Schwab Corp Files Q3 2024 10-Q

TL;DR

**SCHWAB Q3 10-Q FILED: Details on revenue, expenses, and segment performance for the period ending Sept 30, 2024.**

AI Summary

Charles Schwab Corporation filed its 10-Q for the period ending September 30, 2024. The company reported financial results for the third quarter of 2024, detailing revenues and expenses across its various business segments. Key financial data and operational highlights for the period are presented in this filing.

Why It Matters

This filing provides investors with a detailed look at Charles Schwab's financial performance and operational status during the third quarter of 2024, crucial for understanding the company's health and future prospects.

Risk Assessment

Risk Level: medium — As a financial institution, Schwab is subject to market volatility, regulatory changes, and economic downturns, which can impact its performance.

Key Numbers

• 2024 Q3 — Reporting Period (The filing covers the third quarter of 2024.)
• 2024-09-30 — Period End Date (The financial data reported is as of this date.)

Key Players & Entities

• SCHWAB CHARLES CORP (company) — Filer of the 10-Q
• 20240930 (date) — End of the reporting period
• 2024-09-30 (date) — End of the reporting period
• 3000 SCHWAB WAY (address) — Company's business and mailing address
• WESTLAKE (location) — City of the company's address
• TX (location) — State of the company's address
• 76262 (postal_code) — Zip code of the company's address

FAQ

Key Financial Figures

• $70 — g with bank deposits) currently exceeds $70 trillion, which means the Company's $9.
• $9.92 — $70 trillion, which means the Company's $9.92 trillion in client assets leaves substa
• $4.4 billion — months of 2024 include net outflows of $4.4 billion and $9.1 billion, respectively, from of
• $9.1 b — nclude net outflows of $4.4 billion and $9.1 billion, respectively, from off-platform
• $10.3 billion — ine months of 2024 include an inflow of $10.3 billion from a mutual fund clearing services cl
• $0.1 billion — nths of 2024 also include an outflow of $0.1 billion from an international relationship. The
• $3.3 billion — nine months of 2023 includes inflows of $3.3 billion and $30.1 billion, respectively, from o
• $30.1 b — 23 includes inflows of $3.3 billion and $30.1 billion, respectively, from off-platform
• $12.0 billion — ine months of 2023 include an inflow of $12.0 billion from a mutual fund clearing services cl
• $0.8 billion — nths of 2023 also include an outflow of $0.8 billion from an international relationship. (2
• $95.3 billion — ion in May. Core net new assets totaled $95.3 billion in the third quarter, up 109% from the
• $252.1 b — ted) 2024 core net new assets totaled $252.1 billion, up 10% from the first nine month
• $1.4 billion — ealignment activity. Net income totaled $1.4 billion and $4.1 billion in the third quarter a
• $4.1 billion — ty. Net income totaled $1.4 billion and $4.1 billion in the third quarter and first nine mon
• $2.05 — ngs per common share (EPS) was $.71 and $2.05 in the third quarter and first nine mon

Filing Documents

• schw-20240930.htm (10-Q) — 4527KB
• schw-093024xex31110q.htm (EX-31.1) — 10KB
• schw-093024xex31210q.htm (EX-31.2) — 10KB
• schw-093024xex32110q.htm (EX-32.1) — 8KB
• schw-093024xex32210q.htm (EX-32.2) — 7KB
• 0000316709-24-000069.txt ( ) — 21630KB
• schw-20240930.xsd (EX-101.SCH) — 108KB
• schw-20240930_cal.xml (EX-101.CAL) — 211KB
• schw-20240930_def.xml (EX-101.DEF) — 662KB
• schw-20240930_lab.xml (EX-101.LAB) — 1171KB
• schw-20240930_pre.xml (EX-101.PRE) — 864KB
• schw-20240930_htm.xml (XML) — 5201KB

- Financial Information

Part I - Financial Information

Condensed Consolidated Financial Statements (Unaudited)

Item 1. Condensed Consolidated Financial Statements (Unaudited): 29 30 Balance Sheets 31 32 33-34 Notes 35-68

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 1-28

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 28

Controls and Procedures

Item 4. Controls and Procedures 68

- Other Information

Part II - Other Information

Legal Proceedings

Item 1. Legal Proceedings 68

Risk Factors

Item 1A. Risk Factors 68

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 69

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 69

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 69

Other Information

Item 5. Other Information 69

Exhibits

Item 6. Exhibits 70 Signature 71

– 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; 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). In May 2024, the Company completed the final client account conversions to CS&Co from the Ameritrade broker-dealers, TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. (TDAC). Accordingly, these entities are no longer principal business subsidiaries. See Overview – Integration of Ameritrade for additional information regarding the integration. 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 inv

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) or 15(d) of the Securities Exchange Act of 1934. In addition, we post to the website the Dodd-Frank stress test results, our 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," "prioritize," "will," "may," "estimate," "appear," "could," "would," "maintain," "continue," "seek," and other similar expressions. In addition, any statements that refer to expectations, strategy, objectives, 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, expected levels of attrition, and expense and revenue synergies (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); Exit and related costs associated with our actions to streamline operations (see Overview and Results of Operations in Part I – Item 2, and Exit and Other Related Liabilities in Item 1 – Note 10); Capital expenditures and expense management (see Results of Operations in Part I – Item 2); Net interest revenue, the adjustment of rates paid on client-related liabilities, and client cash realignment activity (see Results of Operations in Part

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) Competitive pressure on pricing, including deposit rates; 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; The risk that client transitions 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; Re al estate and workforce decisions; The timing and scope of technology projects; Balance sheet positioning relative to changes in interest rates; Interest-earning asset mix and growth; Our ability to access supplemental funding sources; Prepayment levels for mortgage-backed securities; Migrations of bank deposit account balances (BDA balances); Regulatory and legislative developments; 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 Factors in the 2023 Form 10-K. - 3 - THE CHARLES SCHWAB

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 third quarter and first nine months of 2024 and 2023 are as follows: Three Months Ended September 30, Percent Change Nine Months Ended September 30, Percent Change 2024 2023 2024 2023 Client Metrics Net new client assets (in billions) (1) $ 90.8 $ 48.2 88 % $ 253.2 $ 270.9 (7) % Core net new client assets (in billions) $ 95.3 $ 45.7 109 % $ 252.1 $ 229.6 10 % Client assets (in billions, at quarter end) $ 9,920.5 $ 7,824.5 27 % Average client assets (in billions) $ 9,594.9 $ 8,032.4 19 % $ 9,162.4 $ 7,705.4 19 % New brokerage accounts (in thousands) 972 894 9 % 3,051 2,896 5 % Active brokerage accounts (in thousands, at quarter end) 35,982 34,540 4 % Assets receiving ongoing advisory services (in billions, at quarter end) $ 5,018.9 $ 3,981.0 26 % Client cash as a percentage of client assets (at quarter end) (2) 9.5 % 10.8 % Company Financial Information and Metrics Total net revenues $ 4,847 $ 4,606 5 % $ 14,277 $ 14,378 (1) % Total expenses excluding interest 3,005 3,223 (7) % 8,890 9,194 (3) % Income before taxes on income 1,842 1,383 33 % 5,387 5,184 4 % Taxes on income 434 258 68 % 1,285 1,162 11 % Net income 1,408 1,125 25 % 4,102 4,022 2 % Preferred stock dividends and other 109 108 1 % 341 299 14 % Net income available to common stockholders $ 1,299 $ 1,017 28 % $ 3,761 $ 3,723 1 % Earnings per common share — diluted $ .71 $ .56 27 % $ 2.05 $ 2.03 1 % Net revenue change from prior year 5 % (16) % (1) % (6) % Pre-tax profit margin 38.0 % 30.0 % 37.7 % 36.1 % Return on average common stockholders' equity (annualized) 14 % 14 % 14 % 18 % Expenses excluding interest as a percentage of average client assets (annualized) 0.12 % 0.16

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) 2024 core net new assets totaled $252.1 billion, up 10% from the first nine months of 2023. We continued to see client engagement in the markets throughout the first nine months of the year; clients' daily average trades (DATs) were 5.7 million for both the third quarter and year-to-date periods, which were higher by 9% and 5% from the respective prior-year periods. Clients opened 972 thousand new brokerage accounts in the third quarter to bring the year-to-date total to 3.1 million. Active brokerage accounts were up 4% year-over-year, totaling 36.0 million at September 30, 2024. The Company's financial results in the third quarter and first nine months of 2024 reflected the impact of positive equity markets, solid asset gathering, sustained client engagement, and continued deceleration of client cash realignment activity. Net income totaled $1.4 billion and $4.1 billion in the third quarter and first nine months of 2024, respectively, up 25% and 2% from the same periods in 2023. Diluted earnings per common share (EPS) was $.71 and $2.05 in the third quarter and first nine months of 2024, respectively, up 27% and 1% from the comparable prior-year periods. Adjusted diluted EPS (1) was $.77 and $2.25 in the third quarter and first nine months of 2024, respectively, flat and down 8% from the same periods in 2023. Our third quarter results reflected sequential growth, as net income, diluted EPS, and adjusted diluted EPS were higher by 6%, 8%, and 5%, respectively, from the second quarter of 2024. Total net revenues rose 5% year-over-year to $4.8 billion in the third quarter, bringing the year-to-date total to $14.3 billion, down 1% from the same period in 2023. Net interest revenue was $2.2 billion and $6.6 billion in the third quarter and first nine months of 2024, respectively, down 1% and 9% from the comparable periods

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) (1) Adjusted diluted EPS, adjusted total expenses, adjusted net income available to common stockholders, return on tangible common equity, and adjusted Tier 1 Leverage Ratio are non-GAAP financial measures. See Non-GAAP Financial Measures for further details and a reconciliation of such measures to GAAP reported results. Integration of Ameritrade In May 2024, the Company completed the conversion of the final client transition group from Ameritrade to the Schwab platform. Over the course of five client transition groups throughout the integration, we converted approximately $1.9 trillion in client assets across more than 17 million client accounts, including 7,000 RIAs, from Ameritrade to Schwab, and conversion of this final client group is a significant milestone in our integration. In connection with these transitions, we have experienced some expected attrition of client assets from retail accounts and RIAs that continues to be below our initial estimates when we announced the acquisition. We continue to expect total acquisition and integration-related costs and capital expenditures will be between $2.4 billion and $2.5 billion. Acquisition and integration-related costs, which are inclusive of related exit costs, totaled $23 million and $97 million for the third quarter and first nine months of 2024, respectively, and $106 million and $334 million for the third quarter and first nine months of 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 September 30, 2024, we have achieved approximately 95% 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 t

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