Charles Schwab Corp. Files 10-Q for Q1 2024

AI Summary

SCHWAB CHARLES CORP (SCHW-PJ) filed a Quarterly Report (10-Q) with the SEC on May 9, 2024. The filing covers the period ending March 31, 2024. It includes financial data for Q1 2024 and comparative periods. Key segments include Asset Management and Administration Services, Trading Revenue, and Bank Deposit Account Fees. The company's fiscal year ends on December 31st. The filing is from Charles Schwab Corp., SIC code 6211.

Why It Matters

For investors and stakeholders tracking SCHWAB CHARLES CORP, this filing contains several important signals. This 10-Q provides investors with a detailed look at Schwab's financial health and operational performance in the first quarter of 2024, allowing for assessment of trends and strategic execution. Understanding the revenue breakdown across segments like Asset Management, Trading, and Banking is crucial for evaluating the company's diversified income streams and their respective contributions.

Risk Assessment

Risk Level: medium — SCHWAB CHARLES CORP shows moderate risk based on this filing. The filing is a standard quarterly report (10-Q) which, while providing essential financial data, does not contain significant new strategic information or forward-looking statements that would drastically alter risk perception.

Analyst Insight

Review the detailed segment revenues and compare them to prior periods to identify growth drivers or areas of concern within Charles Schwab's business operations.

Revenue Breakdown

Key Numbers

• 2024-03-31 — Period End Date (CONFORMED PERIOD OF REPORT)
• 2024-05-09 — Filing Date (FILED AS OF DATE)
• 6211 — SIC Code (STANDARD INDUSTRIAL CLASSIFICATION)
• 1231 — Fiscal Year End (FISCAL YEAR END)

Key Players & Entities

• SCHWAB CHARLES CORP (company) — FILER
• 2024-05-09T00:00:00.000Z (date) — FILED AS OF DATE
• 2024-03-31 (date) — CONFORMED PERIOD OF REPORT
• 6211 (industry_code) — STANDARD INDUSTRIAL CLASSIFICATION
• DE (state) — STATE OF INCORPORATION
• TX (state) — BUSINESS ADDRESS STATE
• WESTLAKE (city) — BUSINESS ADDRESS CITY
• 3000 SCHWAB WAY (street) — BUSINESS ADDRESS STREET 1

FAQ

Key Dates

• 2024-03-31: Quarter End — End of the reporting period for the 10-Q filing.
• 2024-05-09: Filing Date — Date the 10-Q was officially submitted to the SEC.

Key Financial Figures

• $65 — g with bank deposits) currently exceeds $65 trillion, which means the Company's $9.
• $9.12 — $65 trillion, which means the Company's $9.12 trillion in client assets leaves substa
• $7.4 billion — f 2024 and 2023 include net outflows of $7.4 billion and inflows of $19.0 billion, respectiv
• $19.0 b — outflows of $7.4 billion and inflows of $19.0 billion, respectively, from off-platform
• $95.6 billion — ntrusted us with core net new assets of $95.6 billion in the first quarter of 2024. As we hav
• $1.4 billion — t reduction efforts. Net income totaled $1.4 billion in the first quarter of 2024, down 15%
• $4.7 billion — revenues decreased 7% year-over-year to $4.7 billion during the first quarter of 2024. Net i
• $2.2 billion — arter of 2024. Net interest revenue was $2.2 billion in the first quarter of 2024, down 19%
• $1.3 billion — agement and administration fees totaled $1.3 billion in the first quarter of 2024, rising 21
• $817 million — g revenue declined 8% year-over-year to $817 million in the first quarter of 2024, primarily
• $183 million — e. Bank deposit account fee revenue was $183 million in the first quarter of 2024, up 21% ye
• $97 million — up 21% year-over-year due primarily to $97 million of one-time breakage fees incurred when
• $90.3 billion — t quarter of 2023. BDA balances totaled $90.3 billion at March 31, 2024, down 7% from year-en
• $2.9 billion — Total expenses excluding interest were $2.9 billion in the first quarter of 2024, down 2% f
• $25 million — orporation (FDIC) special assessment of $25 million (see Current Regulatory and Other Devel

Filing Documents

• schw-20240331.htm (10-Q) — 3645KB
• schw-033124xex31110q.htm (EX-31.1) — 10KB
• schw-033124xex31210q.htm (EX-31.2) — 10KB
• schw-033124xex32110q.htm (EX-32.1) — 8KB
• schw-033124xex32210q.htm (EX-32.2) — 7KB
• 0000316709-24-000044.txt ( ) — 19425KB
• schw-20240331.xsd (EX-101.SCH) — 108KB
• schw-20240331_cal.xml (EX-101.CAL) — 210KB
• schw-20240331_def.xml (EX-101.DEF) — 660KB
• schw-20240331_lab.xml (EX-101.LAB) — 1166KB
• schw-20240331_pre.xml (EX-101.PRE) — 861KB
• schw-20240331_htm.xml (XML) — 4480KB

- Financial Information

Part I - Financial Information

Condensed Consolidated Financial Statements (Unaudited)

Item 1. Condensed Consolidated Financial Statements (Unaudited): 26 27 Balance Sheets 28 29 30-31 Notes 32-62

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1-25

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 25

Controls and Procedures

Item 4. Controls and Procedures 63

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 63

Risk Factors

Item 1A. Risk Factors 63

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 63

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 64

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 64

Other Information

Item 5. Other Information 64

Exhibits

Item 6. Exhibits 65 Signature 66

– FINANCIAL INFORMATION

Part I – FINANCIAL INFORMATION THE CHARLES SCHWAB CORPORATION

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The Charles Schwab Corporation (CSC) is a savings and loan holding company. CSC engages, through its subsidiaries (collectively referred to as Schwab or the Company), in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. Principal business subsidiaries of CSC include the following: Charles Schwab & Co., Inc. (CS&Co), incorporated in 1971, a securities broker-dealer; TD Ameritrade, Inc., an introducing securities broker-dealer; TD Ameritrade Clearing, Inc. (TDAC), a securities broker-dealer that provides trade execution and clearing services to TD Ameritrade, Inc.; Charles Schwab Bank, SSB (CSB), our principal banking entity; and Charles Schwab Investment Management, Inc. (CSIM), the investment advisor for Schwab's proprietary mutual funds (Schwab Funds ) and for Schwab's exchange-traded funds (Schwab ETFs). Unless otherwise indicated, the terms "Schwab," "the Company," "we," "us," or "our" mean CSC together with its consolidated subsidiaries. Schwab provides financial services to individuals and institutional clients through two segments – Investor Services and Advisor Services. The Investor Services segment provides retail brokerage, investment advisory, and banking and trust services to individual investors, and retirement plan services, as well as other corporate brokerage services, to businesses and their employees. The Advisor Services segment provides custodial, trading, banking and trust, and support services, as well as retirement business services, to independent registered investment advisors (RIAs), independent retirement advisors, and recordkeepers. Schwab was founded on the belief that all Americans deserve access to a better investing experience. Although much has changed in the intervening years, our purpose remains clear – to champion every client's goals with passion a

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) regulatory capital disclosures based on Basel III, our average liquidity coverage ratio (LCR), and our average net stable funding ratio (NSFR). The SEC maintains a website at https://www.sec.gov that contains reports, proxy statements, and other information that we file electronically with the Commission.

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," "estimate," "appear," "could," "would," "expand," "aim," "maintain," "continue," "seek," and other similar expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements, which reflect management's beliefs, objectives, and expectations as of the date hereof, are estimates based on the best judgment of Schwab's senior management. These statements relate to, among other things: Maximizing our market valuation and stockholder returns over time; and our belief that developing trusted relationships will translate into more client assets which drives revenue and, along with expense discipline and thoughtful capital management, generates earnings growth and builds stockholder value (see Introduction in Part I – Item 2); Integration of Ameritrade, including the timing of client transitions, transition-related attrition, the amount and timing of expense and revenue synergies, and the benefits of the combined platform (see Overview in Part I – Item 2, and Exit and Other Related Liabilities in Part I – Item 1 – Financial Information – Notes to Condensed Consolidated Financial Statements (Item 1) – Note 10); Investments to support growth in our client base (see Overview in Part I – Item 2); Our actions to streamline our operations and amount of associated exit and related costs that we will incur (see Overview and Results of Operations in Part I – Item 2, and Exit and Other Related Liabilities in Item 1 – Note 10); The expected impact of proposed and fin

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) The level and mix of client trading activity, including daily average trades, margin balances, and balance sheet cash; Regulatory guidance and adverse impacts from new or changed legislation, rulemaking or regulatory expectations; Capital and liquidity needs and management; Our ability to manage expenses; Our ability to attract and retain talent; Our ability to develop and launch new and enhanced products, services, and capabilities, as well as enhance our infrastructure, in a timely and successful manner; Our ability to monetize client assets; Our ability to support client activity levels; Our ability to successfully implement integration plans relating to Ameritrade, including client account transitions; The risk that client transitions may not be completed when expected or may result in a negative client experience; expected expense and revenue synergies and other benefits from the Ameritrade acquisition may not be fully realized or may take longer to realize, and integration expense may be higher than expected; Increased compensation and other costs due to inflationary pressures; Re al estate and workforce decisions; The timing and scope of technology projects; Capital and liquidity needs and management; Balance sheet positioning relative to changes in interest rates; Interest earning asset mix and growth; Our ability to access and use supplemental funding sources; Prepayment levels for mortgage-backed securities; Migrations of bank deposit account balances (BDA balances); Adverse developments in litigation or regulatory matters and any related charges; and Potential breaches of contractual terms for which we have indemnification and guarantee obligations. Certain of these factors, as well as general risk factors affecting the Company, are discussed in greater detail in Part I – Item 1A – Risk Fa

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) OVERVIEW Management focuses on several client activity and financial metrics in evaluating Schwab's financial position and operating performance. Results for the first quarter of 2024 and 2023 are as follows: Three Months Ended March 31, Percent Change 2024 2023 Client Metrics Net new client assets (in billions) (1) $ 88.2 $ 150.7 (41) % Core net new client assets (in billions) $ 95.6 $ 131.7 (27) % Client assets (in billions, at quarter end) $ 9,118.4 $ 7,580.0 20 % Average client assets (in billions) $ 8,761.1 $ 7,385.4 19 % New brokerage accounts (in thousands) 1,094 1,042 5 % Active brokerage accounts (in thousands, at quarter end) 35,301 34,120 3 % Assets receiving ongoing advisory services (in billions, at quarter end) $ 4,628.0 $ 3,895.5 19 % Client cash as a percentage of client assets (at quarter end) (2) 10.0 % 11.2 % Company Financial Information and Metrics Total net revenues $ 4,740 $ 5,116 (7) % Total expenses excluding interest 2,942 3,006 (2) % Income before taxes on income 1,798 2,110 (15) % Taxes on income 436 507 (14) % Net income 1,362 1,603 (15) % Preferred stock dividends and other 111 70 59 % Net income available to common stockholders $ 1,251 $ 1,533 (18) % Earnings per common share — diluted $ .68 $ .83 (18) % Net revenue change from prior year (7) % 10 % Pre-tax profit margin 37.9 % 41.2 % Return on average common stockholders' equity (annualized) 15 % 23 % Expenses excluding interest as a percentage of average client assets (annualized) 0.14 % 0.17 % Consolidated Tier 1 Leverage Ratio (at quarter end) 8.8 % 7.1 % Non-GAAP Financial Measures (3) Adjusted total expenses (4) $ 2,802 $ 2,773 Adjusted diluted EPS $ .74 $ .93 Return on tangible common equity 39 % 83 % (1) The first quarter of 2024 and 2023 include net outflows of $7.4 billion and inflows of $19.0

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) Schwab's financial performance in the first quarter of 2024 reflected the benefits of a supportive macroeconomic backdrop, increased client engagement, and solid organic growth. The Company's financial results were down relative to the first quarter of 2023, though overall performance improved sequentially from the fourth quarter of 2023 driven by lower interest expense due to reduced supplemental funding, rising equity markets and client engagement, and our late-2023 cost reduction efforts. Net income totaled $1.4 billion in the first quarter of 2024, down 15% from the first quarter of 2023 and up 30% from the fourth quarter of 2023. Diluted earnings per share (EPS) was $.68 in the first quarter of 2024, down 18% from the prior-year first quarter and up 33% from the fourth quarter of 2023. Adjusted diluted EPS (1) was $.74 in the first quarter of 2024, down 20% from the first quarter of 2023 and up 9% from the fourth quarter of 2023. Total net revenues decreased 7% year-over-year to $4.7 billion during the first quarter of 2024. Net interest revenue was $2.2 billion in the first quarter of 2024, down 19% from the prior year's first quarter due primarily to greater use of supplemental funding and lower average interest-earning assets, partially offset by higher rates on interest-earning assets. Asset management and administration fees totaled $1.3 billion in the first quarter of 2024, rising 21% from the first quarter of 2023 primarily as a result of growth in money market funds, equity market gains, and growth in advice solutions. Trading revenue declined 8% year-over-year to $817 million in the first quarter of 2024, primarily due to a decrease in order flow revenue, reflecting narrower spreads on options and lower equity volume. Bank deposit account fee revenue was $183 million in the first quarter of 2024, up 21% ye

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations (Tabular Amounts in Millions, Except Ratios, or as Noted) accounts and RIAs, which have been below our initial estimates when we announced the acquisition. The Company expects to complete the remaining client transitions from Ameritrade to Schwab in a final transition group in May 2024. We continue to expect total acquisition and integration-related costs and capital expenditures will be between $2.4 billion and $2.5 billion. The Company's estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs remain subject to change based on certain factors, including the duration and complexity of the remaining integration process and the continued uncertainty of the economic environment. More specifically, factors that could cause variability in our expected acquisition and integration-related costs as we prepare for the last transition group and remaining integration work include the level of employee attrition, the complexity to wind-down the operations of the Ameritrade broker-dealers and related technology, and real estate-related exit cost variability. Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $38 million and $98 million for the first quarters of 2024 and 2023, respectively. Over the course of the integration, we expect to realize annualized cost synergies of between $1.8 billion and $2.0 billion, and, through March 31, 2024, we have achieved over 80% of this amount on an annualized run-rate basis. The Company expects to realize the remaining estimated cost synergies by the end of 2024, with anticipated full year synergy realization beginning in 2025. Estimated timing and amounts of synergy realization are subject to change as we progress in the integration. Refer to Part II – Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7) – O

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