CFO commentary
Schwab strives to keep our stockholders and analysts informed of the firm’s bigger financial picture. Hear from our CFO.
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Periodically, Peter Crawford, our Chief Financial Officer, will use this forum to provide insight and commentary regarding Schwab's financial picture. For any questions, please contact Investor Relations via email or call: Jeff Edwards, Managing Director, Head of Investor Relations: 415-667-1524.
The commentary in this section speaks only as of the date specified below. The company makes no commitment to update any of this information.
Latest Commentary
CFO Commentary
January 18, 2023
This morning’s earnings release highlighted the power of Schwab’s consistent strategy, as our focus on meeting the needs of individual investors and the advisors who serve them helped drive continued business momentum. While equity and bond markets suffered their worst year since 2008, clients turned to us for help. During 2022, they entrusted us with over $425 billion in net new assets, an amount which was impacted by record tax-related outflows in April. We ended the year on a high note, gathering $128 billion of net new assets in the fourth quarter alone – representing an annualized organic growth rate of approximately 8%. With the help of higher rates, we converted this sustained success with clients into record full-year financial results – GAAP earnings per share of $3.50 or $3.90 on an adjusted basis(1).
While these results speak for themselves, I thought it might be helpful to call out a few items included within today’s release as well as spend a moment on Bank Deposit Account (BDA) revenue and cash sorting.
Other revenue came in at $174 million for 4Q22, down 5% relative to the third quarter. The primary driver for the sequential change was an incremental provision for credit loss of approximately $25 million driven by the response of our model-based methodology to the combination of forecasted declines in U.S. home prices and higher interest rates. I want to emphasize that there has been no noticeable change in delinquencies or current payment trends in Schwab’s loan book. The increased reserve was entirely based on current and forecasted trends across the broader economy. During recent cycles, as macroeconomic conditions rebounded, we have been able to release credit reserves – and in some instances end up in a net recovery position.
For the BDA revenue line, given that we continue to get a fair number of questions regarding this item, we thought it would be helpful to revisit certain mechanics as well as reiterate where you can find supplemental information. While the details of this arrangement are fairly intricate, the financial drivers are reasonably straightforward. For the purposes of this commentary, I am going to focus solely on the Insured Deposit Account (IDA) balances that are held at two North American subsidiaries of The Toronto-Dominion Bank (TD). These IDA balances represent over 95% of the total balances within the BDA structure as of December 31, 2022. As a reminder, we provide updated balance information on a quarterly basis within the appendix of our business update materials as well as monthly data via the SMART Supplement. Both documents are available on the Financial Reports & Presentations page of the Schwab Investor Relations website.
Note: BDA = Bank deposit account. IDA = Insured deposit account.
We also provide data regarding the net rate earned by Schwab on both floating and fixed balances within the aforementioned quarterly business update materials. The net rate is a function of gross yields less applicable costs. Using floating balances as an example, the gross yield is based on the Fed Funds Effective Rate. You then need to subtract the TD management fee, applicable FDIC fees, and the current rate paid to clients. The cash solutions page on the Ameritrade website is the best source to track the rate paid on clients’ transactional cash sitting within the BDA. To further the example, here is a build-up of the net rate on floating IDA balances as of January 2023:
Note: FDIC = Federal Deposit Insurance Corporation. 1. FDIC rate increase to approximately 6 basis points went into effect on January 1, 2023. 2. Ameritrade client rate paid on transactional cash balances increased by 5 basis points to 35 basis points effective January 1, 2023.
Note: FDIC = Federal Deposit Insurance Corporation. Source for FF Effective: Effective Federal Funds Rate - FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)
Finally, I’d be remiss to not at least mention client cash sorting. Activity through year-end continued to trend in-line with our expectations, as December 2022 average interest-earning assets equaled $520 billion – a 14% decline from the prior December average or the midpoint of the 13% – 15% range provided in my previous commentary published last month. Additionally, end of period interest-earning assets also closed the year at $520 billion.
At the upcoming Winter Business Update scheduled for January 27, we look forward to sharing additional empirical data and insights regarding client sorting behavior and quantitative analysis around this topic. These analyses bolster our confidence that we’re entering the later innings (though not the last inning) of the cycle and that net sorting activity should abate at some point during 2023.
(1) Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results can be found on pages 11–12 of our earnings release dated January 18, 2023.
Forward-Looking Statements
This commentary contains forward-looking statements relating to Schwab’s strategy; business momentum; client success; the release of credit reserves; and client cash sorting. 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; manage expenses; and monetize client assets. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including the level of interest rates and equity valuations; housing prices; client cash allocation decisions; client sensitivity to rates; competitive pressures on pricing; level of client assets, including cash balances; capital and liquidity needs and management; balance sheet positioning relative to changes in interest rates; interest earning asset mix and growth; the migration of bank deposit account balances; and other factors set forth in the company’s most recent reports on Form 10-K and Form 10-Q.
Previous years
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December 14, 2022
While we look forward to unpacking some of the drivers helping to support our sustained success with clients at the Winter Business Update next month, I wanted to take a moment today to provide some perspective on several notable topics, including total accounts, average interest-earning assets (AIEA), and client cash sorting. Read more >
October 18, 2022
By now, you’ve had a chance to digest our recent earnings release, which discussed our strong business and financial performance in Q3. In our conversations following the release, we heard positive feedback on those results – but also lingering questions around client cash sorting and the implications for our net interest margin and net interest revenue. Read more >
August 1, 2022
As you saw in our press release, we’ve purchased approximately 15 million shares of Schwab nonvoting common stock directly from TD Bank Group (“TD Bank”) for $1 billion. Given this is our first repurchase activity in some time, I thought it might be helpful to provide a bit more perspective on the transaction. Read more >
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May 14, 2021
I wanted to share some perspective around an item in this month’s SMART report related to the number of active brokerage accounts. As you may have noticed, despite another very strong month in new account openings the number of active brokerage accounts actually declined month over month. Rest assured that this is not due to a surge in attrition of our longstanding clients, but rather a natural outcome from the combination of unprecedented volume of new accounts we opened in the first quarter and the methodology we use to screen for active accounts. Read more >
March 12, 2021
Starting in early 2020, words like “unprecedented” and “historic” became fixtures in our descriptions of the environment, and the trend has persisted thus far in 2021. As we all continue to grapple with the effects of the COVID-19 pandemic, these first few months of the new year have seen additional political and social unrest, severe weather conditions across the country, and fresh evidence of the enormous strides that Schwab and others in our industry have made in making it easier, simpler, and less expensive for individuals to invest. Read more >
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October 6, 2020
Today we announced that we’ve completed the acquisition of TD Ameritrade (“TDA”) in an all-stock transaction with an estimated value of approximately $22 billion. Per the merger agreement, TD Ameritrade stockholders are entitled to receive 1.0837 Schwab shares for each TD Ameritrade share owned, which represents a 17% premium over the 30-day volume weighted average price exchange ratio as of November 20, 2019. Read more >
June 12, 2020
On May 26, 2020, we completed the acquisition of the assets of USAA’s Investment Management Company, a very important milestone for Schwab, USAA members, and the ~400 employees from USAA who joined our company. Given how much the environment has changed since we last provided specific information on this acquisition, I wanted to give you an update on certain relevant data. The transaction brought to Schwab a total of $81 billion in client assets and 1.1 million accounts, for which we paid ~$1.6 billion in cash. We also entered into a long-term referral agreement that makes Schwab the exclusive provider of wealth management and investment brokerage services for USAA members. Read more >
March 13, 2020
With global health concerns relating to COVID-19 weighing on the macroeconomic environment and driving heightened volatility in the financial markets, we thought it might be helpful to spend some time discussing the effects on client activity. Not surprisingly, our clients have turned to us for help in this environment and we’ve been there to support them. Read more >
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October 1, 2019
Today, we announced our decision to reduce online trade commissions for U.S. and Canadian-listed equities and ETFs to $0, and to reduce the base charge on options to $0, as well. As noted in the press release, this action is consistent with the principles on which Chuck Schwab founded this company 50 years ago and with the “Through Clients’ Eyes” strategy we have followed ever since then – which have made the Charles Schwab Corporation so successful. Read more >
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August 14, 2018
As we announced in our second quarter earnings release, we crossed the $250 billion asset threshold1 for heightened regulatory requirements, ending the period at $262 billion in consolidated assets. While we don't believe the consequences will be disruptive to our business model or our strategy, I wanted to share a brief overview of what crossing this threshold means to Schwab and how we have been preparing over the last few years. Read more >
February 14, 2018
In our January SMART report released today, we noted a $7.2 billion outflow from a mutual fund clearing services ("clearing") client. Since we expect several additional large clearing outflows in early 2018, I wanted to share some context on the business and discuss the potential effect on our reported client asset flows (noticeable) and revenues (immaterial). Read more >
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December 22, 2017
Today, President Trump signed significant tax reform legislation into law and I wanted to spend a moment focusing on the potential impacts to Schwab's effective tax rate. As you may know, we have historically paid close to the full statutory federal corporate income tax rate, so the benefits are likely to be significant – though the new law does include the disallowance of some Schwab-relevant deductions. Read more >
February 28, 2017
Today we announced another reduction in our online equity, ETF, and option trade commission rates, following moves we announced just a few weeks ago on February 2nd. With this second action coming right on the heels of the first, I thought it might be useful to share some context regarding how they both fit within our financial planning for 2017. Read more >
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January 19, 2016
Those of you who follow The Charles Schwab Corporation closely may receive our quarterly financial results through a wire service/email, a market data aggregator, or simply by checking our corporate website. This morning, we began making our results available via another widely-used platform: Twitter. You can find our page on with the handle @CharlesSchwab. Today's activity includes a Tweet noting the availability of fourth quarter 2015 results with a link to our press release, and follow-ups sharing the headlines from this morning's announcement. Read more >
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December 14, 2015
Today we released our November Monthly Activity Report. While we produced another month of solid client metrics, we have no illusions about another press release stealing the show later this week. As you know, the Federal Reserve is widely anticipated to begin raising interest rates on December 16th. We have seen economic and employment reports meet expectations, FOMC minutes evolve, and member speeches show increasing conviction. Read more >
September 15, 2015
We issued our SMART report for the month of August today, and between the client metrics shown there and the trading data that we've already posted it's clear we've been busy. With the elevated market volatility late in the month, our clients made extensive use of our branches, phone-based service centers and online capabilities to help keep their investing on track. Many of them engaged with our financial consultants and subject matter experts to ask questions about how their assets enrolled in our advisory solutions are positioned, as well as assess their holdings and determine what, if any, action should be taken. Read more >
August 14, 2015
By now, you may have noticed that we recently made a few changes to our disclosures, and I'd like to make sure everyone is aware of these developments as well as provide context for how they help tell our story. As a large savings and loan holding company, our required reporting has expanded significantly in recent years. In addition, as Schwab evolves, we revisit our reporting and strive to keep it closely aligned with the everyday workings of the business. In the second quarter of 2015, we added a new Other Regulatory Disclosures tab to our corporate website, made changes to the Asset Management and Administration Fees (AMAF) table in our earnings release package, and included some new information in our 10-Q filing. Read more >
January 16, 2015
As we announced in our earnings release today, our Q4 '14 financial results included two nonrecurring items related to the company's non-agency residential mortgage-backed securities (RMBS) portfolio: net litigation proceeds of approximately $28 million and net losses of $8 million from selling securities totaling approximately $500 million. Taken together, these items increased pre-tax income by approximately $20 million, or $.01 per share. With the financial crisis well behind us, it's been a while since we've needed to discuss these securities, so I wanted to walk through some history and share a perspective on these recent developments. Read more >
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October 15, 2014
Concurrent with our Earnings Release today, we are inaugurating a new approach to reporting on our clients' trading activity intra-quarter. We have retired the inclusion of trade reporting in our Monthly Market Activity Report ("SMART") and are now providing a weekly look at trading activity, including revenue, asset-based, and other trades, which is posted on the Investor Relations landing page on . Read more >
July 16, 2014
As you look through today's earnings release, you might notice that the size of our balance sheet (shown in the Financial and Operating Highlights table on page 5) hasn't changed much since year-end 2013, continuing to hover around $144 billion. That's unusual for us–for example, the company's balance sheet grew by approximately $8 billion during the second half of 2013. Given the factors influencing this situation, I wanted to share some perspective on current client behavior and ramifications for our capital management going forward. Read more >
March 31, 2014
As I mentioned in my last post, here are a few more thoughts on the evolution of client behavior during the market recovery, which is now a full five years along: With the S&P 500 up over 170% from its lowest point in the first quarter of 2009 and setting new records, it's not really surprising to see investors put cash back to work in the markets. There are, however, some interesting aspects to the way our clients have reallocated their holdings across products and asset classes during the recovery thus far. Read more >
March 14, 2014
The S&P 500 Index bottomed at 676.53 on March 9, 2009, so we are now a full five years into the market recovery. As the recovery has strengthened in recent months, we have been asked more often about individual investor engagement, with the questioner usually equating engagement with trading activity. Read more >
January 16, 2014
This is my inaugural CFO Commentary. I expect to use this site regularly to provide perspectives on Schwab's financial picture, including color on our performance and details on topical issues. Over time, I can see sharing more significant financial information that might be better discussed in a forum like this, versus press releases or other forms of communication. Read more >
Footnote
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