23

%

Client Accounts (at month end, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Brokerage Accounts

11,593

 

11,653

 

11,712

 

11,787

 

11,870

 

11,929

 

11,967

 

12,026

 

12,085

 

12,118

 

12,189

 

12,247

 

12,333

 

1

%

6

%

Banking Accounts (4)

1,302

 

1,312

 

1,313

 

1,300

 

1,310

 

1,323

 

1,336

 

1,352

 

1,361

 

1,361

 

1,374

 

1,384

 

1,390

 

 

7

%

Corporate Retirement Plan Participants

1,655

 

1,679

 

1,685

 

1,684

 

1,690

 

1,699

 

1,698

 

1,701

 

1,711

 

1,718

 

1,735

 

1,743

 

1,748

 

 

6

%

Client Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Brokerage Accounts (in thousands)

132

 

131

 

115

 

140

 

147

 

123

 

116

 

129

 

126

 

108

 

142

 

127

 

164

 

29

%

24

%

Inbound Calls (in thousands)

1,839

 

1,924

 

1,742

 

1,882

 

1,966

 

1,671

 

1,595

 

1,773

 

1,759

 

1,570

 

1,771

 

1,605

 

1,884

 

17

%

2

%

Web Logins (in thousands)

53,920

 

64,563

 

60,121

 

63,692

 

65,669

 

61,522

 

60,824

 

65,809

 

63,928

 

63,530

 

72,547

 

66,394

 

69,733

 

5

%

29

%

Client Cash as a Percentage of Client Assets (5)

12.8

%

11.7

%

11.5

%

11.3

%

10.9

%

11.3

%

10.9

%

11.0

%

11.3

%

11.4

%

11.3

%

11.3

%

11.3

%

 

(150) bp

Mutual Fund and Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Buys (Sells) (6, 7) (in millions of dollars)

Large Capitalization Stock

717

 

1,343

 

1,109

 

1,045

 

980

 

1,114

 

206

 

717

 

328

 

23

 

900

 

1,406

 

991

 

 

 

Small / Mid Capitalization Stock

(1,414

)

1,329

 

638

 

302

 

136

 

(190

)

18

 

10

 

(374

)

(212

)

(458

)

73

 

201

 

 

 

International

(2,163

)

2,212

 

1,086

 

1,274

 

863

 

(100

)

225

 

744

 

(1,390

)

(355

)

340

 

735

 

993

 

 

 

Specialized

(2,105

)

124

 

609

 

750

 

(109

)

(440

)

341

 

418

 

353

 

583

 

618

 

484

 

455

 

 

 

Hybrid

(2,985

)

(321

)

(309

)

(357

)

(228

)

(316

)

(181

)

(366

)

(569

)

(372

)

(202

)

(290

)

(96

)

 

 

Taxable Bond

(4,342

)

3,956

 

2,871

 

1,923

 

3,029

 

1,821

 

2,378

 

3,806

 

2,725

 

2,935

 

2,813

 

2,274

 

4,710

 

 

 

Tax-Free Bond

(409

)

1,184

 

1,111

 

1,133

 

760

 

1,057

 

682

 

960

 

760

 

593

 

809

 

860

 

1,255

 

 

 

Net Buy (Sell) Activity (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds (6)

(21,372

)

6,740

 

2,312

 

1,850

 

1,860

 

86

 

7

 

2,151

 

(1,281

)

(573

)

(473

)

(761

)

1,097

 

 

 

Exchange-Traded Funds (7)

8,671

 

3,087

 

4,803

 

4,220

 

3,571

 

2,860

 

3,662

 

4,138

 

3,114

 

3,768

 

5,293

 

6,303

 

7,412

 

 

 

Money Market Funds

13,548

 

4,944

 

(1,577

)

1,785

 

(2,097

)

5,067

 

4,570

 

6,143

 

6,068

 

5,833

 

7,059

 

4,768

 

1,515

 

 

 

Average Interest-Earning Assets (8)

(in millions of dollars)

274,913

 

277,068

 

270,718

 

272,727

 

270,308

 

263,718

 

262,759

 

263,993

 

265,005

 

266,430

 

266,089

 

268,254

 

274,911

 

2

%

 

(1)

October 2019 includes an inflow of $11.1 billion from a mutual fund clearing services client.

(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 March 2019, banking accounts were reduced by approximately 23,000 as a result of inactive account closures.

(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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