Chief Financial Officer

Adapt and Thrive

Staying the Course

2023 ended up being quite an adventurous year both for investors and our firm. Financial and geopolitical volatility and uncertainty, the continuation of our clients’ moving some of their transactional cash into higher-yielding alternatives (often with our active support and encouragement), and of course the onset of the regional banking crisis all buffeted Schwab throughout the year. And as our stock price dropped and we were subjected to some unfavorable (and often less than fully informed) media coverage, it would have been easy to lose confidence and second-guess our long-term proven strategy. But we have faced challenging times before, and we know from experience that focusing on our clients and taking the long view are the keys to success. And as difficult as this last year has been, we’re in an even stronger position today than 12 months ago—grateful as always for the trust our clients place in us, confident in our strategy, and excited about the opportunities before us.

Coming into the year, the path of inflation was top of mind as the Federal Reserve was forced to embark on its most aggressive interest rate tightening cycle in over four decades. This quick pivot into a hawkish stance weighed on equity and bond market returns throughout 2022. While improving economic data to start 2023 seemed to signal a favorable inflection point, this momentum was disrupted by the onset of the regional banking crisis. The combination of continued rate hikes throughout 2023 (albeit at a much slower pace than in the prior year) and concerns regarding a subset of the U.S. banking sector created a difficult environment for many financial services firms. That being said, our heterogeneous client base of nearly 35 million brokerage accounts, high percentage of FDIC-covered deposits, diversified liquidity profile, and limited credit exposure kept us well positioned to navigate the storm.

When going through a difficult time, it’s natural to seek a quick fix. However, when you have a foundation as strong as Schwab’s, including our Through Clients’ Eyes strategy that has been serving the needs of individual investors and the advisors who serve them for over five decades, the best choice is to stay the course and avoid short-sighted decisions that could undermine our “through the cycle” growth opportunity. Our company has had this long-term orientation since its inception, and we believe continuing to do so will allow us to keep delivering for our clients, employees, and stockholders.

Looking Back at 2023

Before we talk about what I believe is an exciting future ahead, let’s briefly revisit 2023. It’s clear that the one constant we can all count on each year is uncertainty—which is why I often talk about staying focused on the areas under our control. And that has never been truer than during this past year.

As you know, we do not attempt to predict changes in interest rates or market sentiment. Instead we remain solely focused on meeting the evolving needs of our clients with what we believe is a best-in-class modern wealth management platform. We accomplished that by further advancing our key strategic initiatives of scale and efficiency, win-win monetization, and client segmentation—including the successful conversion of approximately 90% of Ameritrade client assets and accounts during 2023. With one final group to be transitioned in May 2024, we are not quite ready to declare victory. Yet, it is still worth celebrating the relentless effort by our employees during the year—or really over the past 3+ years—to be on the verge of reaching this key milestone. Their hard work has put us in position to complete the largest and most ambitious integration in our industry’s history, with attrition below our initial assumptions and, most importantly, with no significant disruptions. Concurrent with this heavy lift, we also made meaningful progress in other key areas: launching new client experiences for our high net worth and trading clients; further bolstering our personalized and thematic investing solutions; and enhancing the digital capabilities for Registered Investment Advisors (RIAs) such as a streamlined Pledged Asset Line® origination process.

How was 2023 from a financial perspective? We typically begin every year with a set of assumptions that help us frame how things might unfold, but the actual trajectory of the year made those assumptions fairly irrelevant early on. With rates ultimately reaching a higher peak than most initially anticipated and the added complexity following the events of mid-March, 2023 unfolded much differently than we expected at the beginning of the year. Led by the “Magnificent Seven” and the broader technology sector, equity markets pushed higher—with the S&P 500® approaching an all-time high near year-end. Despite this strong performance, overall sentiment remained somewhat uneven as investors digested shifting signals regarding a “hard” versus “soft” landing for the economy; stabilizing, but still elevated, consumer prices; a restrictive housing market; and persistent global geopolitical tension. The increased yields available in this environment also led clients to increase their allocations to fixed income and investment cash products by approximately $400 billion in 2023, a continuation of a trend that emerged in 2022. In fact, this activity was something we actively encouraged by helping raise awareness of the yield-related products and solutions available across the Schwab platform. It’s a great example of our Through Clients’ Eyes strategy in action; while the behavior results in lower near-term revenue, it was the right thing for clients and therefore the right thing for Schwab long term, as that reallocated money stays at Schwab—where it is working to meet our clients’ investing needs.

Although the pace of this realignment activity decelerated substantially over the back half of 2023, the lower levels of client cash held on the balance sheet required us to utilize a greater amount of temporary supplemental funding. These short-term borrowings and certificates of deposit (CDs) cost more than our core funding sources, therefore weighing on our net interest margin. This tighter spread on a smaller interest-earning asset base, coupled with softer trading revenue, translated into 2023 total revenue declining by 9% versus the prior year. GAAP expense growth was 10%, which included $935 million of deal-related costs as well as $495 million in restructuring charges related to incremental cost savings expected to be realized in 2024. Exclusive of these items, adjusted total expenses4 came in at $11.0 billion, up 6% year-over-year. Unfortunately, part of the expense narrative for 2023 included some extremely hard personnel decisions that led to the elimination of approximately 6% of positions during the fourth quarter. We did not take these actions lightly, but these reductions, along with the rationalization of our real estate footprint, were in line with our long-standing prioritization of expense discipline. After the Ameritrade acquisition, and the robust growth during the years that followed, the firm was simply not right-sized for the road ahead. No matter how difficult the decision, we must always remain vigilant around expenses, as our low expense on client asset ratio remains one of our strongest competitive advantages. Not only does our leading cost-to-serve provide us with the flexibility to disrupt the industry to benefit investors—it also enables us to deliver solid financial results even when the wind is not at our back.

Total net revenues

(In billions)


Expense as a percentage of client assets, 2003–2023

(In basis points)


2023 was an excellent example of that in action, as our pre-tax profit margin and adjusted pre-tax profit margin7 were 33.9% and 41.5%, respectively. While these figures are off recent peak levels, generating these results against what proved to be a challenging backdrop speaks to the resiliency of our diversified financial model. In fact, this was the 11th consecutive year of pre-tax margins greater than 30% and the fifth consecutive year of generating an adjusted margin7 above 40%.

Similar to other aspects of our 2023 story, the tactical execution of our capital management strategy evolved throughout the year. Following March, we made the decision to pause our buyback program and focus on building up our capital levels inclusive of accumulated other comprehensive income (AOCI)—even though our ratios were already significantly above current requirements. We felt this pivot was appropriate given our expectations that AOCI will eventually be included in our regulatory capital requirement, even though we’re confident the combination of our ability to generate capital organically and the lower capital intensity of our model will enable us to exceed this new standard years before we’re required to do so. Bringing our ratios inclusive of AOCI to such levels will eventually enable our return to a “growth plus” story.

I am grateful for the continued trust of our clients and the hard work of my colleagues, who accomplished so much under challenging circumstances. And while we will certainly look to learn from this experience, I leave this past year with even greater confidence in our all-weather model. The ability to still deliver healthy business and financial results in a stressful environment demonstrates the potential opportunity still in front of us as these temporary headwinds gradually become tailwinds.

Tier 1 leverage ratio


We remain solely focused on meeting the evolving needs of our clients with what we believe is a best-in-class modern wealth management platform.

Looking Ahead to 2024

As we step into 2024, I’d characterize this as the final transition year en route to the next chapter in our illustrious history. Once we complete that final Ameritrade client conversion during the first half of the year, we’ll be able to fully unleash the potential of the combined offering to clients.

As we move to successfully close the door on this great endeavor that began in late 2019, we anticipate a number of external dynamics to impact our business. As has been the case for the last several years, the trajectory of interest rates, investor sentiment, and the level of client engagement will shape our financial performance. The movement of interest rates across the curve will influence the available yields on our floating-rate, interest-earning assets as well as the amount of transactional sweep cash maintained in our clients’ accounts. As a reminder, we define transactional sweep cash9 to include client cash held on the balance sheet and Bank Deposit Account (BDA) balances.

Given the uncertainty surrounding the Federal Reserve’s approach to rates going forward as well as client engagement levels against an uneven backdrop, we decided to express a potential financial outlook using mathematical illustrations instead of a defined scenario. Remember, these illustrations do not represent forecasts or explicit expectations, but rather attempt to frame potential financial performance based on how the rate environment and client trading activity could evolve throughout 2024. Key assumptions underpinning the three calculations include: 6.5% equity market appreciation and a 75-basis-point reduction in Fed Funds—consistent with the December 2023 Dot Plot.

On top of these assumptions, we flex the level of transactional sweep cash and daily average trades (DATs). The comparison base for sweep cash is the total ending balance as of December 31, 2023, while DAT volume is benchmarked on a full-year basis. With all that in mind, the illustrations take on the following form:

  1. Elevated engagement and cash build: Revenue of 5%–6%
    a. DATs up 5%
    b. Transactional sweep cash up 5%

  2. Carryover from 2023: Revenue of 1%–2%
    a. DATs flat
    b. Transactional sweep cash flat

  3. Softer engagement and cash decline: Revenue of (6%)–(5%)
    a. DATs down 5%
    b. Transactional sweep cash down 10%

These illustrations were developed to help you form your own expectations for our revenue growth based on your beliefs regarding these drivers. To aid with this exercise, we’ve also provided estimated annual revenue sensitivities for certain financial drivers within our 2024 Winter Business Update materials.10 

In terms of expenses, we are targeting essentially flat year-over-year growth. Our 2024 expense plan still funds the outlays needed to support our growing business. We’ve also allocated dollars to additional discretionary growth and efficiency initiatives that we expect to help drive value for years to come. These outlays are offset by the approximately $500 million of incremental savings as well as partial benefits from the remaining Ameritrade expense synergies that will start to be incorporated into our run rate during the latter part of the year.

Our approach to capital management remains the same. As always, our primary objective is to support the ongoing growth of the business and then seek to maintain a common dividend that reflects our earnings power over time. Although opportunistic capital return beyond the dividend is likely to remain on hold for the time being, we anticipate that becoming a meaningful part of the formula conversation once the appropriate levels have been achieved.

While our financial path in 2024 will be influenced by a number of factors, we are confident that momentum will build throughout the year and carry over into the subsequent year. In fact, the mathematical illustrations would imply we exit the year with quarterly adjusted earnings of somewhere around $0.80 to $0.90, or a year-over-year growth rate of approximately 20%. While that level of potential earnings power growth is quite powerful on its own, it is even more impressive considering it would be occurring in a period when rates are expected to decline by at least 75 basis points. This demonstrates the strength of our diversified business model and its ability to deliver differentiated results.


Again, it is not lost on me how challenging, and at times frustrating, last year was for all of us—including for our stockholders. However, the long-term investment thesis for Schwab remains firmly intact—and we are taking steps to further enhance it every day.

When you cut through the transitory, cyclical noise and focus on what lies beneath that long-term thesis, it is hard not to be enthusiastic. We have a time-tested strategy, strong competitive positioning, a healthy organic growth recipe, and a resilient financial model. It is these foundational elements that give us the courage and the confidence to stay the course when things get tough. We believe that by continuing to operate every aspect of the firm Through Clients’ Eyes as we have for the past five decades, we will continue to deliver long-term value for all stakeholders.

As always, we are sincerely appreciative of your continued support of our firm and its mission to help investors achieve their financial goals. I look forward to keeping you updated as we venture into this exciting next chapter.

Crawford signature

Peter Crawford
March 1, 2024

Long-term investment thesis

Premier Asset Gatherer

High single to low double-digit total client asset growth

Diversified Revenue Model

Growth in line with (or potentially faster than) asset growth

Disciplined Expense Management

Leverage scale and efficiency to drive down expense on client assets

Efficient Utilization of Capital

Thoughtful capital management


4. Further details on non-GAAP financial measures are included within our 10-K filed on February 23, 2024.

7. Adjusted pre-tax profit margin is calculated as adjusted income before taxes on income divided by net revenues. Further details on non-GAAP financial measures are included within our 10-K filed on February 23, 2024.

9. Transactional Sweep Cash includes bank sweep deposits, broker-dealer free credits, other client cash held on the balance sheet (bank checking and savings deposits as well as broker-dealer non-interest-bearing credits), and Bank Deposit Account balances; excludes proprietary and third-party CDs.

10. 2024 Winter Business Update materials are available at