Past CFO Commentary

The commentary in this section speaks only as of the date specified below. The company makes no commitment to update any of this information.

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.

We supported heavy client trading volumes during this period, including a new daily record of just under 860 thousand revenue trades on August 24.  Thus far in September, trading activity has moderated to the levels we saw in July of this year.  At the same time, the S&P 500 Index is down more than 5% from month-end June, and with the continuing evolution of our model to encompass modern wealth management as well as self-directed investing, this becomes an ever more important factor in driving our revenue outlook.  As we head towards the end of the quarter, I'm confident the investment community will keep an eye on the interplay between the interest rate environment, equity market valuations and trading activity while monitoring our near-term revenue picture.

We noted in the SMART report that average interest bearing assets reached $161 billion in August, up 16% year-over-year.  This strong growth reflects our continued success in building our client base, as well as our focus on transitioning a significant portion of client sweep cash balances to Schwab Bank as capital levels allow.  In early August we supplemented our capital base by issuing $600 million of preferred stock with a dividend rate of 6% and quarterly payments beginning December 1.  As discussed during our Business Update back in July, we expect to utilize this additional capital to support the transition of certain client sweep cash balances from money funds to Schwab Bank.  Our initial plans call for moving approximately $4 billion of these balances over several months, beginning in September, with the majority transferring in December.  We expect to continue to use excess capital above our desired consolidated Tier 1 Leverage ratio of 6.75% to 7.00% to support profitable balance sheet growth by moving additional sweep balances from money funds to the Bank over time.

Forward-looking statements

This commentary contains forward-looking statements relating to building our client base and the transition of client sweep cash balances from money funds to Schwab Bank, including amount, timing and expectations.  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, general market conditions, including the level of interest rates, equity valuations and trading activity; the company's ability to attract and retain clients and grow client assets/relationships; competitive pressures on rates and fees; the level of client assets, including cash balances; the company's ability to monetize client assets; client use of the company's investment advisory services and other products and services; the company's ability to develop and launch new products, services and capabilities in a timely and successful manner; the company's ability to manage expenses; capital needs and management; client sensitivity to interest rates; regulatory guidance; the effect of adverse developments in litigation or regulatory matters and the extent of any charges associated with legal matters; any adverse impact of financial reform legislation and related regulations; and other factors set forth in the company's most recent reports on Form 10-K and Form 10-Q.

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