SCHW
$35.05
The Charles Schwab
$.44
1.27%
Earnings Details
2nd Quarter June 2020
Thursday, July 16, 2020 8:45:00 AM
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Summary

The Charles Schwab Reports In-line

The Charles Schwab (SCHW) reported 2nd Quarter June 2020 earnings of $0.54 per share on revenue of $2.5 billion. The consensus earnings estimate was $0.55 per share on revenue of $2.3 billion. The Earnings Whisper number was $0.54 per share. Revenue fell 8.6% compared to the same quarter a year ago.

Charles Schwab Corp is a savings and loan holding company, which through its subsidiaries is engaged in securities brokerage, banking and related financial services. It operates in two segments namely Investor Services and Advisor Services.

Results
Reported Earnings
$0.54
Earnings Whisper
$0.54
Consensus Estimate
$0.55
Reported Revenue
$2.45 Bil
Revenue Estimate
$2.32 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Schwab Reports Second Quarter Earnings Per Share of $.48, Including $.06 Per Share of Acquisition-related Expenses

Core Net New Assets Rise 25% Year-Over-Year to $46.6 Billion

Client Assets Reach a Record $4.11 Trillion, up 11%

SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the second quarter of 2020 was $671 million compared with $795 million for the first quarter of 2020, and $937 million for the second quarter of 2019. Net income for the six months ended June 30, 2020 was $1.5 billion, compared with $1.9 billion for the year-earlier period. The company’s financial results for both the second quarter and first half of 2020 include certain acquisition and integration-related costs as well as the amortization of acquired intangibles, which together totaled $93 million and $136 million, respectively, on a pre-tax basis.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200716005442/en/

Beginning with this quarter’s earnings release, the company’s financial presentations will include references to adjusted measures of expenses, net income, diluted earnings per common share, pre-tax profit margin, as well as return on tangible common equity (ROTCE), which are intended to help investors evaluate Schwab’s operating performance as well as facilitate a meaningful comparison of our current results to both historic and future periods.

 

Three Months Ended
June 30,

 

%

 

Six Months Ended
June 30,

 

%

Financial Highlights

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues (in millions)

$

2,450

 

 

$

2,681

 

 

(9)%

 

$

5,067

 

 

$

5,404

 

 

(6)%

Net income (in millions)

 

 

 

 

 

 

 

 

 

 

 

GAAP

$

671

 

 

$

937

 

 

(28)%

 

$

1,466

 

 

$

1,901

 

 

(23)%

Adjusted (1)

$

742

 

 

$

945

 

 

(21)%

 

$

1,569

 

 

$

1,915

 

 

(18)%

Diluted earnings per common share

 

 

 

 

 

 

 

 

 

 

 

GAAP

$

.48

 

 

$

.66

 

 

(27)%

 

$

1.07

 

 

$

1.35

 

 

(21)%

Adjusted (1)

$

.54

 

 

$

.67

 

 

(19)%

 

$

1.14

 

 

$

1.36

 

 

(16)%

Pre-tax profit margin

 

 

 

 

 

 

 

 

 

 

 

GAAP

36.2

%

 

46.1

%

 

 

 

38.2

%

 

46.3

%

 

 

Adjusted (1)

40.0

%

 

46.5

%

 

 

 

40.9

%

 

46.6

%

 

 

Return on average common stockholders’ equity (annualized)

10

%

 

19

%

 

 

 

12

%

 

20

%

 

 

Return on tangible common equity (annualized) (1)

12

%

 

21

%

 

 

 

15

%

 

22

%

 

 

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 reported results are included on pages 11-12 of this release.

CEO Walt Bettinger said, “Throughout the second quarter, the COVID-19 pandemic and its effects continued to dominate the macroeconomic environment, presenting myriad challenges for our clients and Schwab alike. We grappled with the ongoing health crisis, a contracting U.S. economy, and sustained pressures on interest rates, yet there were some encouraging signs as the quarter progressed, including domestic equity markets recovering to pre-pandemic levels. Whatever path the crisis takes from here, our focus on clients has been and will remain unwavering, even as almost 95% of our employees continue to work remotely. Our compelling ‘no trade-offs’ approach to combining value, service, transparency, and trust helped sustain strong business momentum during the second quarter. We gathered $137.4 billion in net new assets, with core net new assets totaling $46.6 billion before including the effects of the USAA acquisition and a large mutual fund clearing inflow. Aided by ongoing engagement across both of our primary businesses, as well as an extended tax-filing season, our year-to-date core net new assets reached $119.8 billion, representing a 6% annualized organic growth rate for the first half. Our staff and systems continued to accommodate heavy volumes during the second quarter as investors utilized our contemporary full-service model – we handled over 230 million more client interactions across web, mobile, chat, and messaging versus a year ago. We also supported strong daily trading activity, which averaged 1.6 million for the second quarter, up 126% year-over-year. While volatility subsided from March’s peak levels, access to our investment professionals remained very much in demand, with Schwab Intelligent Portfolios Premium® planning appointments increasing 30% from a year earlier. Total active brokerage accounts ended June at 14.1 million, up 18% year-over-year, which includes the addition of 1.1 million USAA member accounts to our platform when that transaction closed. Renewed strength in equity market valuations, along with our ongoing asset-gathering and approximately $80 billion in client assets transferred from USAA, helped push total client assets to a record $4.11 trillion at June 30th, up 11% year-over-year.”

Mr. Bettinger added, “Providing investors with innovative solutions to help them build their financial futures remains at the forefront of our ‘Through Clients’ Eyes’ strategy across all environments. As part of this ongoing effort, we introduced Schwab Stock SlicesTM, a simple and engaging way to buy fractional shares of any S&P 500® stock in amounts as small as $5 and with no transaction fee. Shortly thereafter, we announced the acquisition of the technology and intellectual property of Motif to help us unlock the flexibility of personalized thematic investing, build upon our real-time fractional share trading abilities, and continue our work towards developing a comprehensive direct indexing solution that will complement Schwab’s diverse suite of advice offerings. Our unique blend of people and technology across those offerings has helped build overall client balances receiving ongoing advisory services by 8% year-over-year to $2.09 trillion. Within that total, client utilization of our digital advisory solutions remained strong, with balances up 12% versus a year ago to $45.9 billion at June 30th. In our Advisor Services business, we launched integrations with leading Health Savings Account providers, enabling advisors to manage their clients’ investments via a Schwab brokerage window. We also introduced a number of enhanced workflows as part of Schwab Advisor Center® aimed at improving processing times. Such improvements allow advisors to set up account features digitally, including Schwab MoneyLink® and Limited Power of Attorney, making it easier to complete tasks securely, quickly, and with fewer errors.”

Mr. Bettinger concluded, “Recent weeks have included a string of M&A milestones for our firm, each representing another step on our path of building a more capable Schwab. In addition to closing the USAA and Motif transactions, we also brought Wasmer Schroeder in-house, adding a leading investment manager of fixed income separate accounts to Schwab’s advisory line-up. Moreover, we made significant progress on our pending acquisition of TD Ameritrade, with the completion of the Department of Justice antitrust review and affirmative votes by both Schwab and TD Ameritrade stockholders. Our teams are working diligently on integration planning efforts and we remain on track for closing during the second half of this year. Pulling off four acquisitions in close succession, concurrent with sustained progress on our other initiatives to build scale and efficiency, further diversify our revenues, and enhance our product and service capabilities across client segments, would be challenging enough under the most favorable conditions. Doing all of this in the face of today’s headwinds is especially rewarding because we know pushing ahead is the right thing to do – the company will emerge stronger and even better positioned to serve the needs of individual investors and independent advisors. We have the talent, experience, and leadership needed across the firm to stay on offense, and I’m excited to be working with this team in writing the next chapter of Schwab’s story.”

CFO Peter Crawford commented, “Our results thus far in 2020 reflect the company’s ability to convert ongoing success with clients into solid financial performance even as strong environmental headwinds weigh on revenues. As the impact of the Fed’s dramatic monetary easing during March extended across the yield curve, the further compression in asset returns outweighed growth in client cash sweep balances from both ongoing asset gathering and the USAA acquisition, driving a 14% year-over-year decline in net interest revenue to $1.4 billion. We were able to limit that decline somewhat by working throughout the quarter to move over $30 billion out of excess reserves at the Fed and investing those balances at higher yields within our bank securities portfolio. We ended the quarter with excess reserves at the Fed of $27.5 billion at month-end June, or 9% of total deposits, versus a longer-term objective of approximately 5%-7%. Asset management and administration fees increased 2% year-over-year to $801 million as a result of clients’ increased utilization of money market funds and higher balances in advisory solutions, including managed account assets transferred from USAA. These increases more than offset the effect of money market fund fee waivers due to declining portfolio yields, lower Mutual Fund OneSource® balances, and pressured equity market valuations at the beginning of the quarter. Trading volume remained elevated in the second quarter compared with a year ago – if not at the record shattering heights experienced in March 2020 – but the impact of our October 2019 pricing actions still led to a 7% year-over-year decline in trading revenue to $193 million. Overall, total revenues contracted 9% from a year earlier to $2.5 billion, while reported expenses rose 8% to $1.6 billion. Noteworthy contributors to our second quarter expense growth included $39 million in USAA acquisition and integration-related costs, $42 million in other acquisition costs, and $12 million in amortization of acquired intangibles. Exclusive of these items (1), adjusted total expenses were $1.5 billion, up 2% year-over-year, largely consistent with the expectations we laid out during our Spring Business Update. Overall, we produced a 36.2% pre-tax profit margin (40.0% on an adjusted basis) and 10% return on equity (12% ROTCE). Though we are not immune to external headwinds, these results reinforce our confidence that disciplined management of the levers under our control will enable us to sustain a balance between near-term profitability and appropriate investment for ongoing growth.”

Mr. Crawford concluded, “During the second quarter, we remained intent on maintaining an all-weather balance sheet with healthy liquidity and capital levels. The sharp pandemic-driven increase in client sweep deposits during the first quarter was followed by more modest balance sheet expansion over the past three months, and after adding approximately $10 billion of USAA client cash to our deposits we ended June with total assets of $400 billion, up 8% from month-end March. We further solidified our capital mix during the quarter by issuing $2.5 billion of preferred stock at an initial fixed rate of 5.375%, bringing total preferred outstanding to $5.3 billion, or approximately 17% of stockholders’ equity. The company’s preliminary Tier 1 leverage ratio was 5.9% at quarter end, remaining well above regulatory minimums. So we continue to operate from a position of strength while our priorities for balance sheet management remain consistent and clear: ensure we have the capital and flexibility to support our ongoing growth, integrate our acquisitions, and continue investing in our clients regardless of how the operating environment unfolds.”

(1) Further details on non-GAAP financial measures and a reconciliation of such measures to reported results are included on pages 11-12 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 The Charles Schwab Corporation’s recently completed acquisition of the assets of USAA’s Investment Management Company was posted on June 12, 2020.

Forward-Looking Statements

This press release contains forward-looking statements relating to progress on initiatives to build scale and efficiency, diversify revenues, and innovate and enhance product and service capabilities, including through acquisitions; the status and anticipated closing of the pending acquisition of TD Ameritrade; integration of acquisitions; company strength and positioning; converting success with clients into solid financial performance; objective for amount of deposits held in excess reserves at the Fed; sustaining balance between near-term profitability and investment for ongoing growth; balance sheet management; and liquidity and capital. 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 develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure, in a timely and successful manner; client use of the company’s advisory solutions and other products and services; the risk that expected revenue, expense and other synergies and benefits from acquisitions may not be fully realized or may take longer to realize than expected; failure of the parties to satisfy the closing conditions in the agreement for the pending TD Ameritrade acquisition in a timely manner or at all, including regulatory approvals, and the implementation of integration plans; disruptions to the parties’ businesses as a result of the announcement and pendency of the TD Ameritrade acquisition; 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; general market conditions, including equity valuations, trading activity, the level of interest rates which can impact money market fund fee waivers, and credit spreads; the company’s ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; competitive pressures on pricing, including deposit rates; client sensitivity to rates; level of client assets, including cash balances; client cash sorting; capital and liquidity needs and management; the company’s ability to manage expenses; timing and ability to invest amounts held in excess reserves at the Fed into higher yielding investments in the company’s bank securities portfolio; 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 more than 360 offices and 14.1 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.5 million banking accounts, and $4.11 trillion in client assets as of June 30, 2020. 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 subsidiary, Charles Schwab & Co., Inc. (member SIPC, https://www.sipc.org), and 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 banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at https://www.schwab.com and https://www.aboutschwab.com.

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,

 

2020

 

2019

 

2020

 

2019

Net Revenues

 

 

 

 

 

 

 

Interest revenue

$

1,486

 

 

$

1,927

 

 

$

3,194

 

 

$

3,925

 

Interest expense

(97

)

 

(318

)

 

(233

)

 

(635

)

Net interest revenue

1,389

 

 

1,609

 

 

2,961

 

 

3,290

 

Asset management and administration fees

801

 

 

786

 

 

1,628

 

 

1,541

 

Trading revenue (1)

193

 

 

207

 

 

381

 

 

424

 

Other (1)

67

 

 

79

 

 

97

 

 

149

 

Total net revenues

2,450

 

 

2,681

 

 

5,067

 

 

5,404

 

Expenses Excluding Interest

 

 

 

 

 

 

 

Compensation and benefits

819

 

 

807

 

 

1,716

 

 

1,657

 

Professional services

198

 

 

178

 

 

380

 

 

348

 

Occupancy and equipment

152

 

 

133

 

 

294

 

 

264

 

Advertising and market development

70

 

 

77

 

 

137

 

 

146

 

Communications

78

 

 

62

 

 

153

 

 

124

 

Depreciation and amortization

109

 

 

84

 

 

205

 

 

167

 

Regulatory fees and assessments

36

 

 

30

 

 

70

 

 

62

 

Other

100

 

 

74

 

 

177

 

 

136

 

Total expenses excluding interest

1,562

 

 

1,445

 

 

3,132

 

 

2,904

 

Income before taxes on income

888

 

 

1,236

 

 

1,935

 

 

2,500

 

Taxes on income

217

 

 

299

 

 

469

 

 

599

 

Net Income

671

 

 

937

 

 

1,466

 

 

1,901

 

Preferred stock dividends and other

50

 

 

50

 

 

88

 

 

89

 

Net Income Available to Common Stockholders

$

621

 

 

$

887

 

 

$

1,378

 

 

$

1,812

 

Weighted-Average Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

1,288

 

 

1,328

 

 

1,287

 

 

1,331

 

Diluted

1,294

 

 

1,337

 

 

1,294

 

 

1,340

 

Earnings Per Common Shares Outstanding:

 

 

 

 

 

 

 

Basic

$

.48

 

 

$

.67

 

 

$

1.07

 

 

$

1.36

 

Diluted

$

.48

 

 

$

.66

 

 

$

1.07

 

 

$

1.35

 

(1)

Beginning in the first quarter of 2020, order flow revenue was reclassified from other revenue to trading revenue. Prior periods have been reclassified to reflect this change

THE CHARLES SCHWAB CORPORATION

Financial and Operating Highlights

(Unaudited)

 

 

Q2-20 % change

 

 

2020

 

2019

 

vs.

 

vs.

 

 

Second

 

First

 

Fourth

 

Third

 

Second

(In millions, except per share amounts and as noted)

Q2-19

 

Q1-20

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Net Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest revenue

(14

)%

 

(12

)%

 

 

$

1,389

 

 

$

1,572

 

 

$

1,595

 

 

$

1,631

 

 

$

1,609

 

Asset management and administration fees

2

%

 

(3

)%

 

 

801

 

 

827

 

 

845

 

 

825

 

 

786

 

Trading revenue (1)

(7

)%

 

3

%

 

 

193

 

 

188

 

 

122

 

 

206

 

 

207

 

Other (1)

(15

)%

 

123

%

 

 

67

 

 

30

 

 

44

 

 

49

 

 

79

 

Total net revenues

(9

)%

 

(6

)%

 

 

2,450

 

 

2,617

 

 

2,606

 

 

2,711

 

 

2,681

 

Expenses Excluding Interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

1

%

 

(9

)%

 

 

819

 

 

897

 

 

806

 

 

857

 

 

807

 

Professional services

11

%

 

9

%

 

 

198

 

 

182

 

 

186

 

 

168

 

 

178

 

Occupancy and equipment

14

%

 

7

%

 

 

152

 

 

142

 

 

151

 

 

144

 

 

133

 

Advertising and market development

(9

)%

 

4

%

 

 

70

 

 

67

 

 

90

 

 

71

 

 

77

 

Communications

26

%

 

4

%

 

 

78

 

 

75

 

 

66

 

 

63

 

 

62

 

Depreciation and amortization

30

%

 

14

%

 

 

109

 

 

96

 

 

94

 

 

88

 

 

84

 

Regulatory fees and assessments

20

%

 

6

%

 

 

36

 

 

34

 

 

30

 

 

30

 

 

30

 

Other

35

%

 

30

%

 

 

100

 

 

77

 

 

71

 

 

54

 

 

74

 

Total expenses excluding interest

8

%

 

(1

)%

 

 

1,562

 

 

1,570

 

 

1,494

 

 

1,475

 

 

1,445

 

Income before taxes on income

(28

)%

 

(15

)%

 

 

888

 

 

1,047

 

 

1,112

 

 

1,236

 

 

1,236

 

Taxes on income

(27

)%

 

(14

)%

 

 

217

 

 

252

 

 

260

 

 

285

 

 

299

 

Net Income

(28

)%

 

(16

)%

 

 

$

671

 

 

$

795

 

 

$

852

 

 

$

951

 

 

$

937

 

Preferred stock dividends and other

 

 

32

%

 

 

50

 

 

38

 

 

51

 

 

38

 

 

50

 

Net Income Available to Common Stockholders

(30

)%

 

(18

)%

 

 

$

621

 

 

$

757

 

 

$

801

 

 

$

913

 

 

$

887

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(28

)%

 

(19

)%

 

 

$

.48

 

 

$

.59

 

 

$

.62

 

 

$

.70

 

 

$

.67

 

Diluted

(27

)%

 

(17

)%

 

 

$

.48

 

 

$

.58

 

 

$

.62

 

 

$

.70

 

 

$

.66

 

Dividends declared per common share

6

%

 

 

 

 

$

.18

 

 

$

.18

 

 

$

.17

 

 

$

.17

 

 

$

.17

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

(3

)%

 

 

 

 

1,288

 

 

1,287

 

 

1,284

 

 

1,300

 

 

1,328

 

Diluted

(3

)%

 

 

 

 

1,294

 

 

1,294

 

 

1,293

 

 

1,308

 

 

1,337

 

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax profit margin

 

 

 

 

 

36.2

%

 

40.0

%

 

42.7

%

 

45.6

%

 

46.1

%

Return on average common stockholders’ equity (annualized) (2)

 

 

 

 

 

10

%

 

14

%

 

17

%

 

20

%

 

19

%

Financial Condition (at quarter end, in billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

39

%

 

(51

)%

 

 

$

33.6

 

 

$

68.5

 

 

$

29.3

 

 

$

20.3

 

 

$

24.2

 

Cash and investments segregated

135

%

 

(3

)%

 

 

33.2

 

 

34.3

 

 

20.5

 

 

16.2

 

 

14.1

 

Receivables from brokerage clients — net

 

 

13

%

 

 

21.4

 

 

19.0

 

 

21.8

 

 

21.1

 

 

21.4

 

Available for sale securities (3)

N/M

 

27

%

 

 

281.2

 

 

221.2

 

 

61.4

 

 

56.5

 

 

54.6

 

Held to maturity securities (3)

(100

)%

 

 

 

 

 

 

 

 

134.7

 

 

140.2

 

 

138.3

 

Bank loans — net

26

%

 

7

%

 

 

20.9

 

 

19.5

 

 

18.2

 

 

16.9

 

 

16.6

 

Total assets

45

%

 

8

%

 

 

400.5

 

 

370.8

 

 

294.0

 

 

279.0

 

 

276.3

 

Bank deposits

45

%

 

9

%

 

 

301.6

 

 

277.5

 

 

220.1

 

 

209.3

 

 

208.4

 

Payables to brokerage clients

62

%

 

2

%

 

 

50.1

 

 

49.3

 

 

39.2

 

 

35.6

 

 

31.0

 

Long-term debt

15

%

 

 

 

 

8.5

 

 

8.5

 

 

7.4

 

 

7.4

 

 

7.4

 

Stockholders’ equity

45

%

 

17

%

 

 

30.8

 

 

26.3

 

 

21.7

 

 

21.4

 

 

21.3

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Full-time equivalent employees (at quarter end, in thousands)

6

%

 

8

%

 

 

21.8

 

 

20.2

 

 

19.7

 

 

19.8

 

 

20.5

 

Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)

(2

)%

 

(32

)%

 

 

$

169

 

 

$

250

 

 

$

209

 

 

$

190

 

 

$

173

 

Expenses excluding interest as a percentage of average client assets (annualized)

 

 

 

 

 

0.16

%

 

0.16

%

 

0.15

%

 

0.16

%

 

0.16

%

Clients’ Daily Average Trades (DATs) (in thousands)

126

%

 

5

%

 

 

1,619

 

 

1,540

 

 

785

 

 

718

 

 

716

 

Number of Trading Days

 

 

2

%

 

 

63.0

 

 

62.0

 

 

63.0

 

 

63.5

 

 

63.0

 

Revenue Per Trade (4)

(59

)%

 

(4

)%

 

 

$

1.89

 

 

$

1.97

 

 

$

2.47

 

 

$

4.52

 

 

$

4.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Beginning in the first quarter of 2020, order flow revenue was reclassified from other revenue to trading revenue. Prior periods have been reclassified to reflect this change.

(2)

Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.

(3)

On January 1, 2020, the Company transferred all of its investment securities designated as held to maturity to the available for sale category, as described in Part II – Item 8 – Note 25 of our 2019 Annual Report on Form 10-K.

(4)

Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.

N/M Not meaningful.

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions)

(Unaudited)

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

$

56,553

 

 

$

19

 

 

0.13

%

 

 

$

26,146

 

 

$

158

 

 

2.39

%

 

 

$

44,343

 

 

$

104

 

 

0.46

%

 

 

$

25,568

 

 

$

309

 

 

2.41

%

Cash and investments segregated

33,521

 

 

27

 

 

0.32

%

 

 

14,588

 

 

89

 

 

2.41

%

 

 

28,619

 

 

114

 

 

0.79

%

 

 

14,075

 

 

172

 

 

2.43

%

Broker-related receivables (1)

429

 

 

 

 

0.30

%

 

 

199

 

 

 

 

1.38

%

 

 

580

 

 

2

 

 

0.96

%

 

 

228

 

 

2

 

 

2.15

%

Receivables from brokerage clients

17,915

 

 

111

 

 

2.44

%

 

 

19,423

 

 

217

 

 

4.42

%

 

 

18,533

 

 

279

 

 

2.97

%

 

 

19,199

 

 

431

 

 

4.46

%

Available for sale securities (2,3)

234,346

 

 

1,146

 

 

1.95

%

 

 

56,020

 

 

386

 

 

2.74

%

 

 

216,045

 

 

2,331

 

 

2.15

%

 

 

61,407

 

 

837

 

 

2.72

%

Held to maturity securities (3)

 

 

 

 

 

 

 

132,738

 

 

899

 

 

2.70

%

 

 

 

 

 

 

 

 

 

132,583

 

 

1,815

 

 

2.73

%

Bank loans

20,163

 

 

133

 

 

2.63

%

 

 

16,560

 

 

148

 

 

3.58

%

 

 

19,530

 

 

277

 

 

2.84

%

 

 

16,569

 

 

297

 

 

3.59

%

Total interest-earning assets

362,927

 

 

1,436

 

 

1.58

%

 

 

265,674

 

 

1,897

 

 

2.84

%

 

 

327,650

 

 

3,107

 

 

1.89

%

 

 

269,629

 

 

3,863

 

 

2.86

%

Other interest revenue

 

 

50

 

 

 

 

 

 

 

30

 

 

 

 

 

 

 

87

 

 

 

 

 

 

 

62

 

 

 

Total interest-earning assets

$

362,927

 

 

$

1,486

 

 

1.63

%

 

 

$

265,674

 

 

$

1,927

 

 

2.88

%

 

 

$

327,650

 

 

$

3,194

 

 

1.94

%

 

 

$

269,629

 

 

$

3,925

 

 

2.90

%

Funding sources

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bank deposits

$

288,990

 

 

$

12

 

 

0.02

%

 

 

$

210,811

 

 

$

224

 

 

0.43

%

 

 

$

258,256

 

 

$

69

 

 

0.05

%

 

 

$

215,374

 

 

$

450

 

 

0.42

%

Payables to brokerage clients

37,500

 

 

1

 

 

0.01

%

 

 

23,034

 

 

24

 

 

0.42

%

 

 

33,894

 

 

9

 

 

0.05

%

 

 

22,611

 

 

47

 

 

0.42

%

Short-term borrowings (1)

39

 

 

 

 

0.24

%

 

 

3

 

 

 

 

2.68

%

 

 

21

 

 

 

 

0.31

%

 

 

17

 

 

 

 

2.50

%

Long-term debt

8,524

 

 

77

 

 

3.60

%

 

 

7,090

 

 

63

 

 

3.58

%

 

 

8,025

 

 

143

 

 

3.57

%

 

 

6,968

 

 

125

 

 

3.60

%

Total interest-bearing liabilities

335,053

 

 

90

 

 

0.11

%

 

 

240,938

 

 

311

 

 

0.52

%

 

 

300,196

 

 

221

 

 

0.15

%

 

 

244,970

 

 

622

 

 

0.51

%

Non-interest-bearing funding sources

27,874

 

 

 

 

 

 

 

24,736

 

 

 

 

 

 

 

27,454

 

 

 

 

 

 

 

24,659

 

 

 

 

 

Other interest expense

 

 

7

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

12

 

 

 

 

 

 

 

13

 

 

 

Total funding sources

$

362,927

 

 

$

97

 

 

0.10

%

 

 

$

265,674

 

 

$

318

 

 

0.48

%

 

 

$

327,650

 

 

$

233

 

 

0.14

%

 

 

$

269,629

 

 

$

635

 

 

0.47

%

Net interest revenue

 

 

$

1,389

 

 

1.53

%

 

 

 

 

$

1,609

 

 

2.40

%

 

 

 

 

$

2,961

 

 

1.80

%

 

 

 

 

$

3,290

 

 

2.43

%

(1)

Interest revenue or expense was less than $500,000 in the period or periods presented.

(2)

Amounts have been calculated based on amortized cost.

(3)

On January 1, 2020, the Company transferred all of its investment securities designated as held to maturity to the available for sale category, as described in Part II – Item 8 – Note 25 of our 2019 Annual Report on Form 10-K.

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions)

(Unaudited)

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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

$

213,037

 

 

$

164

 

 

0.31

%

 

 

$

161,998

 

 

$

123

 

 

0.30

%

 

 

$

208,405

 

 

$

316

 

 

0.30

%

 

 

$

160,133

 

 

$

245

 

 

0.31

%

Fee waivers

 

 

(15

)

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

 

 

 

 

 

 

 

Schwab money market funds

213,037

 

 

149

 

 

0.28

%

 

 

161,998

 

 

123

 

 

0.30

%

 

 

208,405

 

 

301

 

 

0.29

%

 

 

160,133

 

 

245

 

 

0.31

%

Schwab equity and bond funds, ETFs, and collective trust funds (CTFs)

274,570

 

 

68

 

 

0.10

%

 

 

261,773

 

 

74

 

 

0.11

%

 

 

282,689

 

 

144

 

 

0.10

%

 

 

253,048

 

 

144

 

 

0.11

%

Mutual Fund OneSource® and other non-transaction fee funds

175,067

 

 

135

 

 

0.31

%

 

 

192,227

 

 

152

 

 

0.32

%

 

 

181,825

 

 

282

 

 

0.31

%

 

 

189,725

 

 

299

 

 

0.32

%

Other third-party mutual funds and ETFs (1)

416,242

 

 

73

 

 

0.07

%

 

 

471,638

 

 

79

 

 

0.07

%

 

 

434,100

 

 

150

 

 

0.07

%

 

 

462,050

 

 

154

 

 

0.07

%

Total mutual funds, ETFs, and CTFs (2)

$

1,078,916

 

 

425

 

 

0.16

%

 

 

$

1,087,636

 

 

428

 

 

0.16

%

 

 

$

1,107,019

 

 

877

 

 

0.16

%

 

 

$

1,064,956

 

 

842

 

 

0.16

%

Advice solutions (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-based

$

260,653

 

 

314

 

 

0.48

%

 

 

$

243,050

 

 

295

 

 

0.49

%

 

 

$

261,954

 

 

626

 

 

0.48

%

 

 

$

236,722

 

 

573

 

 

0.49

%

Non-fee-based

69,234

 

 

 

 

 

 

 

69,274

 

 

 

 

 

 

 

70,232

 

 

 

 

 

 

 

68,015

 

 

 

 

 

Total advice solutions

$

329,887

 

 

314

 

 

0.38

%

 

 

$

312,324

 

 

295

 

 

0.38

%

 

 

$

332,186

 

 

626

 

 

0.38

%

 

 

$

304,737

 

 

573

 

 

0.38

%

Other balance-based fees (3)

407,796

 

 

45

 

 

0.04

%

 

 

408,929

 

 

54

 

 

0.05

%

 

 

420,321

 

 

99

 

 

0.05

%

 

 

400,560

 

 

106

 

 

0.05

%

Other (4)

 

 

17

 

 

 

 

 

 

 

9

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

20

 

 

 

Total asset management and administration fees

 

 

$

801

 

 

 

 

 

 

 

$

786

 

 

 

 

 

 

 

$

1,628

 

 

 

 

 

 

 

$

1,541

 

 

 

(1)

 

Beginning in the fourth quarter of 2019, Schwab ETF OneSourceTM was discontinued as a result of the elimination of online trading commissions for U.S. and Canadian-listed ETFs.

(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®, and Schwab Intelligent Portfolios PremiumTM; 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)

 

 

Q2-20 % Change

 

 

2020

 

2019

 

vs.

 

vs.

 

 

Second

 

First

 

Fourth

 

Third

 

Second

(In billions, at quarter end, except as noted)

Q2-19

 

Q1-20

 

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

Assets in client accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Schwab One®, certain cash equivalents and bank deposits

47

%

 

8

%

 

 

$

349.2

 

 

$

324.4

 

 

$

256.7

 

 

$

242.9

 

 

$

237.3

 

Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (1)

26

%

 

4

%

 

 

211.6

 

 

203.7

 

 

200.8

 

 

187.0

 

 

168.1

 

Equity and bond funds and CTFs (2)

6

%

 

18

%

 

 

117.0

 

 

99.1

 

 

122.5

 

 

112.4

 

 

110.9

 

Total proprietary mutual funds and CTFs

18

%

 

9

%

 

 

328.6

 

 

302.8

 

 

323.3

 

 

299.4

 

 

279.0

 

Mutual Fund Marketplace® (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Fund OneSource® and other non-transaction fee funds

(2

)%

 

19

%

 

 

193.0

 

 

161.6

 

 

202.1

 

 

194.7

 

 

197.8

 

Mutual fund clearing services

13

%

 

20

%

 

 

217.3

 

 

180.8

 

 

217.4

 

 

197.2

 

 

192.9

 

Other third-party mutual funds

4

%

 

18

%

 

 

796.5

 

 

676.2

 

 

824.5

 

 

776.8

 

 

767.3

 

Total Mutual Fund Marketplace

4

%

 

18

%

 

 

1,206.8

 

 

1,018.6

 

 

1,244.0

 

 

1,168.7

 

 

1,158.0

 

Total mutual fund assets

7

%

 

16

%

 

 

1,535.4

 

 

1,321.4

 

 

1,567.3

 

 

1,468.1

 

 

1,437.0

 

Exchange-traded funds (ETFs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proprietary ETFs (2)

9

%

 

15

%

 

 

156.3

 

 

136.5

 

 

163.8

 

 

150.8

 

 

143.6

 

Schwab ETF OneSource™ (3,4)

N/M

 

N/M

 

 

 

 

 

 

 

 

94.1

 

 

88.1

 

Other third-party ETFs (4)

48

%

 

22

%

 

 

468.0

 

 

382.5

 

 

457.0

 

 

321.6

 

 

315.7

 

Total ETF assets

14

%

 

20

%

 

 

624.3

 

 

519.0

 

 

620.8

 

 

566.5

 

 

547.4

 

Equity and other securities

12

%

 

26

%

 

 

1,305.8

 

 

1,035.5

 

 

1,286.4

 

 

1,178.0

 

 

1,168.3

 

Fixed income securities

(5

)%

 

 

 

 

314.8

 

 

313.8

 

 

327.1

 

 

332.3

 

 

332.1

 

Margin loans outstanding

(2

)%

 

13

%

 

 

(19.4

)

 

(17.2

)

 

(19.5

)

 

(19.4

)

 

(19.7

)

Total client assets

11

%

 

18

%

 

 

$

4,110.1

 

 

$

3,496.9

 

 

$

4,038.8

 

 

$

3,768.4

 

 

$

3,702.4

 

Client assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

14

%

 

20

%

 

 

$

2,223.5

 

 

$

1,846.8

 

 

$

2,131.0

 

 

$

1,978.7

 

 

$

1,946.5

 

Advisor Services

7

%

 

14

%

 

 

1,886.6

 

 

1,650.1

 

 

1,907.8

 

 

1,789.7

 

 

1,755.9

 

Total client assets

11

%

 

18

%

 

 

$

4,110.1

 

 

$

3,496.9

 

 

$

4,038.8

 

 

$

3,768.4

 

 

$

3,702.4

 

Net growth in assets in client accounts (for the quarter ended)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new assets by business

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services (5)

N/M

 

N/M

 

 

$

113.0

 

 

$

35.3

 

 

$

43.1

 

 

$

25.4

 

 

$

17.9

 

Advisor Services

26

%

 

(36

)%

 

 

24.4

 

 

37.9

 

 

34.2

 

 

31.2

 

 

19.3

 

Total net new assets

N/M

 

88

%

 

 

$

137.4

 

 

$

73.2

 

 

$

77.3

 

 

$

56.6

 

 

$

37.2

 

Net market gains (losses)

N/M

 

N/M

 

 

475.8

 

 

(615.1

)

 

193.1

 

 

9.4

 

 

79.8

 

Net growth (decline)

N/M

 

N/M

 

 

$

613.2

 

 

$

(541.9

)

 

$

270.4

 

 

$

66.0

 

 

$

117.0

 

New brokerage accounts (in thousands, for the quarter ended) (6)

N/M

 

171

%

 

 

1,652

 

 

609

 

 

433

 

 

363

 

 

386

 

Client accounts (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active brokerage accounts

18

%

 

11

%

 

 

14,107

 

 

12,736

 

 

12,333

 

 

12,118

 

 

11,967

 

Banking accounts

10

%

 

3

%

 

 

1,463

 

 

1,426

 

 

1,390

 

 

1,361

 

 

1,336

 

Corporate retirement plan participants

1

%

 

 

 

 

1,716

 

 

1,721

 

 

1,748

 

 

1,718

 

 

1,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(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, 2020, off-platform equity and bond funds, CTFs, and ETFs were $13.8 billion, $4.8 billion, and $45.8 billion, respectively.

(3)

Excludes all proprietary mutual funds and ETFs.

(4)

Beginning in the fourth quarter of 2019, Schwab ETF OneSource™ was discontinued. These assets are now included with other third-party ETFs.

(5)

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. Fourth quarter of 2019 includes an inflow of $11.1 billion from a mutual fund clearing services client.

(6)

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.

The Charles Schwab Corporation Monthly Activity Report For June 2020

 

 

2019

 

 

 

 

 

 

2020

 

 

 

 

 

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

26,600

 

26,864

 

26,403

 

26,917

 

27,046

 

28,051

 

28,538

 

28,256

 

25,409

 

21,917

 

24,346

 

25,383

 

25,813

 

2

%

(3

)%

Nasdaq Composite

8,006

 

8,175

 

7,963

 

7,999

 

8,292

 

8,665

 

8,973

 

9,151

 

8,567

 

7,700

 

8,890

 

9,490

 

10,059

 

6

%

26

%

Standard & Poor’s 500

2,942

 

2,980

 

2,926

 

2,977

 

3,038

 

3,141

 

3,231

 

3,226

 

2,954

 

2,585

 

2,912

 

3,044

 

3,100

 

2

%

5

%

Client Assets (in billions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Client Assets

3,530.6

 

3,702.4

 

3,746.7

 

3,716.5

 

3,768.4

 

3,854.6

 

3,942.2

 

4,038.8

 

4,051.6

 

3,862.8

 

3,496.9

 

3,778.3

 

4,009.0

 

 

 

Net New Assets (1)

20.2

 

19.3

 

19.9

 

17.4

 

35.2

 

12.0

 

30.1

 

20.9

 

24.4

 

27.9

 

15.3

 

97.5

 

24.6

 

(75

)%

22

%

Net Market Gains (Losses)

151.6

 

25.0

 

(50.1

)

34.5

 

51.0

 

75.6

 

66.5

 

(8.1

)

(213.2

)

(393.8

)

266.1

 

133.2

 

76.5

 

 

 

Total Client Assets (at month end)

3,702.4

 

3,746.7

 

3,716.5

 

3,768.4

 

3,854.6

 

3,942.2

 

4,038.8

 

4,051.6

 

3,862.8

 

3,496.9

 

3,778.3

 

4,009.0

 

4,110.1

 

3

%

11

%

Core Net New Assets (2)

20.2

 

19.3

 

19.9

 

17.4

 

24.1

 

12.0

 

30.1

 

20.9

 

24.4

 

27.9

 

15.3

 

17.6

 

13.7

 

(22

)%

(32

)%

Receiving Ongoing Advisory Services (at month end)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investor Services

311.6

 

314.8

 

314.2

 

318.5

 

324.6

 

330.8

 

337.1

 

336.8

 

323.2

 

291.5

 

309.9

 

339.8

 

345.2

 

2

%

11

%

Advisor Services (3)

1,626.6

 

1,646.1

 

1,635.7

 

1,659.4

 

1,691.6

 

1,728.2

 

1,769.7

 

1,773.2

 

1,694.0

 

1,531.3

 

1,647.9

 

1,711.7

 

1,747.5

 

2

%

7

%

Client Accounts (at month end, in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Active Brokerage Accounts

11,967

 

12,026

 

12,085

 

12,118

 

12,189

 

12,247

 

12,333

 

12,431

 

12,521

 

12,736

 

12,866

 

14,007

 

14,107

 

1

%

18

%

Banking Accounts

1,336

 

1,352

 

1,361

 

1,361

 

1,374

 

1,384

 

1,390

 

1,403

 

1,411

 

1,426

 

1,439

 

1,448

 

1,463

 

1

%

10

%

Corporate Retirement Plan Participants

1,698

 

1,701

 

1,711

 

1,718

 

1,735

 

1,743

 

1,748

 

1,732

 

1,726

 

1,721

 

1,696

 

1,714

 

1,716

 

 

1

%

Client Activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Brokerage Accounts (in thousands) (4)

116

 

129

 

126

 

108

 

142

 

127

 

164

 

167

 

159

 

283

 

201

 

1,250

 

201

 

(84

)%

73

%

Inbound Calls (in thousands)

1,595

 

1,773

 

1,759

 

1,570

 

1,771

 

1,605

 

1,884

 

1,947

 

1,831

 

2,366

 

1,824

 

1,736

 

2,128

 

23

%

33

%

Web Logins (in thousands)

60,824

 

65,809

 

63,928

 

63,530

 

72,547

 

66,394

 

69,733

 

77,716

 

76,941

 

97,523

 

92,491

 

93,803

 

106,720

 

14

%

75

%

Client Cash as a Percentage of Client Assets (5)

10.9

%

11.0

%

11.3

%

11.4

%

11.3

%

11.3

%

11.3

%

11.3

%

12.0

%

15.1

%

14.3

%

14.0

%

13.6

%

(40) bp

270 bp

Mutual Fund and Exchange-Traded Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Buys (Sells) (6, 7) (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Large Capitalization Stock

206

 

717

 

328

 

23

 

900

 

1,406

 

991

 

845

 

(178

)

984

 

(693

)

(768

)

(1,254

)

 

 

Small / Mid Capitalization Stock

18

 

10

 

(374

)

(212

)

(458

)

73

 

201

 

(314

)

(531

)

(954

)

151

 

(401

)

(1,063

)

 

 

International

225

 

744

 

(1,390

)

(355

)

340

 

735

 

993

 

1,360

 

132

 

(2,116

)

(2,207

)

(1,953

)

(1,580

)

 

 

Specialized

341

 

418

 

353

 

583

 

618

 

484

 

455

 

762

 

397

 

333

 

2,059

 

1,512

 

1,020

 

 

 

Hybrid

(181

)

(366

)

(569

)

(372

)

(202

)

(290

)

(96

)

615

 

(257

)

(4,790

)

(860

)

(518

)

(97

)

 

 

Taxable Bond

2,378

 

3,806

 

2,725

 

2,935

 

2,813

 

2,274

 

4,710

 

5,714

 

3,830

 

(23,142

)

1,642

 

5,469

 

9,215

 

 

 

Tax-Free Bond

682

 

960

 

760

 

593

 

809

 

860

 

1,255

 

1,481

 

1,066

 

(5,229

)

(242

)

805

 

1,710

 

 

 

Net Buy (Sell) Activity (in millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mutual Funds (6)

7

 

2,151

 

(1,281

)

(573

)

(473

)

(761

)

1,097

 

2,684

 

(565

)

(34,382

)

(3,863

)

(564

)

1,768

 

 

 

Exchange-Traded Funds (7)

3,662

 

4,138

 

3,114

 

3,768

 

5,293

 

6,303

 

7,412

 

7,779

 

5,024

 

(532

)

3,713

 

4,710

 

6,183

 

 

 

Money Market Funds

4,570

 

6,143

 

6,068

 

5,833

 

7,059

 

4,768

 

1,515

 

1,911

 

1,312

 

(1,233

)

8,465

 

4,833

 

(5,673

)

 

 

Average Interest-Earning Assets (8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions of dollars)

262,759

 

263,993

 

265,005

 

266,430

 

266,089

 

268,254

 

274,911

 

279,437

 

278,966

 

317,850

 

353,018

 

361,814

 

373,986

 

3

%

42

%

(1)

June 2020 includes an inflow of $10.9 billion from a mutual fund clearing services client. May 2020 includes inflows of $79.9 billion related to the acquisition of the assets of USAA’s Investment Management Company. October 2019 includes an inflow of $11.1 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)

Excludes Retirement Business Services.

(4)

May 2020 includes 1.1 million new brokerage accounts related to the acquisition of the assets of USAA’s Investment Management Company.

(5)

Schwab One®, certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets.

(6)

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.

(7)

Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.

(8)

Represents average total interest-earning assets on the company’s balance sheet.

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 Management and Investors

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 completed and pending business 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 may be 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 on-going 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.

The following tables present reconciliations of GAAP measures to non-GAAP measures:

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

2019

 

2020

2019

 

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)

$

1,562

 

$

671

 

$

1,445

 

$

937

 

 

$

3,132

 

$

1,466

 

$

2,904

 

$

1,901

 

Acquisition and integration-related costs (1)

(81

)

81

 

(3

)

3

 

 

(118

)

118

 

(4

)

4

 

Amortization of acquired intangible assets

(12

)

12

 

(7

)

7

 

 

(18

)

18

 

(14

)

14

 

Income tax effects (2)

N/A

(22

)

N/A

(2

)

 

N/A

(33

)

N/A

(4

)

Adjusted total expenses (Non-GAAP), Adjusted net income (Non-GAAP)

$

1,469

 

$

742

 

$

1,435

 

$

945

 

 

$

2,996

 

$

1,569

 

$

2,886

 

$

1,915

 

(1)

Acquisition and integration-related expenses are primarily included in 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.

THE CHARLES SCHWAB CORPORATION

Non-GAAP Financial Measures

(In millions, except ratios and per share amounts)

(Unaudited)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

2019

 

2020

2019

 

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)

$

888

 

36.2

%

$

1,236

 

46.1

%

 

$

1,935

 

38.2

%

$

2,500

 

46.3

%

Acquisition and integration-related costs

81

 

3.3

%

3

 

0.1

%

 

118

 

2.3

%

4

 

0.1

%

Amortization of acquired intangible assets

12

 

0.5

%

7

 

0.3

%

 

18

 

0.4

%

14

 

0.2

%

Adjusted income before taxes on income (Non-GAAP),
Adjusted pre-tax profit margin (Non-GAAP)

$

981

 

40.0

%

$

1,246

 

46.5

%

 

$

2,071

 

40.9

%

$

2,518

 

46.6

%

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

2019

 

2020

2019

 

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)

$

621

 

$

.48

 

$

887

 

$

.66

 

 

$

1,378

 

$

1.07

 

$

1,812

 

$

1.35

 

Acquisition and integration-related costs

81

 

.07

 

3

 

 

 

118

 

.09

 

4

 

 

Amortization of acquired intangible assets

12

 

.01

 

7

 

.01

 

 

18

 

.01

 

14

 

.01

 

Income tax effects

(22

)

(.02

)

(2

)

 

 

(33

)

(.03

)

(4

)

 

Adjusted net income available to common stockholders
(Non-GAAP), Adjusted diluted EPS (Non-GAAP)

$

692

 

$

.54

 

$

895

 

$

.67

 

 

$

1,481

 

$

1.14

 

$

1,826

 

$

1.36

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2020

2019

 

2020

2019

Return on average common stockholders' equity (GAAP)

10

%

19

%

 

12

%

20

%

Average common stockholders' equity

$

24,515

 

$

18,679

 

 

$

22,253

 

$

18,202

 

Less: Average goodwill

(1,480

)

(1,227

)

 

(1,480

)

(1,227

)

Less: Average acquired intangible assets — net

(700

)

(143

)

 

(703

)

(146

)

Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net

67

 

67

 

 

67

 

67

 

Average tangible common equity

$

22,402

 

$

17,376

 

 

$

20,137

 

$

16,896

 

Adjusted net income available to common stockholders (1)

$

692

 

$

895

 

 

$

1,481

 

$

1,826

 

Return on tangible common equity (Non-GAAP)

12

%

21

%

 

15

%

22

%

(1)

 

See table above for the reconciliation of net income available to common stockholders to adjusted net income available to common stockholders (non-GAAP).

 

MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525

INVESTORS/ANALYSTS:
Rich Fowler
Charles Schwab
Phone: 415-667-1841

Source: The Charles Schwab Corporation