Core Net New Assets Rise 28% Sequentially to
$139.0 Billion, a Third Quarter Record
Total Client Assets Reach $7.61 Trillion, up
14% Year-to-Date
The Charles Schwab Corporation announced today that its net
income for the third quarter of 2021 was a record $1.5 billion
compared with $1.3 billion for the second quarter of 2021, and $698
million for the third quarter of 2020. Net income for the nine
months ended September 30, 2021 was $4.3 billion, compared with
$2.2 billion for the year-earlier period. The company’s financial
results include TD Ameritrade from October 6, 2020 forward, as well
as certain acquisition and integration-related costs and the
amortization of acquired intangibles. For the third quarter and
first nine months of 2021, these transaction-related expenses
totaled $257 million and $828 million, respectively, on a pre-tax
basis. In addition, the company’s results for the first nine months
of 2021 included a non-deductible charge of approximately $200
million regarding a previously disclosed regulatory matter.
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Three Months Ended September
30,
%
Nine Months Ended September
30,
%
Financial Highlights (1)
2021
2020
Change
2021
2020
Change
Net revenues (in millions)
$
4,570
$
2,448
87
%
$
13,812
$
7,515
84
%
Net income (in millions)
GAAP
$
1,526
$
698
119
%
$
4,275
$
2,164
98
%
Adjusted (1)
$
1,722
$
749
130
%
$
4,895
$
2,318
111
%
Diluted earnings per common share
GAAP
$
.74
$
.48
54
%
$
2.06
$
1.54
34
%
Adjusted (1)
$
.84
$
.51
65
%
$
2.39
$
1.66
44
%
Pre-tax profit margin
GAAP
44.0
%
36.3
%
41.2
%
37.6
%
Adjusted (1)
49.6
%
39.1
%
47.2
%
40.3
%
Return on average common stockholders’
equity (annualized)
12
%
10
%
11
%
12
%
Return on tangible common equity
(annualized) (1)
23
%
12
%
21
%
14
%
Note: All per-share results are rounded to the nearest cent, based
on weighted-average diluted common shares outstanding.
(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.
CEO Walt Bettinger said, “Guided by our "Through Clients’ Eyes"
strategy, Schwab continues to drive robust business momentum as we
support investors through an uneven economic recovery. While
bullish sentiment largely persisted throughout the third quarter,
debates regarding the overall pace of economic growth, the
potential path of inflation, and the ultimate impact of certain
global market disruptions weighed on this optimism – contributing
to the S&P 500® ending September essentially flat versus June
30. Through it all, investors consistently turned to Schwab as a
trusted financial partner, opening over a million new brokerage
accounts for the fourth consecutive quarter – bringing year-to-date
new brokerage accounts to 6.0 million. We generated core net new
assets of $139.0 billion in the quarter, pushing asset gathering
for the first nine months of the year to $396.0 billion,
representing an 8% annualized organic growth rate. Total client
assets ended September at $7.61 trillion, up from $6.69 trillion at
year-end 2020. In addition, while the third quarter is often viewed
as a slower period for client activity, engagement levels showed
persistent strength through the summer months – daily average trade
volumes softened only modestly versus the prior quarter to 5.5
million.”
Mr. Bettinger continued, “We believe our ‘no trade-offs’
approach to combining value, service, transparency and trust has
enabled us to continue meeting the needs of the expanding
population of individual investors and independent investment
advisors who look to Schwab for support. Clients remained highly
engaged with our banking services during the third quarter, as
demonstrated by a 21% increase in mortgage originations and 66%
growth in Pledged Asset Line® balances on a year-over-year basis.
Additionally, investor interest in low-cost investing solutions
elevated our Schwab-managed ETFs to a record $251.6 billion in
assets, up 49% year-over-year. Retail clients also sought out our
help and guidance; over $437 billion of assets were enrolled in one
of our advisory offerings at month-end September, representing an
increase of 24% from a year ago. Finally, in support of our
independent investment advisors we further enhanced the digital
onboarding experience for new accounts to include integrated
funding, end-client editing capabilities, and detailed status
tracking, among other improvements. This streamlined and
collaborative functionality minimizes the potential for errors and
delays, saving advisors time to focus on creating and building
relationships.”
“I am incredibly proud of all the great work our team of
talented employees have poured into serving our clients and each
other this year and throughout the pandemic,” Mr. Bettinger
concluded. “Their unwavering focus has kept the TD Ameritrade
integration on track, helped advance our other key strategic
initiatives, and yielded outstanding operating and financial
performance for our company. As such, we rewarded them by
implementing a special 5% pay increase, effective at the end of
September. Additionally, to better reflect the changing ways our
employees live and work, we introduced a hybrid workplace program
designed to provide greater flexibility while still maintaining our
strong, interconnected culture. Investing in our talent, alongside
other platform and service investments, allows us to continue
building the future of modern wealth management.”
CFO Peter Crawford added, “Consistent execution of our strategy
and sustained business momentum, in combination with our
diversified revenue model, helped produce impressive financial
performance in the third quarter. Net interest revenue grew 4%
versus the second quarter of 2021, driven by further expansion of
our interest-earning asset base, including strength in lending
activity and rising investment portfolio balances. This expansion
more than offset a decline in securities lending revenue as well as
a lower average yield on outstanding margin loans. Asset management
and administration fees increased 5% sequentially, driven by rising
balances in both proprietary and third-party mutual fund and ETF
offerings and advisory solutions. Trading revenue edged up 1% as a
higher proportion of derivatives bolstered revenue per trade in the
third quarter, offsetting the impact of an 8% slowdown in activity
overall. Turning to expenses, our total GAAP spending declined 9%
sequentially to $2.6 billion, which included $104 million in
acquisition and integration-related costs and $153 million in
amortization of acquired intangibles. Exclusive of these items (1),
adjusted total expenses were down 8% quarter-over-quarter. The
sequential declines in GAAP and adjusted expenses largely reflect
lower Other expenses due to the non-recurring nature of the
regulatory charge in the second quarter. The combination of our
revenue growth and steady expense discipline enabled us to produce
a 44.0% pre-tax profit margin – 49.6% on an adjusted basis (1) –
our highest quarterly level since late 2019.”
Mr. Crawford concluded, “As we navigated the third quarter’s
mixed macroeconomic environment, we worked to further enhance our
liquidity position and streamline our capital structure. In August,
we issued $850 million in long-term senior notes, marking our third
debt issuance in 2021. We also completed a tender offer to exchange
nearly $2 billion of TD Ameritrade Holding Corporation debt for an
equal amount of equivalent Charles Schwab Corporation debt. Both
organic client activity and the previously announced bank deposit
account migrations helped our consolidated balance sheet reach
$607.5 billion as of September 30, and the company’s preliminary
Tier 1 Leverage Ratio was 6.3%. Our ongoing ability to maintain a
healthy balance sheet and strong capital base enabled us to deliver
a 12% return on equity and 23% ROTCE (1) for the quarter. Supported
by the outstanding work of the entire Schwab team, we continue to
operate from a position of strength, leveraging our sustained
business momentum to keep building long-term stockholder
value.”
(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; integration of TD Ameritrade;
strategic initiatives; investments to attract and retain talent,
improve service and the client experience, expand products,
services and offerings to meet client needs, diversify revenues,
and drive scale and efficiency; balance sheet and capital base
strength; and stockholder value. 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 independent 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 and retain 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 migration 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 32.7
million active brokerage accounts, 2.2 million corporate retirement
plan participants, 1.6 million banking accounts, and approximately
$7.61 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 September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Net Revenues
Interest revenue
$
2,153
$
1,432
$
6,236
$
4,626
Interest expense
(123
)
(89
)
(348
)
(322
)
Net interest revenue
2,030
1,343
5,888
4,304
Asset management and administration fees
(1)
1,101
860
3,164
2,488
Trading revenue
964
181
3,135
562
Bank deposit account fees
323
—
1,011
—
Other
152
64
614
161
Total net revenues
4,570
2,448
13,812
7,515
Expenses Excluding Interest
Compensation and benefits
1,303
840
4,051
2,556
Professional services
250
194
723
574
Occupancy and equipment
246
155
722
449
Advertising and market development
119
66
363
203
Communications
144
73
457
226
Depreciation and amortization
140
97
404
284
Amortization of acquired intangible
assets
153
25
461
43
Regulatory fees and assessments
64
36
208
106
Other
140
73
733
250
Total expenses excluding interest
2,559
1,559
8,122
4,691
Income before taxes on income
2,011
889
5,690
2,824
Taxes on income
485
191
1,415
660
Net Income
1,526
698
4,275
2,164
Preferred stock dividends and other
120
83
364
171
Net Income Available to Common
Stockholders
$
1,406
$
615
$
3,911
$
1,993
Weighted-Average Common Shares
Outstanding:
Basic
1,888
1,289
1,885
1,288
Diluted
1,898
1,294
1,895
1,294
Earnings Per Common Shares
Outstanding (2):
Basic
$
.74
$
.48
$
2.07
$
1.55
Diluted
$
.74
$
.48
$
2.06
$
1.54
(1)
Includes fee waivers of $83
million and $246 million for the three and nine months ended
September 30, 2021, respectively, and $44 million and $59 million
for the three and nine months ended September 30, 2020,
respectively.
(2)
For the three and nine months
ended September 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)
Q3-21 %
change
2021
2020
vs.
vs.
Third
Second
First
Fourth
Third
(In millions, except per share amounts and
as noted)
Q3-20
Q2-21
Quarter
Quarter
Quarter
Quarter
Quarter
Net Revenues
Net interest revenue
51
%
4
%
$
2,030
$
1,947
$
1,911
$
1,809
$
1,343
Asset management and administration
fees
28
%
5
%
1,101
1,047
1,016
987
860
Trading revenue
N/M
1
%
964
955
1,216
854
181
Bank deposit account fees
N/M
(4
)%
323
337
351
355
—
Other
138
%
(37
)%
152
241
221
171
64
Total net revenues
87
%
1
%
4,570
4,527
4,715
4,176
2,448
Expenses Excluding Interest
Compensation and benefits
55
%
(1
)%
1,303
1,318
1,430
1,398
840
Professional services
29
%
1
%
250
247
226
269
194
Occupancy and equipment
59
%
3
%
246
239
237
254
155
Advertising and market development
80
%
(7
)%
119
128
116
123
66
Communications
97
%
(13
)%
144
166
147
127
73
Depreciation and amortization
44
%
4
%
140
135
129
130
97
Amortization of acquired intangible
assets
N/M
(1
)%
153
154
154
147
25
Regulatory fees and assessments
78
%
(3
)%
64
66
78
57
36
Other
92
%
(61
)%
140
355
238
195
73
Total expenses excluding interest
64
%
(9
)%
2,559
2,808
2,755
2,700
1,559
Income before taxes on income
126
%
17
%
2,011
1,719
1,960
1,476
889
Taxes on income
154
%
7
%
485
454
476
341
191
Net Income
119
%
21
%
$
1,526
$
1,265
$
1,484
$
1,135
$
698
Preferred stock dividends and other
45
%
(19
)%
120
148
96
85
83
Net Income Available to Common
Stockholders
129
%
26
%
$
1,406
$
1,117
$
1,388
$
1,050
$
615
Earnings per common share (1):
Basic
54
%
25
%
$
.74
$
.59
$
.74
$
.57
$
.48
Diluted
54
%
25
%
$
.74
$
.59
$
.73
$
.57
$
.48
Dividends declared per common share
—
—
$
.18
$
.18
$
.18
$
.18
$
.18
Weighted-average common shares
outstanding:
Basic
46
%
—
1,888
1,886
1,882
1,848
1,289
Diluted
47
%
—
1,898
1,896
1,892
1,855
1,294
Performance Measures
Pre-tax profit margin
44.0
%
38.0
%
41.6
%
35.3
%
36.3
%
Return on average common stockholders’
equity (annualized) (2)
12
%
10
%
12
%
11
%
10
%
Financial Condition (at quarter
end, in billions)
Cash and cash equivalents
25
%
13
%
$
34.3
$
30.3
$
48.6
$
40.3
$
27.5
Cash and investments segregated
43
%
6
%
42.3
39.9
40.4
50.4
29.6
Receivables from brokerage clients —
net
N/M
5
%
86.6
82.2
74.7
64.4
25.4
Available for sale securities
24
%
5
%
377.0
359.6
341.6
337.4
303.8
Bank loans — net
42
%
9
%
31.6
28.9
25.4
23.8
22.3
Total assets
45
%
6
%
607.5
574.5
563.5
549.0
419.4
Bank deposits
23
%
7
%
395.3
368.6
369.9
358.0
320.7
Payables to brokerage clients
118
%
8
%
113.1
105.0
101.3
104.2
52.0
Short-term borrowings
N/M
(14
)%
3.0
3.5
2.5
—
—
Long-term debt
150
%
4
%
19.5
18.7
17.7
13.6
7.8
Stockholders’ equity
83
%
—
57.4
57.5
55.6
56.1
31.3
Other
Full-time equivalent employees (at quarter
end, in thousands)
47
%
—
32.4
32.5
32.0
32.0
22.1
Capital expenditures — purchases of
equipment, office facilities, and
property, net (in millions)
44
%
(22
)%
$
176
$
225
$
209
$
200
$
122
Expenses excluding interest as a
percentage of average client assets
(annualized)
0.13
%
0.15
%
0.16
%
0.17
%
0.14
%
Clients’ Daily Average Trades
(DATs) (in thousands)
N/M
(8
)%
5,549
6,042
8,414
5,796
1,460
Number of Trading Days
—
2
%
64.0
63.0
61.0
63.0
64.0
Revenue Per Trade (3)
40
%
8
%
$
2.71
$
2.51
$
2.37
$
2.34
$
1.94
Note: The above table reflects
the recognition of TD Ameritrade’s assets acquired and liabilities
assumed at 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 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.
(2)
Return on average common
stockholders’ equity is calculated using net income available to
common stockholders divided by average common stockholders’
equity.
(3)
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 September
30,
Nine Months Ended September
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
$
38,732
$
11
0.12
%
$
32,628
$
8
0.10
%
$
39,848
$
27
0.09
%
$
40,410
$
112
0.37
%
Cash and investments segregated
42,617
5
0.04
%
33,214
14
0.16
%
43,914
19
0.06
%
30,162
128
0.56
%
Receivables from brokerage clients
80,873
628
3.04
%
21,242
125
2.31
%
74,831
1,800
3.17
%
19,442
404
2.73
%
Available for sale securities (1)
362,204
1,187
1.30
%
276,081
1,103
1.59
%
348,477
3,381
1.29
%
236,204
3,434
1.93
%
Bank loans
30,235
161
2.12
%
21,668
134
2.46
%
27,336
448
2.18
%
20,248
411
2.70
%
Total interest-earning assets
554,661
1,992
1.42
%
384,833
1,384
1.43
%
534,406
5,675
1.41
%
346,466
4,489
1.72
%
Securities lending revenue (2)
159
47
557
133
Other interest revenue (2)
2
1
4
4
Total interest-earning assets (3)
$
554,661
$
2,153
1.54
%
$
384,833
$
1,432
1.47
%
$
534,406
$
6,236
1.55
%
$
346,466
$
4,626
1.77
%
Funding sources
Bank deposits
$
384,561
$
14
0.01
%
$
310,685
$
12
0.02
%
$
371,974
$
40
0.01
%
$
275,860
$
81
0.04
%
Payables to brokerage clients
92,498
3
0.01
%
40,169
1
0.01
%
89,087
7
0.01
%
36,001
10
0.04
%
Short-term borrowings (4)
3,485
3
0.34
%
5
—
0.12
%
2,617
6
0.32
%
16
—
0.29
%
Long-term debt
19,030
99
2.10
%
7,992
69
3.46
%
17,225
281
2.18
%
8,014
212
3.53
%
Total interest-bearing liabilities
499,574
119
0.09
%
358,851
82
0.09
%
480,903
334
0.09
%
319,891
303
0.13
%
Non-interest-bearing funding sources
(3)
55,087
25,982
53,503
26,575
Securities lending expense (2)
4
10
16
26
Other interest expense (2)
—
(3
)
(2
)
(7
)
Total funding sources (3)
$
554,661
$
123
0.09
%
$
384,833
$
89
0.09
%
$
534,406
$
348
0.09
%
$
346,466
$
322
0.13
%
Net interest revenue
$
2,030
1.45
%
$
1,343
1.38
%
$
5,888
1.46
%
$
4,304
1.64
%
(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 September
30,
Nine Months Ended September
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
$
149,508
$
112
0.30
%
$
199,822
$
153
0.30
%
$
158,749
$
348
0.29
%
$
205,544
$
469
0.30
%
Fee waivers
(83
)
(44
)
(246
)
(59
)
Schwab money market funds
149,508
29
0.08
%
199,822
109
0.22
%
158,749
102
0.09
%
205,544
410
0.27
%
Schwab equity and bond funds, ETFs, and
collective trust funds (CTFs)
441,344
99
0.09
%
306,899
75
0.10
%
411,312
279
0.09
%
290,759
219
0.10
%
Mutual Fund OneSource® and other
non-transaction fee funds
234,582
188
0.32
%
197,809
154
0.31
%
228,643
540
0.32
%
187,153
436
0.31
%
Other third-party mutual funds and ETFs
(1)
918,363
187
0.08
%
469,822
85
0.07
%
888,003
533
0.08
%
446,007
235
0.07
%
Total mutual funds, ETFs, and CTFs (2)
$
1,743,797
503
0.11
%
$
1,174,352
423
0.14
%
$
1,686,707
1,454
0.12
%
$
1,129,463
1,300
0.15
%
Advice solutions (2)
Fee-based
$
463,827
511
0.44
%
$
307,983
373
0.48
%
$
445,521
1,469
0.44
%
$
277,297
999
0.48
%
Non-fee-based
90,649
—
—
73,850
—
—
87,758
—
—
71,438
—
—
Total advice solutions
$
554,476
511
0.37
%
$
381,833
373
0.39
%
$
533,279
1,469
0.37
%
$
348,735
999
0.38
%
Other balance-based fees (3)
632,806
68
0.04
%
443,929
51
0.05
%
604,995
195
0.04
%
428,191
150
0.05
%
Other (4)
19
13
46
39
Total asset management and
administration fees
$
1,101
$
860
$
3,164
$
2,488
(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 Client™, Schwab Managed Portfolios™,
Managed Account Select®, Schwab Advisor Network®, Windhaven®
Strategies, ThomasPartners® Strategies, Schwab Index Advantage®
advised retirement plan balances, Schwab Intelligent Portfolios®,
Institutional Intelligent Portfolios®, 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)
Q3-21 %
Change
2021
2020
vs.
vs.
Third
Second
First
Fourth
Third
(In billions, at quarter end, except as
noted)
Q3-20
Q2-21
Quarter
Quarter
Quarter
Quarter
Quarter
Assets in client accounts
Schwab One®, certain cash equivalents and
bank deposits
36
%
7
%
$
503.9
$
469.5
$
467.3
$
458.4
$
370.3
Bank deposit account balances
N/M
(5
)%
153.3
161.9
164.2
165.9
—
Proprietary mutual funds (Schwab Funds®
and Laudus Funds®) and CTFs
Money market funds (1)
(22
)%
(3
)%
147.7
151.9
163.6
176.1
190.3
Equity and bond funds and CTFs (2)
33
%
1
%
167.4
165.9
152.9
142.9
125.5
Total proprietary mutual funds and
CTFs
—
(1
)%
315.1
317.8
316.5
319.0
315.8
Mutual Fund Marketplace® (3)
Mutual Fund OneSource® and other
non-transaction fee funds
15
%
(2
)%
234.7
240.2
227.3
223.9
203.6
Mutual fund clearing services
19
%
—
271.9
271.3
248.7
252.9
228.4
Other third-party mutual funds (4)
71
%
1
%
1,450.1
1,441.5
1,375.8
1,304.6
848.1
Total Mutual Fund Marketplace
53
%
—
1,956.7
1,953.0
1,851.8
1,781.4
1,280.1
Total mutual fund assets
42
%
—
2,271.8
2,270.8
2,168.3
2,100.4
1,595.9
Exchange-traded funds (ETFs)
Proprietary ETFs (2)
49
%
3
%
251.6
245.2
220.9
198.8
168.9
Other third-party ETFs
131
%
2
%
1,183.7
1,158.8
1,035.1
947.3
512.6
Total ETF assets
111
%
2
%
1,435.3
1,404.0
1,256.0
1,146.1
681.5
Equity and other securities
105
%
—
2,976.7
2,988.8
2,721.0
2,504.7
1,453.2
Fixed income securities
12
%
(1
)%
356.8
359.6
364.5
377.1
318.0
Margin loans outstanding
N/M
5
%
(83.8
)
(79.8
)
(72.2
)
(60.9
)
(23.6
)
Total client assets
73
%
1
%
$
7,614.0
$
7,574.8
$
7,069.1
$
6,691.7
$
4,395.3
Client assets by business
Investor Services
74
%
—
$
4,137.7
$
4,146.2
$
3,865.9
$
3,667.9
$
2,377.7
Advisor Services
72
%
1
%
3,476.3
3,428.6
3,203.2
3,023.8
2,017.6
Total client assets
73
%
1
%
$
7,614.0
$
7,574.8
$
7,069.1
$
6,691.7
$
4,395.3
Net growth in assets in client
accounts (for the quarter ended)
Net new assets by business
Investor Services (5)
N/M
30
%
$
57.9
$
44.5
$
65.1
$
939.2
$
18.9
Advisor Services (6)
151
%
26
%
81.1
64.3
68.7
751.5
32.3
Total net new assets
171
%
28
%
$
139.0
$
108.8
$
133.8
$
1,690.7
$
51.2
Net market (losses) gains
N/M
N/M
(99.8
)
396.9
243.6
605.7
234.0
Net growth (decline)
(86
)%
(92
)%
$
39.2
$
505.7
$
377.4
$
2,296.4
$
285.2
New brokerage accounts (in
thousands, for the quarter ended) (7)
99
%
(29
)%
1,178
1,657
3,153
15,774
592
Client accounts (in thousands)
Active brokerage accounts
127
%
1
%
32,675
32,265
31,902
29,629
14,393
Banking accounts
6
%
—
1,580
1,574
1,608
1,499
1,486
Corporate retirement plan participants
28
%
3
%
2,207
2,149
2,105
2,054
1,722
(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 September 30, 2021, off-platform equity
and bond funds, CTFs, and ETFs were $21.0 billion, $6.0 billion,
and $87.5 billion, respectively.
(3)
Excludes all proprietary mutual
funds and ETFs.
(4)
As of September 30, 2021,
third-party money funds were $14.2 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.
(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.
N/M Not meaningful. Percentage changes greater than 200% are
presented as not meaningful.
The Charles Schwab Corporation
Monthly Activity Report For September 2021
2020
2021
Change
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Mo.
Yr.
Market Indices (at month end)
Dow Jones Industrial Average
27,782
26,502
29,639
30,606
29,983
30,932
32,982
33,875
34,529
34,503
34,935
35,361
33,844
(4
)%
22
%
Nasdaq Composite
11,168
10,912
12,199
12,888
13,071
13,192
13,247
13,963
13,749
14,504
14,673
15,259
14,449
(5
)%
29
%
Standard & Poor’s® 500
3,363
3,270
3,622
3,756
3,714
3,811
3,973
4,181
4,204
4,298
4,395
4,523
4,308
(5
)%
28
%
Client Assets (in billions of
dollars)
Beginning Client Assets
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
7,642.7
7,838.2
Net New Assets (1)
20.0
1,596.9
32.1
61.7
34.2
37.0
62.6
37.2
28.1
43.5
44.3
51.8
42.9
(17
)%
115
%
Net Market (Losses) Gains
(114.4
)
(113.7
)
510.4
209.0
33.7
103.9
106.0
229.8
31.5
135.6
23.6
143.7
(267.1
)
Total Client Assets (at month end)
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
7,642.7
7,838.2
7,614.0
(3
)%
73
%
Core Net New Assets (2)
20.0
25.6
32.1
61.7
34.2
51.4
62.6
37.2
28.1
43.5
44.3
51.8
42.9
(17
)%
115
%
Receiving Ongoing Advisory Services (at
month end) (3)
Investor Services
361.2
425.3
457.1
471.8
472.4
481.3
495.2
511.1
517.8
525.1
531.9
542.5
530.1
(2
)%
47
%
Advisor Services (4)
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
3,256.5
3,333.4
3,253.2
(2
)%
74
%
Client Accounts (at month end, in
thousands)
Active Brokerage Accounts
14,393
29,013
29,202
29,629
30,534
31,523
31,902
31,877
32,110
32,265
32,386
32,513
32,675
—
127
%
Banking Accounts
1,486
1,496
1,504
1,499
1,518
1,542
1,608
1,562
1,584
1,574
1,578
1,594
1,580
(1
)%
6
%
Corporate Retirement Plan Participants
1,722
2,072
2,045
2,054
2,069
2,093
2,105
2,116
2,130
2,149
2,159
2,188
2,207
1
%
28
%
Client Activity
New Brokerage Accounts (in thousands)
(5)
184
14,718
430
626
1,095
1,211
847
609
549
499
402
402
374
(7
)%
103
%
Client Cash as a Percentage of Client
Assets (6)
12.8
%
13.4
%
12.4
%
12.3
%
12.2
%
11.8
%
11.5
%
10.9
%
10.8
%
10.5
%
10.4
%
10.3
%
10.8
%
50 bp
(200) bp
Derivative Trades as a Percentage of Total
Trades
14.5
%
20.5
%
19.4
%
18.9
%
17.4
%
16.6
%
18.5
%
20.4
%
20.9
%
20.6
%
22.2
%
23.1
%
23.1
%
—
860 bp
Selected Average Balances (in millions
of dollars)
Average Interest-Earning Assets (7,8)
392,784
442,119
466,677
482,394
517,306
514,885
520,074
527,194
528,642
536,146
546,579
552,372
565,379
2
%
44
%
Average Margin Balances (8)
22,780
48,095
53,916
59,142
62,999
69,064
71,266
72,863
75,921
78,410
79,910
81,021
81,705
1
%
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
151,275
150,896
152,330
1
%
N/M
Mutual Fund and Exchange-Traded
Fund
Net Buys (Sells) (10,11) (in millions
of dollars)
Equities
(1,372
)
(1,305
)
10,980
13,875
8,234
14,246
16,301
13,422
9,854
10,873
7,418
8,808
7,596
Hybrid
(12
)
(553
)
(402
)
359
407
832
1,133
877
1
390
666
569
335
Bonds
6,857
6,765
5,956
12,169
13,601
9,334
8,237
8,940
5,906
10,101
6,917
8,044
6,232
Net Buy (Sell) Activity (in millions of
dollars)
Mutual Funds (10)
757
(2,260
)
2,832
6,336
5,713
6,273
6,190
5,754
2,022
5,872
2,644
3,876
(308
)
Exchange-Traded Funds (11)
4,716
7,167
13,702
20,067
16,529
18,139
19,481
17,485
13,739
15,492
12,357
13,545
14,471
Money Market Funds
(6,627
)
(4,021
)
(5,908
)
(7,332
)
(5,248
)
(4,405
)
(4,528
)
(5,153
)
(3,988
)
(3,806
)
(2,501
)
(1,372
)
(1,512
)
Note: Certain supplemental details related to the information above
can be found at: https://www.aboutschwab.com/financial-reports.
(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.
(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.
(11)
Represents the principal value of
client ETF transactions handled by Schwab, including transactions
in proprietary ETFs.
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 third 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 September
30,
Nine Months Ended September
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)
$
2,559
$
1,526
$
1,559
$
698
$
8,122
$
4,275
$
4,691
$
2,164
Acquisition and integration-related costs
(1)
(104
)
104
(42
)
42
(367
)
367
(160
)
160
Amortization of acquired intangible
assets
(153
)
153
(25
)
25
(461
)
461
(43
)
43
Income tax effects (2)
N/A
(61
)
N/A
(16
)
N/A
(208
)
N/A
(49
)
Adjusted total expenses (non-GAAP),
Adjusted net income (non-GAAP)
$
2,302
$
1,722
$
1,492
$
749
$
7,294
$
4,895
$
4,488
$
2,318
(1)
Acquisition and
integration-related costs for the three and nine months ended
September 30, 2021 primarily consist of $58 million and $227
million of compensation and benefits, $35 million and $99 million
of professional services, and $7 million and $30 million of
occupancy and equipment. Acquisition and integration-related costs
for the three and nine months ended September 30, 2020 primarily
consist of professional services and compensation and benefits.
(2)
The income tax effects 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 September
30,
Nine Months Ended September
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)
$
2,011
44.0
%
$
889
36.3
%
$
5,690
41.2
%
$
2,824
37.6
%
Acquisition and integration-related
costs
104
2.3
%
42
1.7
%
367
2.7
%
160
2.1
%
Amortization of acquired intangible
assets
153
3.3
%
25
1.1
%
461
3.3
%
43
0.6
%
Adjusted income before taxes on income
(non-GAAP), Adjusted pre-tax profit margin (non-GAAP)
$
2,268
49.6
%
$
956
39.1
%
$
6,518
47.2
%
$
3,027
40.3
%
Three Months Ended September
30,
Nine Months Ended September
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)
$
1,406
$
.74
$
615
$
.48
$
3,911
$
2.06
$
1,993
$
1.54
Acquisition and integration-related
costs
104
.05
42
.03
367
.19
160
.12
Amortization of acquired intangible
assets
153
.08
25
.02
461
.24
43
.03
Income tax effects
(61
)
(.03
)
(16
)
(.02
)
(208
)
(.10
)
(49
)
(.03
)
Adjusted net income available to common
stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)
$
1,602
$
.84
$
666
$
.51
$
4,531
$
2.39
$
2,147
$
1.66
Three Months Ended September
30,
Nine Months Ended September
30,
2021
2020
2021
2020
Return on average common stockholders’
equity (GAAP)
12
%
10
%
11
%
12
%
Average common stockholders’ equity
$
47,492
$
25,810
$
47,908
$
22,511
Less: Average goodwill
(11,952
)
(1,735
)
(11,952
)
(1,482
)
Less: Average acquired intangible assets —
net
(9,609
)
(1,268
)
(9,762
)
(693
)
Plus: Average deferred tax liabilities
related to goodwill and acquired intangible assets — net
1,895
67
1,913
67
Average tangible common equity
$
27,826
$
22,874
$
28,107
$
20,403
Adjusted net income available to common
stockholders (1)
$
1,602
$
666
$
4,531
$
2,147
Return on tangible common equity
(non-GAAP)
23
%
12
%
21
%
14
%
(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/20211015005150/en/
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