Core Net New Assets Total $108.8 Billion, a
Second Quarter Record
Client Assets Reach a Record $7.57 Trillion
The Charles Schwab Corporation announced today that its net
income for the second quarter of 2021 was $1.3 billion, compared
with $1.5 billion for the first quarter of 2021, and $671 million
for the second quarter of 2020. Net income for the six months ended
June 30, 2021 was $2.7 billion, compared with $1.5 billion for the
year-earlier period. The company’s financial results include TD
Ameritrade from closing on October 6, 2020 forward, as well as
certain acquisition and integration-related costs and the
amortization of acquired intangibles. For the second quarter and
first half of 2021, these transaction-related expenses totaled $298
million and $571 million, respectively, on a pre-tax basis. In
addition, the company’s second quarter of 2021 results included a
non-deductible charge of $200 million, or $.10 per share, regarding
a previously disclosed regulatory matter.
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the full release here:
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Three Months Ended June 30,
%
Six Months Ended June 30,
%
Financial Highlights (1)
2021
2020
Change
2021
2020
Change
Net revenues (in millions)
$
4,527
$
2,450
85%
$
9,242
$
5,067
82%
Net income (in millions)
GAAP
$
1,265
$
671
89%
$
2,749
$
1,466
88%
Adjusted (2)
$
1,483
$
742
100%
$
3,173
$
1,569
102%
Diluted earnings per common share
GAAP
$
.59
$
.48
23%
$
1.32
$
1.07
23%
Adjusted (2)
$
.70
$
.54
30%
$
1.55
$
1.14
36%
Pre-tax profit margin
GAAP
38.0
%
36.2
%
39.8
%
38.2
%
Adjusted (2)
44.6
%
40.0
%
46.0
%
40.9
%
Return on average common stockholders’
equity (annualized)
10
%
10
%
10
%
12
%
Return on tangible common equity
(annualized) (2)
20
%
12
%
21
%
15
%
Note: All per-share results are
rounded to the nearest cent, based on weighted-average diluted
common shares outstanding.
(1)
Approximate impact of the $200
million regulatory matter charge, included in other expense, on
results for the three months ended June 30, 2021 is as follows:
Diluted earnings per common share, $.10; pre-tax profit margin,
4.4%; return on average common stockholders’ equity, 1%; and return
on tangible common equity, 3%.
(2)
Further details on non-GAAP
financial measures and a reconciliation of such measures to GAAP
reported results are included on pages 10-11 of this release.
CEO Walt Bettinger said, “Schwab’s strong business momentum is
sustained by the power of our contemporary full-service model as it
continues to attract new clients and deepen existing relationships.
During the second quarter, signs of normalcy took root across the
U.S. as vaccinations accelerated, social activities largely
resumed, and people started returning to corporate offices. At the
same time, equity markets continued their ascent, with both the
S&P 500® and NASDAQ® achieving record highs during the quarter,
while longer-term interest rates fluctuated as investors digested
economic recovery data and recent Federal Reserve commentary.
Against this evolving backdrop, we continued to support highly
engaged investors even as activity levels moderated from the first
quarter surge. Clients opened 1.7 million new brokerage accounts in
the second quarter, representing our third consecutive quarter in
excess of a million new accounts when excluding M&A activity.
Daily trade volume averaged 6.0 million over the same period – a
28% slowdown on the heels of the record first quarter, yet a
still-impressive 4% increase over the fourth quarter of 2020, when
we included TD Ameritrade for the first time. At the same time,
both independent advisors and individual clients contributed to our
total core net new assets of $108.8 billion, up 133% from a year
ago – the highest second quarter in our history and a particularly
noteworthy result when considering the impact of seasonal
tax-related outflows. Our first half core net new assets reached
$257.0 billion, a total which is more than double the first half of
2020 and implies a year-to-date organic growth rate of 8%. Total
client assets ended June at a record $7.57 trillion, up 7% from the
prior record set three months earlier, and up 84%
year-over-year.”
Mr. Bettinger added, “Our full-service model embraces an
omni-channel approach – aiming to blend the best elements of human
interaction and technology so that clients can access us where,
when, and how they choose. Our branch network remains integral to
our approach, and we successfully re-opened nearly all of our 406
branches, including 80 independent branches during the second
quarter. Additionally, we continue to further diversify our
offerings and push forward on our key strategic initiatives via our
recent acquisitions. The TD Ameritrade integration is on track, and
we’ve rolled out the newly combined Schwab Advisor Network®
consisting of a nationwide array of independent advisory firms with
a range of capabilities to serve the specialized needs of high and
ultra-high net worth investors. Following the early 2021 launch of
Wasmer SchroederTM Strategies, client demand has accelerated, with
net inflows more than doubling sequentially to $2.2 billion in the
second quarter. Finally, our referral program for USAA members has
proven a steady source of new accounts with open rates of 5,000 per
month on average. Entering the second half of 2021, our focus
remains firmly on clients. As we help them work towards their
financial goals, strive to meet their service expectations, and
drive forward on all of our integration efforts, we are
simultaneously building the future of modern wealth
management.”
CFO Peter Crawford commented, “We continue to deliver solid
financial performance through a combination of ongoing success with
clients and sustained expense discipline. On the revenue front, net
interest revenue grew 2% versus the first quarter of 2021 as modest
growth in interest-earning assets, as well as higher bank and
margin loan utilization, helped offset the Federal Reserve’s
ongoing Zero Interest Rate Policy and persistent prepayment
activity within our investment portfolio. In addition, strong asset
gathering and sustained growth in advisory solution enrollments
pushed asset management and administration fees up 3% sequentially.
Trading revenue fell 21% as client activity stepped down from the
dramatic surge of the prior quarter, but still remained quite
strong relative to past levels. Total revenues contracted 4%
quarter-over-quarter to $4.5 billion. Looking at expenses, typical
compensation-related seasonality and the slowdown in client
engagement from earlier in 2021 helped shape our second quarter
spending as we concurrently worked to enhance service capacity and
make progress on our integration efforts. Total GAAP expenses
increased 2% sequentially to $2.8 billion for the quarter,
including $144 million in acquisition and integration-related costs
and $154 million in amortization of acquired intangibles. Exclusive
of these items (1), adjusted total expenses were up 1%. The
sequential increases in GAAP and adjusted expenses both reflect the
$200 million regulatory matter charge. We once again effectively
balanced near-term profitability with reinvestment for future
growth. Our 38.0% pre-tax profit margin – 44.6% on an adjusted
basis (1) – marked the 25th consecutive quarter in excess of
35%.”
Mr. Crawford concluded, “We maintained a consistent approach to
balance sheet management during the second quarter as we continued
to support organic growth and prepared for initial bank deposit
account migrations, which have totaled $9.9 billion to date. We
supplemented our funding mix in the second quarter by issuing $2.25
billion in long-term senior notes and repaying $1.2 billion in
similar debt that matured in May. In addition, we redeemed our $600
million Series C preferred stock in June. Consolidated balance
sheet assets were $575 billion at June 30th, up 2% from the first
quarter, and our preliminary Tier 1 Leverage Ratio was flat at
6.4%. The company’s 10% return on equity and 20% ROTCE (1) for the
quarter reflect our ability to sustain the healthy financial
performance, strong balance sheet, and efficient capital management
necessary to build long-term value for both clients and
stockholders.”
(1) Further details on non-GAAP financial measures and a
reconciliation of such measures to GAAP reported results are
included on pages 10-11 of this release.
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 recent account activity
was posted on May 14, 2021.
Forward-Looking Statements
This press release contains forward-looking statements relating
to business momentum; growth in the client base, accounts and
assets; investments and acquisitions to improve service capacity
and the client experience, expand products, services and offerings
to meet client needs, diversify revenues, and drive scale and
efficiency; strategic initiatives; integration of TD Ameritrade;
client demand for Wasmer Schroeder Strategies; USAA referral
program; financial performance; expense discipline; the liability
and related charge for the pending regulatory matter; balancing
near-term profitability with reinvestment for future growth;
balance sheet strength; capital management; and long-term value for
clients and stockholders. These forward-looking statements reflect
management’s expectations as of the date hereof. 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; develop and launch new and
enhanced products, services, and capabilities, as well as enhance
its infrastructure and capacity, in a timely and successful manner;
hire talent; support client activity levels; successfully implement
integration strategies and plans; monetize client assets; and
manage expenses. Other important factors include general market
conditions, including equity valuations, trading activity, the
level of interest rates – which can impact money market fund fee
waivers, and credit spreads; market volatility; 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 transfer
of Bank Deposit Account balances; balance sheet cash; the scope and
duration of the COVID-19 pandemic and actions taken by governmental
authorities to contain the spread of the virus and the economic
impact; adverse developments in the resolution and settlement
amount of the pending regulatory matter; and other factors set
forth in the company’s most recent reports on Form 10-K and Form
10-Q.
About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading
provider of financial services, with 32.3 million active brokerage
accounts, 2.1 million corporate retirement plan participants, 1.6
million banking accounts, and approximately $7.57 trillion in
client assets. 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 subsidiaries, Charles Schwab & Co., Inc., TD
Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC,
https://www.sipc.org), and their 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
primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC
and an Equal Housing Lender), provides banking and lending services
and products. More information is available at
https://www.aboutschwab.com.
TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are
separate but affiliated companies and subsidiaries of TD Ameritrade
Holding Corporation. TD Ameritrade Holding Corporation is a wholly
owned subsidiary of The Charles Schwab Corporation. TD Ameritrade
is a trademark jointly owned by TD Ameritrade IP Company, Inc. and
The Toronto-Dominion Bank.
THE CHARLES SCHWAB
CORPORATION
Consolidated Statements of
Income
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Net Revenues
Interest revenue
$
2,068
$
1,486
$
4,083
$
3,194
Interest expense
(121)
(97)
(225)
(233)
Net interest revenue
1,947
1,389
3,858
2,961
Asset management and administration fees
(1)
1,047
801
2,063
1,628
Trading revenue
955
193
2,171
381
Bank deposit account fees
337
—
688
—
Other
241
67
462
97
Total net revenues
4,527
2,450
9,242
5,067
Expenses Excluding Interest
Compensation and benefits
1,318
819
2,748
1,716
Professional services
247
198
473
380
Occupancy and equipment
239
152
476
294
Advertising and market development
128
70
244
137
Communications
166
78
313
153
Depreciation and amortization (2)
135
97
264
187
Amortization of acquired intangible assets
(2)
154
12
308
18
Regulatory fees and assessments
66
36
144
70
Other
355
100
593
177
Total expenses excluding interest
2,808
1,562
5,563
3,132
Income before taxes on income
1,719
888
3,679
1,935
Taxes on income
454
217
930
469
Net Income
1,265
671
2,749
1,466
Preferred stock dividends and other
148
50
244
88
Net Income Available to Common
Stockholders
$
1,117
$
621
$
2,505
$
1,378
Weighted-Average Common Shares
Outstanding:
Basic
1,886
1,288
1,884
1,287
Diluted
1,896
1,294
1,894
1,294
Earnings Per Common Shares
Outstanding (3):
Basic
$
.59
$
.48
$
1.33
$
1.07
Diluted
$
.59
$
.48
$
1.32
$
1.07
(1)
Includes fee waivers of $85 million and
$163 million for the three and six months ended June 30, 2021,
respectively, and $15 million for the three and six months ended
June 30, 2020.
(2)
Beginning in the third quarter of 2020,
amortization of acquired intangible assets was reclassified from
depreciation and amortization. Prior periods have been reclassified
to reflect this change.
(3)
For the three and six months ended June
30, 2021, the Company had voting and nonvoting common stock
outstanding. As the participation rights, including dividend and
liquidation rights, are identical between the voting and nonvoting
stock classes, basic and diluted earnings per share are the same
for each class.
THE CHARLES SCHWAB
CORPORATION
Financial and Operating
Highlights
(Unaudited)
Q2-21 %
change
2021
2020
vs.
vs.
Second
First
Fourth
Third
Second
(In millions, except per share amounts and
as noted)
Q2-20
Q1-21
Quarter
Quarter
Quarter
Quarter
Quarter
Net Revenues
Net interest revenue
40
%
2
%
$
1,947
$
1,911
$
1,809
$
1,343
$
1,389
Asset management and administration
fees
31
%
3
%
1,047
1,016
987
860
801
Trading revenue
N/M
(21)
%
955
1,216
854
181
193
Bank deposit account fees
N/M
(4)
%
337
351
355
—
—
Other
N/M
9
%
241
221
171
64
67
Total net revenues
85
%
(4)
%
4,527
4,715
4,176
2,448
2,450
Expenses Excluding Interest
Compensation and benefits
61
%
(8)
%
1,318
1,430
1,398
840
819
Professional services
25
%
9
%
247
226
269
194
198
Occupancy and equipment
57
%
1
%
239
237
254
155
152
Advertising and market development
83
%
10
%
128
116
123
66
70
Communications
113
%
13
%
166
147
127
73
78
Depreciation and amortization (1)
39
%
5
%
135
129
130
97
97
Amortization of acquired intangible assets
(1)
N/M
—
154
154
147
25
12
Regulatory fees and assessments
83
%
(15)
%
66
78
57
36
36
Other
N/M
49
%
355
238
195
73
100
Total expenses excluding interest
80
%
2
%
2,808
2,755
2,700
1,559
1,562
Income before taxes on income
94
%
(12)
%
1,719
1,960
1,476
889
888
Taxes on income
109
%
(5)
%
454
476
341
191
217
Net Income
89
%
(15)
%
$
1,265
$
1,484
$
1,135
$
698
$
671
Preferred stock dividends and other
196
%
54
%
148
96
85
83
50
Net Income Available to Common
Stockholders
80
%
(20)
%
$
1,117
$
1,388
$
1,050
$
615
$
621
Earnings per common share (2):
Basic
23
%
(20)
%
$
.59
$
.74
$
.57
$
.48
$
.48
Diluted
23
%
(19)
%
$
.59
$
.73
$
.57
$
.48
$
.48
Dividends declared per common share
—
—
$
.18
$
.18
$
.18
$
.18
$
.18
Weighted-average common shares
outstanding:
Basic
46
%
—
1,886
1,882
1,848
1,289
1,288
Diluted
47
%
—
1,896
1,892
1,855
1,294
1,294
Performance Measures
Pre-tax profit margin
38.0
%
41.6
%
35.3
%
36.3
%
36.2
%
Return on average common stockholders’
equity (annualized) (3)
10
%
12
%
11
%
10
%
10
%
Financial Condition (at quarter
end, in billions)
Cash and cash equivalents
(10)
%
(38)
%
$
30.3
$
48.6
$
40.3
$
27.5
$
33.6
Cash and investments segregated
20
%
(1)
%
39.9
40.4
50.4
29.6
33.2
Receivables from brokerage clients —
net
N/M
10
%
82.2
74.7
64.4
25.4
21.4
Available for sale securities
28
%
5
%
359.6
341.6
337.4
303.8
281.2
Bank loans — net
38
%
14
%
28.9
25.4
23.8
22.3
20.9
Total assets
43
%
2
%
574.5
563.5
549.0
419.4
400.5
Bank deposits
22
%
—
368.6
369.9
358.0
320.7
301.6
Payables to brokerage clients
110
%
4
%
105.0
101.3
104.2
52.0
50.1
Short-term borrowings
N/M
40
%
3.5
2.5
—
—
—
Long-term debt
120
%
6
%
18.7
17.7
13.6
7.8
8.5
Stockholders’ equity
87
%
3
%
57.5
55.6
56.1
31.3
30.8
Other
Full-time equivalent employees (at quarter
end, in thousands)
49
%
2
%
32.5
32.0
32.0
22.1
21.8
Capital expenditures — purchases of
equipment, office facilities, and
property, net (in millions)
33
%
8
%
$
225
$
209
$
200
$
122
$
169
Expenses excluding interest as a
percentage of average client assets
(annualized)
0.15
%
0.16
%
0.17
%
0.14
%
0.16
%
Clients’ Daily Average Trades
(DATs) (in thousands)
N/M
(28)
%
6,042
8,414
5,796
1,460
1,619
Number of Trading Days
—
3
%
63.0
61.0
63.0
64.0
63.0
Revenue Per Trade (4)
33
%
6
%
$
2.51
$
2.37
$
2.34
$
1.94
$
1.89
Note: The above table reflects the recognition of TD Ameritrade’s
assets acquired and liabilities assumed at provisional fair value
as of October 6, 2020. Results of operations and metrics are
inclusive of TD Ameritrade beginning October 6, 2020.
(1)
Beginning in the third quarter of
2020, amortization of acquired intangible assets was reclassified
from depreciation and amortization. Prior periods have been
reclassified to reflect this change.
(2)
Beginning in the fourth quarter
of 2020, the Company had voting and nonvoting common stock
outstanding. As the participation rights, including dividend and
liquidation rights, are identical between the voting and nonvoting
stock classes, basic and diluted earnings per share are the same
for each class.
(3)
Return on average common
stockholders’ equity is calculated using net income available to
common stockholders divided by average common stockholders’
equity.
(4)
Revenue per trade is calculated
as trading revenue divided by DATs multiplied by the number of
trading days.
N/M Not meaningful. Percentage changes greater than 200% are
presented as not meaningful.
THE CHARLES SCHWAB
CORPORATION
Net Interest Revenue
Information
(In millions, except ratios or as
noted)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
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
$
41,913
$
9
0.07
%
$
56,553
$
19
0.13
%
$
40,414
$
16
0.08
%
$
44,343
$
104
0.46
%
Cash and investments segregated
41,037
4
0.04
%
33,521
27
0.32
%
44,573
14
0.06
%
28,619
114
0.79
%
Receivables from brokerage clients
75,737
609
3.18
%
17,915
111
2.44
%
71,760
1,172
3.25
%
18,533
279
2.97
%
Available for sale securities (1)
344,719
1,103
1.28
%
234,346
1,146
1.95
%
341,500
2,194
1.28
%
216,045
2,331
2.15
%
Bank loans
27,234
148
2.18
%
20,163
133
2.63
%
25,862
287
2.22
%
19,530
277
2.84
%
Total interest-earning assets
530,640
1,873
1.40
%
362,498
1,436
1.58
%
524,109
3,683
1.40
%
327,070
3,105
1.89
%
Securities lending revenue (2)
194
49
398
86
Other interest revenue (2)
1
1
2
3
Total interest-earning assets (3)
$
530,640
$
2,068
1.55
%
$
362,498
$
1,486
1.63
%
$
524,109
$
4,083
1.55
%
$
327,070
$
3,194
1.94
%
Funding sources
Bank deposits
$
368,026
$
13
0.01
%
$
288,990
$
12
0.02
%
$
365,576
$
26
0.01
%
$
258,256
$
69
0.05
%
Payables to brokerage clients
87,367
2
0.01
%
37,500
1
0.01
%
87,353
4
0.01
%
33,894
9
0.05
%
Short-term borrowings (4)
3,245
3
0.33
%
39
—
0.24
%
2,175
3
0.30
%
21
—
0.31
%
Long-term debt
18,349
97
2.12
%
8,524
77
3.60
%
16,308
182
2.23
%
8,025
143
3.57
%
Total interest-bearing liabilities
476,987
115
0.10
%
335,053
90
0.11
%
471,412
215
0.09
%
300,196
221
0.15
%
Non-interest-bearing funding sources
(3)
53,653
27,445
52,697
26,874
Securities lending expense (2)
7
9
12
16
Other interest expense (2)
(1)
(2)
(2)
(4)
Total funding sources (3)
$
530,640
$
121
0.09
%
$
362,498
$
97
0.10
%
$
524,109
$
225
0.08
%
$
327,070
$
233
0.14
%
Net interest revenue
$
1,947
1.46
%
$
1,389
1.53
%
$
3,858
1.47
%
$
2,961
1.80
%
(1)
Amounts have been calculated based on
amortized cost.
(2)
Beginning in the fourth quarter of 2020,
securities lending revenue has been reclassified from
broker-related receivables and other revenue. Securities lending
expense has been reclassified from other expense. Prior period
amounts have been reclassified to reflect this change.
(3)
Beginning in the fourth quarter of 2020,
broker-related receivables were removed from total interest-earning
assets and netted against non-interest-bearing funding sources,
resulting in an immaterial reduction to total interest-earning
assets and total funding sources. Prior period amounts have been
reclassified to reflect this change.
(4)
Interest revenue or expense was less than
$500 thousand in the period or periods presented.
THE CHARLES SCHWAB
CORPORATION
Asset Management and
Administration Fees Information
(In millions, except ratios or as
noted)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
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
$
157,057
$
114
0.29
%
$
213,037
$
164
0.31
%
$
163,370
$
236
0.29
%
$
208,405
$
316
0.30
%
Fee waivers
(85)
(15)
(163)
(15)
Schwab money market funds
157,057
29
0.07
%
213,037
149
0.28
%
163,370
73
0.09
%
208,405
301
0.29
%
Schwab equity and bond funds, ETFs,
and
collective trust funds (CTFs)
415,311
94
0.09
%
274,570
68
0.10
%
396,296
180
0.09
%
282,689
144
0.10
%
Mutual Fund OneSource® and other non-
transaction fee funds
228,890
180
0.32
%
175,067
135
0.31
%
225,673
352
0.31
%
181,825
282
0.31
%
Other third-party mutual funds and ETFs
(1)
896,236
178
0.08
%
416,242
73
0.07
%
872,822
346
0.08
%
434,100
150
0.07
%
Total mutual funds, ETFs, and CTFs (2)
$
1,697,494
481
0.11
%
$
1,078,916
425
0.16
%
$
1,658,161
951
0.12
%
$
1,107,019
877
0.16
%
Advice solutions (2)
Fee-based
$
448,107
490
0.44
%
$
260,653
314
0.48
%
$
436,368
958
0.44
%
$
261,954
626
0.48
%
Non-fee-based
87,857
—
—
69,234
—
—
86,312
—
—
70,232
—
—
Total advice solutions
$
535,964
490
0.37
%
$
329,887
314
0.38
%
$
522,680
958
0.37
%
$
332,186
626
0.38
%
Other balance-based fees (3)
605,617
63
0.04
%
407,796
45
0.04
%
591,090
127
0.04
%
420,321
99
0.05
%
Other (4)
13
17
27
26
Total asset management and
administration fees
$
1,047
$
801
$
2,063
$
1,628
(1)
Beginning in the fourth quarter of 2020,
includes third-party money funds related to the acquisition of TD
Ameritrade.
(2)
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®, Schwab
Intelligent Portfolios Premium®, TD Ameritrade AdvisorDirect®,
Essential Portfolios, Selective Portfolios, and Personalized
Portfolios; 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.
(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)
Q2-21 %
Change
2021
2020
vs.
vs.
Second
First
Fourth
Third
Second
(In billions, at quarter end, except as
noted)
Q2-20
Q1-21
Quarter
Quarter
Quarter
Quarter
Quarter
Assets in client accounts
Schwab One®, certain cash equivalents and
bank deposits
34
%
—
$
469.5
$
467.3
$
458.4
$
370.3
$
349.2
Bank deposit account balances
N/M
(1)
%
161.9
164.2
165.9
—
—
Proprietary mutual funds (Schwab Funds®
and Laudus Funds®) and CTFs
Money market funds (1)
(28)
%
(7)
%
151.9
163.6
176.1
190.3
211.6
Equity and bond funds and CTFs (2)
42
%
9
%
165.9
152.9
142.9
125.5
117.0
Total proprietary mutual funds and
CTFs
(3)
%
—
317.8
316.5
319.0
315.8
328.6
Mutual Fund Marketplace® (3)
Mutual Fund OneSource® and other
non-transaction fee funds
24
%
6
%
240.2
227.3
223.9
203.6
193.0
Mutual fund clearing services
25
%
9
%
271.3
248.7
252.9
228.4
217.3
Other third-party mutual funds (4)
81
%
5
%
1,441.5
1,375.8
1,304.6
848.1
796.5
Total Mutual Fund Marketplace
62
%
5
%
1,953.0
1,851.8
1,781.4
1,280.1
1,206.8
Total mutual fund assets
48
%
5
%
2,270.8
2,168.3
2,100.4
1,595.9
1,535.4
Exchange-traded funds (ETFs)
Proprietary ETFs (2)
57
%
11
%
245.2
220.9
198.8
168.9
156.3
Other third-party ETFs
148
%
12
%
1,158.8
1,035.1
947.3
512.6
468.0
Total ETF assets
125
%
12
%
1,404.0
1,256.0
1,146.1
681.5
624.3
Equity and other securities
129
%
10
%
2,988.8
2,721.0
2,504.7
1,453.2
1,305.8
Fixed income securities
14
%
(1)
%
359.6
364.5
377.1
318.0
314.8
Margin loans outstanding
N/M
11
%
(79.8)
(72.2)
(60.9)
(23.6)
(19.4)
Total client assets
84
%
7
%
$
7,574.8
$
7,069.1
$
6,691.7
$
4,395.3
$
4,110.1
Client assets by business
Investor Services
86
%
7
%
$
4,146.2
$
3,865.9
$
3,667.9
$
2,377.7
$
2,223.5
Advisor Services
82
%
7
%
3,428.6
3,203.2
3,023.8
2,017.6
1,886.6
Total client assets
84
%
7
%
$
7,574.8
$
7,069.1
$
6,691.7
$
4,395.3
$
4,110.1
Net growth in assets in client
accounts (for the quarter ended)
Net new assets by business
Investor Services (5)
(61)
%
(32)
%
$
44.5
$
65.1
$
939.2
$
18.9
$
113.0
Advisor Services (6)
164
%
(6)
%
64.3
68.7
751.5
32.3
24.4
Total net new assets
(21)
%
(19)
%
$
108.8
$
133.8
$
1,690.7
$
51.2
$
137.4
Net market gains (losses)
(17)
%
63
%
396.9
243.6
605.7
234.0
475.8
Net growth (decline)
(18)
%
34
%
$
505.7
$
377.4
$
2,296.4
$
285.2
$
613.2
New brokerage accounts (in
thousands, for the quarter ended) (7)
—
(47)
%
1,657
3,153
15,774
592
1,652
Client accounts (in thousands)
Active brokerage accounts
129
%
1
%
32,265
31,902
29,629
14,393
14,107
Banking accounts
8
%
(2)
%
1,574
1,608
1,499
1,486
1,463
Corporate retirement plan participants
25
%
2
%
2,149
2,105
2,054
1,722
1,716
(1)
Total client assets in purchased money
market funds are located at:
https://www.aboutschwab.com/investor-relations.
(2)
Includes balances held on and off the
Schwab platform. As of June 30, 2021, off-platform equity and bond
funds, CTFs, and ETFs were $20.5 billion, $6.2 billion, and $82.0
billion, respectively.
(3)
Excludes all proprietary mutual funds and
ETFs.
(4)
As of June 30, 2021, third-party money
funds were $15.2 billion.
(5)
First quarter of 2021 includes an outflow
of $14.4 billion from a mutual fund clearing services client.
Fourth quarter of 2020 includes inflows of $890.7 billion related
to the acquisition of TD Ameritrade. Second quarter of 2020
includes inflows of $79.9 billion related to the acquisition of the
assets of USAA’s Investment Management Company and $10.9 billion
from a mutual fund clearing services client.
(6)
Fourth quarter of 2020 includes inflows of
$680.6 billion related to the acquisition of TD Ameritrade. Third
quarter of 2020 includes an inflow of $8.5 billion related to the
acquisition of Wasmer, Schroeder & Company, LLC.
(7)
Fourth quarter of 2020 includes 14.5
million new brokerage accounts related to the acquisition of TD
Ameritrade. Second quarter of 2020 includes 1.1 million new
brokerage accounts related to the acquisition of the assets of
USAA’s Investment Management Company.
N/M Not meaningful. Percentage changes
greater than 200% are presented as not meaningful.
The Charles Schwab Corporation
Monthly Activity Report For June 2021
2020
2021
Change
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Mo.
Yr.
Market Indices (at month end)
Dow Jones Industrial Average
25,813
26,428
28,430
27,782
26,502
29,639
30,606
29,983
30,932
32,982
33,875
34,529
34,503
—
34
%
Nasdaq Composite
10,059
10,745
11,775
11,168
10,912
12,199
12,888
13,071
13,192
13,247
13,963
13,749
14,504
5
%
44
%
Standard & Poor’s® 500
3,100
3,271
3,500
3,363
3,270
3,622
3,756
3,714
3,811
3,973
4,181
4,204
4,298
2
%
39
%
Client Assets (in billions of
dollars)
Beginning Client Assets
4,009.0
4,110.1
4,278.0
4,489.7
4,395.3
5,878.5
6,421.0
6,691.7
6,759.6
6,900.5
7,069.1
7,336.1
7,395.7
Net New Assets (1)
24.6
11.2
20.0
20.0
1,596.9
32.1
61.7
34.2
37.0
62.6
37.2
28.1
43.5
55
%
77
%
Net Market Gains (Losses)
76.5
156.7
191.7
(114.4)
(113.7)
510.4
209.0
33.7
103.9
106.0
229.8
31.5
135.6
Total Client Assets (at month end)
4,110.1
4,278.0
4,489.7
4,395.3
5,878.5
6,421.0
6,691.7
6,759.6
6,900.5
7,069.1
7,336.1
7,395.7
7,574.8
2
%
84
%
Core Net New Assets (2)
13.7
2.7
20.0
20.0
25.6
32.1
61.7
34.2
51.4
62.6
37.2
28.1
43.5
55
%
N/M
Receiving Ongoing Advisory Services (at
month end) (3)
Investor Services
345.2
355.6
366.8
361.2
425.3
457.1
471.8
472.4
481.3
495.2
511.1
517.8
525.1
1
%
52
%
Advisor Services (4)
1,747.5
1,818.5
1,900.5
1,870.1
2,505.5
2,715.7
2,828.3
2,840.6
2,913.3
2,997.9
3,112.5
3,150.4
3,209.3
2
%
84
%
Client Accounts (at month end, in
thousands)
Active Brokerage Accounts
14,107
14,220
14,311
14,393
29,013
29,202
29,629
30,534
31,523
31,902
31,877
32,110
32,265
—
129
%
Banking Accounts
1,463
1,480
1,493
1,486
1,496
1,504
1,499
1,518
1,542
1,608
1,562
1,584
1,574
(1)
%
8
%
Corporate Retirement Plan Participants
1,716
1,712
1,715
1,722
2,072
2,045
2,054
2,069
2,093
2,105
2,116
2,130
2,149
1
%
25
%
Client Activity
New Brokerage Accounts (in thousands)
(5)
201
206
202
184
14,718
430
626
1,095
1,211
847
609
549
499
(9)
%
148
%
Client Cash as a Percentage of Client
Assets (6)
13.6
%
13.0
%
12.5
%
12.8
%
13.4
%
12.4
%
12.3
%
12.2
%
11.8
%
11.5
%
10.9
%
10.8
%
10.5
%
(30) bp
(310) bp
Derivative Trades as a Percentage of Total
Trades
10.6
%
13.1
%
13.8
%
14.5
%
20.5
%
19.4
%
18.9
%
17.4
%
16.6
%
18.5
%
20.4
%
20.9
%
20.6
%
(30) bp
1,000 bp
Selected Average Balances (in millions
of dollars)
Average Interest-Earning Assets (7,8)
373,986
379,521
384,690
392,784
442,119
466,677
482,394
517,306
514,885
520,074
527,194
528,642
536,146
1
%
43
%
Average Margin Balances (8)
18,658
19,802
21,190
22,780
48,095
53,916
59,142
62,999
69,064
71,266
72,863
75,921
78,410
3
%
N/M
Average Bank Deposits Account Balances
(8,9)
—
—
—
—
132,030
162,315
163,463
167,980
167,433
164,866
162,392
160,459
161,377
1
%
N/M
Mutual Fund and Exchange-Traded
Fund
Net Buys (Sells) (10,11) (in millions
of dollars)
Equities
(2,877)
(3,280)
(727)
(1,372)
(1,305)
10,980
13,875
8,234
14,246
16,301
13,422
9,854
10,873
Hybrid
(97)
(769)
(124)
(12)
(553)
(402)
359
407
832
1,133
877
1
390
Bonds
10,925
8,611
9,328
6,857
6,765
5,956
12,169
13,601
9,334
8,237
8,940
5,906
10,101
Net Buy (Sell) Activity (in millions of
dollars)
Mutual Funds (10)
1,768
(147)
2,568
757
(2,260)
2,832
6,336
5,713
6,273
6,190
5,754
2,022
5,872
Exchange-Traded Funds (11)
6,183
4,709
5,909
4,716
7,167
13,702
20,067
16,529
18,139
19,481
17,485
13,739
15,492
Money Market Funds
(5,673)
(9,039)
(5,614)
(6,627)
(4,021)
(5,908)
(7,332)
(5,248)
(4,405)
(4,528)
(5,153)
(3,988)
(3,806)
(1)
February 2021 includes an outflow of $14.4
billion from a mutual fund clearing services client. October 2020
includes an inflow of $1.6 trillion related to the acquisition of
TD Ameritrade. July 2020 includes an inflow of $8.5 billion related
to the acquisition of Wasmer, Schroeder & Company, LLC. June
2020 includes an inflow of $10.9 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)
Beginning in December 2020, AdvisorDirect®
assets are presented as Investor Services. In December 2020, $46.5
billion and $50.4 billion for October and November, respectively,
were reclassified from Advisor Services to Investor Services.
(4)
Excludes Retirement Business Services.
(5)
October 2020 includes 14.5 million new
brokerage accounts related to the acquisition of TD Ameritrade.
(6)
Schwab One®, certain cash equivalents,
bank deposits, third-party bank deposit accounts, and money market
fund balances as a percentage of total client assets.
(7)
Represents average total interest-earning
assets on the company’s balance sheet.
(8)
October 2020 averages reflect a full month
of Schwab balances and 26 days of TD Ameritrade balances following
the acquisition closing on October 6, 2020. Calculating the
consolidated daily average from the closing date onwards would
result in Average Interest- Earning Assets, Average Margin
Balances, and Average Bank Deposit Account Balances of $450,004
million, $52,744 million, and $157,414 million, respectively.
(9)
Represents average TD Ameritrade clients’
uninvested cash sweep account balances held in deposit accounts at
third-party financial institutions.
(10)
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.
Additional fund categories can be found at
https://www.aboutschwab.com/financial-reports.
(11)
Represents the principal value of client
ETF transactions handled by Schwab, including transactions in
proprietary ETFs. Additional fund categories can be found at
https://www.aboutschwab.com/financial-reports.
N/M Not meaningful. Percentage changes greater than 200% are
presented as not meaningful.
THE CHARLES SCHWAB CORPORATION Non-GAAP
Financial Measures (In millions, except ratios and per share
amounts) (Unaudited)
In addition to disclosing financial results in accordance with
generally accepted accounting principles in the U.S. (GAAP),
Schwab’s second quarter earnings release contains references to the
non-GAAP financial measures described below. We believe these
non-GAAP financial measures provide useful supplemental information
about the financial performance of the Company, and facilitate
meaningful comparison of Schwab’s results in the current period to
both historic and future results. These non-GAAP measures should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and may not be
comparable to non-GAAP financial measures presented by other
companies.
Schwab’s use of non-GAAP measures is reflective of certain
adjustments made to GAAP financial measures as described below.
Non-GAAP Adjustment or
Measure
Definition
Usefulness to Investors and
Uses by Management
Acquisition and integration-related costs
and amortization of acquired intangible assets
Schwab adjusts certain GAAP financial
measures to exclude the impact of acquisition and
integration-related costs incurred as a result of the Company’s
acquisitions, amortization of acquired intangible assets, and,
where applicable, the income tax effect of these expenses.
Adjustments made to exclude amortization
of acquired intangible assets are reflective of all acquired
intangible assets, which were recorded as part of purchase
accounting. These acquired intangible assets contribute to the
Company’s revenue generation. Amortization of acquired intangible
assets will continue in future periods over their remaining useful
lives.
We exclude acquisition and
integration-related costs and amortization of acquired intangible
assets for the purpose of calculating certain non-GAAP measures
because we believe doing so provides additional transparency of
Schwab’s ongoing operations, and is useful in both evaluating the
operating performance of the business and facilitating comparison
of results with prior and future periods.
Acquisition and integration-related costs
fluctuate based on the timing of acquisitions and integration
activities, thereby limiting comparability of results among
periods, and are not representative of the costs of running the
Company’s ongoing business. Amortization of acquired intangible
assets is excluded because management does not believe it is
indicative of the Company’s underlying operating performance.
Return on tangible common equity
Return on tangible common equity
represents annualized adjusted net income available to common
stockholders as a percentage of average tangible common equity.
Tangible common equity represents common equity less goodwill,
acquired intangible assets — net, and related deferred tax
liabilities.
Acquisitions typically result in the
recognition of significant amounts of goodwill and acquired
intangible assets. We believe return on tangible common equity may
be useful to investors as a supplemental measure to facilitate
assessing capital efficiency and returns relative to the
composition of Schwab’s balance sheet.
Beginning in 2021, the Company also uses adjusted diluted EPS
and return on tangible common equity as components of performance
criteria for employee bonus and certain executive management
incentive compensation arrangements. The Compensation Committee of
CSC’s Board of Directors maintains discretion in evaluating
performance against these criteria.
THE CHARLES SCHWAB CORPORATION Non-GAAP
Financial Measures (In millions, except ratios and per share
amounts) (Unaudited)
The tables below present reconciliations of GAAP measures to
non-GAAP measures:
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Total Expenses Excluding
Interest
Net Income
Total Expenses Excluding
Interest
Net Income
Total Expenses Excluding
Interest
Net Income
Total Expenses Excluding
Interest
Net Income
Total expenses excluding interest
(GAAP),
Net income (GAAP)
$
2,808
$
1,265
$
1,562
$
671
$
5,563
$
2,749
$
3,132
$
1,466
Acquisition and integration-related costs
(1)
(144)
144
(81)
81
(263)
263
(118)
118
Amortization of acquired intangible
assets
(154)
154
(12)
12
(308)
308
(18)
18
Income tax effects (2)
N/A
(80)
N/A
(22)
N/A
(147)
N/A
(33)
Adjusted total expenses
(non-GAAP),
Adjusted net income (non-GAAP)
$
2,510
$
1,483
$
1,469
$
742
$
4,992
$
3,173
$
2,996
$
1,569
(1)
Acquisition and integration-related costs
for the three and six months ended June 30, 2021 primarily consist
of $97 million and $169 million of compensation and benefits, $37
million and $64 million of professional services, and $7 million
and $23 million of occupancy and equipment. Acquisition and
integration-related costs for the three and six months ended June
30, 2020 primarily consist of professional services and other.
(2)
The income tax effect of the non-GAAP
adjustments is determined using an effective tax rate reflecting
the exclusion of non-deductible acquisition costs and is used to
present the acquisition and integration-related costs and
amortization of acquired intangible assets on an after-tax
basis.
N/A Not applicable.
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Amount
% of Total Net Revenues
Amount
% of Total Net Revenues
Amount
% of Total Net Revenues
Amount
% of Total Net Revenues
Income before taxes on income
(GAAP),
Pre-tax profit margin (GAAP)
$
1,719
38.0
%
$
888
36.2
%
$
3,679
39.8
%
$
1,935
38.2
%
Acquisition and integration-related
costs
144
3.2
%
81
3.3
%
263
2.9
%
118
2.3
%
Amortization of acquired intangible
assets
154
3.4
%
12
0.5
%
308
3.3
%
18
0.4
%
Adjusted income before taxes on income
(non-GAAP),
Adjusted pre-tax profit margin
(non-GAAP)
$
2,017
44.6
%
$
981
40.0
%
$
4,250
46.0
%
$
2,071
40.9
%
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Amount
Diluted EPS
Net income available to common
stockholders (GAAP),
Earnings per common share — diluted
(GAAP)
$
1,117
$
.59
$
621
$
.48
$
2,505
$
1.32
$
1,378
$
1.07
Acquisition and integration-related
costs
144
.08
81
.07
263
.14
118
.09
Amortization of acquired intangible
assets
154
.08
12
.01
308
.16
18
.01
Income tax effects
(80)
(.05)
(22)
(.02)
(147)
(.07)
(33)
(.03)
Adjusted net income available to common
stockholders
(non-GAAP), Adjusted diluted EPS
(non-GAAP)
$
1,335
$
.70
$
692
$
.54
$
2,929
$
1.55
$
1,481
$
1.14
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Return on average common stockholders’
equity (GAAP)
10
%
10
%
10
%
12
%
Average common stockholders’ equity
$
46,276
$
24,515
$
47,912
$
22,253
Less: Average goodwill
(11,952)
(1,480)
(11,952)
(1,480)
Less: Average acquired intangible assets —
net
(9,762)
(700)
(9,838)
(703)
Plus: Average deferred tax liabilities
related to goodwill and acquired
intangible assets — net
1,907
67
1,925
67
Average tangible common equity
$
26,469
$
22,402
$
28,047
$
20,137
Adjusted net income available to common
stockholders (1)
$
1,335
$
692
$
2,929
$
1,481
Return on tangible common equity
(non-GAAP)
20
%
12
%
21
%
15
%
(1)
See table above for the reconciliation of
net income available to common stockholders to adjusted net income
available to common stockholders (non-GAAP).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210716005069/en/
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