SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its net income for the first quarter of 2017 was a record $564 million, up 8% from $522 million for the prior quarter, and up 37% from $412 million for the first quarter of 2016. The company's financial results for the first three months of 2017 reflect a new accounting standard for equity compensation; a description of this item is included under the following table.
|
Three Months Ended |
% | ||||||||||
| Financial Highlights | 2017 | 2016 | Change | ||||||||
| Net revenues (in millions) | $ | 2,081 | $ | 1,764 | 18 | % | |||||
| Net income (in millions) | $ | 564 | $ | 412 | 37 | % | |||||
| Diluted earnings per common share | $ | .39 | $ | .29 | 34 | % | |||||
| Pre-tax profit margin | 40.5 | % | 37.1 | % | |||||||
|
Return on average common stockholders’ equity (annualized) |
15 | % | 13 | % | |||||||
| Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding. Effective January 1, 2017, a new accounting standard prospectively changes the treatment of a portion of the tax deductions relating to equity compensation. These deductions were previously reflected in additional paid-in capital, a component of stockholders’ equity, and are now included in taxes on income, a component of net income. The company’s first quarter 2017 tax expense was reduced by approximately $31 million as a result of this change. Future effects will depend on the company’s share price, restricted stock vesting, and the volume of equity incentive options exercised. | |||||||||||
CEO Walt Bettinger said, “We continue to build a bigger, stronger, and more capable Schwab through a steadfast focus on our “Through Clients’ Eyes” strategy. During the first quarter, the equity markets began in positive territory and remained solidly positive throughout. Investors were engaged, and Schwab was there to provide guidance and support along the way. Clients opened more than 100,000 new brokerage accounts per month during the quarter, putting total new accounts at 362,000, the highest quarterly total in 17 years excluding acquisitions. Our Retail business gathered record levels of core net new assets over the past three months, posting an 83% increase over the year-earlier period. At the same time, Advisor Services attracted near-record inflows from the independent advisor clients who custody with us and achieved a 57% increase. Net new assets across the company reached $39 billion for the first quarter, up 22%, and total client assets rose to $2.92 trillion at month-end March, up 14% year-over-year. Our growing client base continues to make greater use of our contemporary wealth management capabilities and we recently ranked highest in J.D. Power’s U.S. Full-Service Investor Satisfaction Survey for the second consecutive year. During the first quarter, our financial consultants held planning conversations with 38,000 clients, up 12%. At the end of March, $1.48 trillion in assets were enrolled in some form of ongoing advisory service, an increase of $200 billion from a year ago. We ended March serving 10.3 million active brokerage accounts, 1.1 million banking accounts, and 1.5 million retirement plan participants, up 5%, 7%, and 1%, respectively. Our growing business is a testament to the power of our strategy as we strive to earn our clients’ trust every day.”
Mr. Bettinger continued, “We know that operating “through clients’ eyes” requires a sustained commitment to investing in our business. We believe those investments must include not only the people needed to serve clients and run the company, as well as the technology and infrastructure to support a better investing experience, but also the products, services, and value clients seek to help pursue their investing goals. During February, we announced strategic pricing moves to deliver significantly more value to all clients – regardless of the amount they have to invest. We lowered equity and options trade commissions from $8.95 to $4.95, dropped the per contract option fee to $0.65, and introduced a broad-reaching Satisfaction Guarantee, which is unique among brokerage firms.”*
Mr. Bettinger added, “While these trade pricing moves reflect our belief that commission rates should never be an obstacle for investors deciding whether Schwab can best serve their needs, they also reflect our commitment to sharing the benefits of our scale with clients. Our February announcements included further actions on this front: we reduced the operating expense ratios on our market cap-weighted index mutual funds to align with their ETF equivalents, as well as eliminated investment minimums and multiple share classes for both fundamental and market cap-weighted index funds. These steps are designed to ensure that even the smallest investor can access the low costs historically available only to large institutions. Also, during the quarter, we announced the broad availability of Schwab Intelligent AdvisoryTM, a hybrid advisory service that combines live credentialed professionals and advanced technology to make financial and investment planning more accessible. With a $25,000 minimum balance, an annual advisory fee of 0.28%, and a quarterly fee maximum of $900, we are challenging the status quo for how advice is delivered and priced for mass affluent investors. Finally, we recently passed an important milestone as we celebrated the second anniversary of Intelligent Portfolios, now with $16 billion in assets across 149,000 accounts.”
CFO Joe Martinetto commented, “Schwab’s strong first quarter financial performance was driven by ongoing success in building our client base, sustained improvement in the economic environment, and the Federal Reserve’s actions to lift interest rates, along with focused expense management. Net interest revenue grew 30% to $1 billion as a result of larger client cash sweep balances and the subsequent increase in interest-earning assets, as well as higher interest rates across the yield curve. Asset management and administration fees increased 18% to $823 million largely due to continued improvement in net money fund revenue from rising rates and growing balances in advisory solutions, mutual funds, and ETFs. Trading revenue declined 17% to $192 million, primarily reflecting the impact of lower trade pricing. In total, first quarter revenue grew 18%, surpassing the $2 billion mark, and once again demonstrating the Schwab formula of solid asset growth driving solid revenue growth. On the expense front, our 12% growth was in line with our expectations for the quarter. Compensation and benefits reflected higher incentive accruals relating to strong client metrics, as well as routine seasonal effects and staffing to support our growing client base. In addition, Other expense rose mainly due to deposit insurance assessments driven by larger balances and surcharges. Our six percentage point gap between revenue and expense growth and 40.5% pre-tax margin for the first quarter leave us well positioned to work through the full effects of our recent pricing moves while investing in our growth initiatives as planned during 2017.”
Mr. Martinetto concluded, “During the first quarter, we continued to manage our balance sheet for liquidity and ongoing growth in our client base. We issued $650 million in 3.2% senior notes due in 2027. We also transferred approximately $1.1 billion of Schwab One® balances to Schwab Bank, which has greater flexibility than the broker-dealer in investing client cash sweep balances. Our current plans call for transferring approximately $500 million to $1 billion in sweep money fund balances to the Bank during the second quarter. Schwab’s consolidated balance sheet totaled $227 billion at quarter-end, up 19%, and the company’s preliminary Tier 1 Leverage ratio was 7.1%. By combining effective capital management with a relentless drive for profitable growth, we can support strong balance sheet expansion while building stockholder value – our first quarter return on equity reached 15%, the highest in six years.”
Business highlights for the first quarter (data as of quarter-end unless otherwise noted):
Investor Services
- New retail brokerage accounts for the quarter totaled approximately 235,000, up 44% year-over-year; total accounts were 7.2 million, up 4% year-over-year.
- Opened one independent branch in Saratoga Springs, NY and signed our 35th Independent Branch Leader, continuing the company’s franchising initiative designed to make financial advice more accessible.
- Relocated five branches and expanded three branches; Schwab has over 335 branches across the country that offer clients access to a range of investing and personal finance guidance, services, and products.
- Graduated the third class of FC Academy, a 24-month development rotational program preparing recent college graduates for a career in one of our branch offices; 37 graduates represent the largest class to date.
- Schwab Stock Plan Services entered into an agreement with eShares, an online equity management platform and the only SEC-registered transfer agent for private companies, to enable eShares clients to transition their employee equity plans to Schwab’s stock plan administration platform as they prepare to enter the public market.
- Ranked #1 for Customer Service in Investor’s Business Daily 2017 Best Online Brokers.
Advisor Services
- Debuted ADVANTAGE®, a conference for growth-oriented advisors representing approximately $60 billion in assets under management; Schwab executives and keynote speakers discussed industry trends, best practices, techniques, and technologies integral to the execution of business growth strategies.
- Hosted nearly 1,300 advisor clients for the Spring Regulatory Update webcast, which addressed key topics, including the Department of Labor fiduciary rule and the SEC Custody Rule.
- Enhanced several advisor tools and technologies: Schwab Alliance with simplified Schwab MoneyLink® sign up, Schwab Advisor Center® with improved account open and block trade order entry, and the Institutional Intelligent Portfolios® app for tablets and mobile phones with more intuitive navigation.
Products and Infrastructure
-
For Charles Schwab Bank:
- Improved technology capabilities for Pledged Asset Line® to provide a more customized lending experience and streamlined money movement for banking accounts.
- Balance sheet assets = $180.5 billion, up 23% year-over-year.
- Outstanding mortgage and home equity loans = $11.6 billion, up 5% year-over-year.
- Pledged Asset Line® balances = $3.8 billion, up 15% year-over-year.
- Schwab Bank High Yield Investor Checking® accounts = 928,000, with $14.1 billion in balances.
-
For Charles Schwab Investment Management:
- Received four Best-In-Class Thomson Reuters Lipper Fund Awards: Schwab Fundamental International Small Company Index Fund (best 3-year performance), Laudus International MarketMasters Fund™ (best 10-year performance), and Laudus Mondrian International Equity Fund, Institutional (best 3-year and 5-year performance).
- Excluding money funds, quarterly net flows for mutual funds, ETFs, and collective funds reached a record $7.5 billion.
- Schwab ETF OneSource™ celebrated its fourth anniversary and added four Oppenheimer funds as well as eight new funds from existing providers to its lineup; with these additions, investors and advisors can buy and sell 228 ETFs covering 69 Morningstar Categories from 16 providers.
- Client assets managed by Windhaven® totaled $8.5 billion, down 23% from the first quarter of 2016.
- Client assets managed by ThomasPartners® totaled $11.8 billion, up 51% from the first quarter of 2016.
- Client assets managed by Intelligent Portfolios (Schwab Intelligent Portfolios® and Institutional Intelligent Portfolios®) totaled $15.9 billion, up $3.6 billion from the fourth quarter of 2016.
Supporting schedules are either attached or located at: http://www.aboutschwab.com/investor-relations/financial-reports.
*Restrictions apply: The $4.95 commission does not apply to certain transactions. All broker-assisted and automated phone trades are subject to service charges. See the Charles Schwab Pricing Guide for Individual Investors for full fee and commission schedules. If you are not completely satisfied for any reason, at your request Charles Schwab & Co., Inc. will refund any eligible fee related to your concern within the time frames described below. Two kinds of “Fees” are eligible for this guarantee: (1) asset-based “Program Fees” for certain investment advisory services sponsored by Schwab; and (2) commissions and fees listed in the Charles Schwab Pricing Guide for Individual Investors (“Account Fees”). Program Fee refund requests must be received no later than the next calendar quarter after the Fee was charged. Account Fee refund requests must be received within one year of the date that the Fee was charged.
Commentary from the CFO
Joe Martinetto, Senior Executive Vice President and Chief Financial Officer, provides insight and commentary regarding Schwab’s financial picture at: http://www.aboutschwab.com/investor-relations/cfo-commentary. The most recent commentary was posted on February 28, 2017.
Forward-Looking Statements
This press release contains forward-looking statements relating to building a bigger, stronger, and more capable company; strategy; growing client base; client use of wealth management capabilities; growing business; commitment to investing in the business; sharing the benefits of scale with clients; solid asset growth driving solid revenue growth; positioning to work through the effects of recent pricing moves; investing in planned growth initiatives; transferring sweep money fund balances to the bank; effective capital management; profitable growth; strong balance sheet expansion; and building stockholder value. 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 registered investment advisors and grow those relationships and client assets; general market conditions, including the level of interest rates, equity valuations and trading activity; competitive pressures on pricing; the company’s ability to develop and launch new products, services and capabilities in a timely and successful manner; client use of the company’s investment advisory services and other products and services; the level of client assets, including cash balances; the company’s ability to manage expenses; capital and liquidity needs and management; the timing, amount and impact of bulk transfers; 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; and other factors set forth in the company’s most recent report on Form 10-K.
About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 335 offices and 10.3 million active brokerage accounts, 1.5 million corporate retirement plan participants, 1.1 million banking accounts, and $2.92 trillion in client assets as of March 31, 2017. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://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 www.schwab.com and www.aboutschwab.com.
|
THE CHARLES SCHWAB CORPORATION Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) |
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|
Three Months Ended March 31, |
||||||||
| 2017 | 2016 | |||||||
| Net Revenues | ||||||||
| Asset management and administration fees (1) | $ | 823 | $ | 699 | ||||
| Interest revenue | 1,055 | 810 | ||||||
| Interest expense | (55 | ) | (38 | ) | ||||
| Net interest revenue | 1,000 | 772 | ||||||
| Trading revenue | 192 | 232 | ||||||
| Other | 66 | 63 | ||||||
| Provision for loan losses | — | (2 | ) | |||||
| Total net revenues | 2,081 | 1,764 | ||||||
| Expenses Excluding Interest | ||||||||
| Compensation and benefits | 701 | 626 | ||||||
| Professional services | 133 | 116 | ||||||
| Occupancy and equipment | 105 | 98 | ||||||
| Advertising and market development | 71 | 70 | ||||||
| Communications | 57 | 60 | ||||||
| Depreciation and amortization | 65 | 56 | ||||||
| Other | 106 | 83 | ||||||
| Total expenses excluding interest | 1,238 | 1,109 | ||||||
| Income before taxes on income | 843 | 655 | ||||||
| Taxes on income (2) | 279 | 243 | ||||||
| Net Income | 564 | 412 | ||||||
| Preferred stock dividends and other (3) | 39 | 20 | ||||||
| Net Income Available to Common Stockholders | $ | 525 | $ | 392 | ||||
| Weighted-Average Common Shares Outstanding: | ||||||||
| Basic | 1,336 | 1,321 | ||||||
| Diluted | 1,351 | 1,330 | ||||||
| Earnings Per Common Share: | ||||||||
| Basic | $ | .39 | $ | .30 | ||||
| Diluted | $ | .39 | $ | .29 | ||||
| Dividends Declared Per Common Share | $ | .08 | $ | .06 | ||||
|
(1) |
Includes fee waivers of $8 million and $97 million for the three months ended March 31, 2017 and 2016, respectively, relating to Schwab-sponsored money market funds. |
|
(2) |
First quarter 2017 tax expense was reduced by approximately $31 million to reflect the required adoption of Accounting Standards Update 2016-09, which changes the accounting treatment of a portion of the tax deductions relating to equity compensation. |
|
(3) |
Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units. |
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THE CHARLES SCHWAB CORPORATION Financial and Operating Highlights (Unaudited) |
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| Q1-17 % change | 2017 | 2016 | ||||||||||||||||||||||||
| (In millions, except per share amounts and as noted) |
vs. Q1-16 |
vs. Q4-16 |
First Quarter |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|||||||||||||||||||
| Net Revenues | ||||||||||||||||||||||||||
| Asset management and administration fees | 18 | % | 3 | % | $ | 823 | $ | 801 | $ | 798 | $ | 757 | $ | 699 | ||||||||||||
| Net interest revenue | 30 | % | 10 | % | 1,000 | 907 | 845 | 798 | 772 | |||||||||||||||||
| Trading revenue | (17 | )% | (5 | )% | 192 | 202 | 190 | 201 | 232 | |||||||||||||||||
| Other | 5 | % | 6 | % | 66 | 62 | 76 | 70 | 63 | |||||||||||||||||
| Provision for loan losses | (100 | )% | — | — | — | 5 | 2 | (2 | ) | |||||||||||||||||
| Total net revenues | 18 | % | 6 | % | 2,081 | 1,972 | 1,914 | 1,828 | 1,764 | |||||||||||||||||
| Expenses Excluding Interest | ||||||||||||||||||||||||||
| Compensation and benefits | 12 | % | 11 | % | 701 | 629 | 609 | 602 | 626 | |||||||||||||||||
| Professional services | 15 | % | (1 | )% | 133 | 134 | 131 | 125 | 116 | |||||||||||||||||
| Occupancy and equipment | 7 | % | 6 | % | 105 | 99 | 100 | 101 | 98 | |||||||||||||||||
| Advertising and market development | 1 | % | 16 | % | 71 | 61 | 64 | 70 | 70 | |||||||||||||||||
| Communications | (5 | )% | (2 | )% | 57 | 58 | 57 | 62 | 60 | |||||||||||||||||
| Depreciation and amortization | 16 | % | 7 | % | 65 | 61 | 60 | 57 | 56 | |||||||||||||||||
| Other | 28 | % | — | 106 | 106 | 99 | 91 | 83 | ||||||||||||||||||
| Total expenses excluding interest | 12 | % | 8 | % | 1,238 | 1,148 | 1,120 | 1,108 | 1,109 | |||||||||||||||||
| Income before taxes on income | 29 | % | 2 | % | 843 | 824 | 794 | 720 | 655 | |||||||||||||||||
| Taxes on income | 15 | % | (8 | )% | 279 | 302 | 291 | 268 | 243 | |||||||||||||||||
| Net Income | 37 | % | 8 | % | $ | 564 | $ | 522 | $ | 503 | $ | 452 | $ | 412 | ||||||||||||
| Preferred stock dividends and other | 95 | % | (11 | )% | 39 | 44 | 33 | 46 | 20 | |||||||||||||||||
| Net Income Available to Common Stockholders | 34 | % | 10 | % | $ | 525 | $ | 478 | $ | 470 | $ | 406 | $ | 392 | ||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic | 30 | % | 8 | % | $ | .39 | $ | .36 | $ | .36 | $ | .31 | $ | .30 | ||||||||||||
| Diluted | 34 | % | 8 | % | $ | .39 | $ | .36 | $ | .35 | $ | .30 | $ | .29 | ||||||||||||
| Dividends declared per common share | 33 | % | 14 | % | $ | .08 | $ | .07 | $ | .07 | $ | .07 | $ | .06 | ||||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||||||||||
| Basic | 1 | % | 1 | % | 1,336 | 1,329 | 1,324 | 1,322 | 1,321 | |||||||||||||||||
| Diluted | 2 | % | 1 | % | 1,351 | 1,341 | 1,334 | 1,333 | 1,330 | |||||||||||||||||
| Performance Measures | ||||||||||||||||||||||||||
| Pre-tax profit margin | 40.5 | % | 41.8 | % | 41.5 | % | 39.4 | % | 37.1 | % | ||||||||||||||||
| Return on average common stockholders’ equity (annualized) (1) | 15 | % | 14 | % | 14 | % | 13 | % | 13 | % | ||||||||||||||||
| Financial Condition (at quarter end, in billions) | ||||||||||||||||||||||||||
| Cash and investments segregated | 4 | % | (5 | )% | $ | 21.2 | $ | 22.2 | $ | 20.1 | $ | 18.6 | $ | 20.3 | ||||||||||||
| Receivables from brokerage clients - net | 4 | % | (3 | )% | 16.7 | 17.2 | 16.4 | 16.8 | 16.0 | |||||||||||||||||
| Bank loans - net | 8 | % | 1 | % | 15.5 | 15.4 | 14.9 | 14.7 | 14.4 | |||||||||||||||||
| Total assets | 19 | % | 2 | % | 227.1 | 223.4 | 209.3 | 198.1 | 191.0 | |||||||||||||||||
| Bank deposits | 23 | % | 2 | % | 166.9 | 163.5 | 149.6 | 137.3 | 135.7 | |||||||||||||||||
| Payables to brokerage clients | 6 | % | (4 | )% | 34.3 | 35.9 | 33.0 | 32.7 | 32.3 | |||||||||||||||||
| Short-term borrowings | (25 | )% | 100 | % | .6 | — | 3.0 | 5.0 | .8 | |||||||||||||||||
| Long-term debt | 21 | % | 21 | % | 3.5 | 2.9 | 2.9 | 2.9 | 2.9 | |||||||||||||||||
| Stockholders’ equity | 17 | % | 4 | % | 17.0 | 16.4 | 15.5 | 15.0 | 14.5 | |||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Full-time equivalent employees (at quarter end, in thousands) | 6 | % | 2 | % | 16.5 | 16.2 | 16.1 | 16.1 | 15.6 | |||||||||||||||||
|
Capital expenditures - purchases of equipment, office facilities, and property, net (in millions) |
10 | % | (22 | )% | $ | 67 | $ | 86 | $ | 75 | $ | 131 | $ | 61 | ||||||||||||
|
Expenses excluding interest as a percentage of average client assets (annualized) |
0.18 | % | 0.17 | % | 0.17 | % | 0.17 | % | 0.18 | % | ||||||||||||||||
| Clients’ Daily Average Trades (in thousands) | ||||||||||||||||||||||||||
| Revenue trades (2) | (3 | )% | 8 | % | 317 | 293 | 268 | 279 | 328 | |||||||||||||||||
| Asset-based trades (3) | 2 | % | (3 | )% | 103 | 106 | 80 | 90 | 101 | |||||||||||||||||
| Other trades (4) | (12 | )% | (5 | )% | 165 | 174 | 195 | 149 | 187 | |||||||||||||||||
| Total | (5 | )% | 2 | % | 585 | 573 | 543 | 518 | 616 | |||||||||||||||||
| Average Revenue Per Revenue Trade (2) | (14 | )% | (11 | )% | $ | 9.84 | $ | 11.03 | $ | 11.17 | $ | 11.27 | $ | 11.44 | ||||||||||||
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(1) |
Return on average common stockholders' equity is calculated using net income available to common stockholders divided by average common stockholders' equity. |
|
(2) |
Includes all client trades that generate trading revenue (i.e., commission revenue or principal transaction revenue); also known as DART. |
|
(3) |
Includes eligible trades executed by clients who participate in one or more of the Company's asset-based pricing relationships. |
|
(4) |
Includes all commission-free trades, including Schwab Mutual Funds OneSource® funds and ETFs, and other proprietary products. |
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THE CHARLES SCHWAB CORPORATION Net Interest Revenue Information (In millions) (Unaudited) |
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|
Three Months Ended March 31, |
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| 2017 | 2016 | |||||||||||||||||||||
|
Average Balance |
Interest Revenue/ Expense |
Average Yield/ Rate |
Average Balance |
Interest Revenue/ Expense |
Average Yield/ Rate |
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| Interest-earning assets: | ||||||||||||||||||||||
| Cash and cash equivalents | $ | 9,047 | $ | 17 | 0.76 | % | $ | 10,752 | $ | 13 | 0.49 | % | ||||||||||
| Cash and investments segregated | 21,820 | 35 | 0.65 | % | 20,265 | 19 | 0.38 | % | ||||||||||||||
| Broker-related receivables (1) | 388 | — | 0.55 | % | 384 | — | 0.04 | % | ||||||||||||||
| Receivables from brokerage clients | 15,245 | 126 | 3.35 | % | 14,890 | 125 | 3.38 | % | ||||||||||||||
| Available for sale securities (2) | 71,430 | 251 | 1.43 | % | 68,163 | 198 | 1.17 | % | ||||||||||||||
| Held to maturity securities | 83,368 | 485 | 2.36 | % | 50,257 | 322 | 2.58 | % | ||||||||||||||
| Bank loans | 15,527 | 110 | 2.87 | % | 14,405 | 99 | 2.76 | % | ||||||||||||||
| Total interest-earning assets | 216,825 | 1,024 | 1.92 | % | 179,116 | 776 | 1.74 | % | ||||||||||||||
| Other interest revenue | 31 | 34 | ||||||||||||||||||||
| Total interest-earning assets | $ | 216,825 | $ | 1,055 | 1.97 | % | $ | 179,116 | $ | 810 | 1.82 | % | ||||||||||
| Funding sources: | ||||||||||||||||||||||
| Bank deposits | $ | 163,682 | $ | 19 | 0.05 | % | $ | 131,620 | $ | 8 | 0.02 | % | ||||||||||
| Payables to brokerage clients (1) | 27,666 | 2 | 0.03 | % | 26,728 | — | 0.01 | % | ||||||||||||||
| Short-term borrowings (1) | 1,332 | 2 | 0.61 | % | 20 | — | 0.20 | % | ||||||||||||||
| Long-term debt | 3,090 | 28 | 3.67 | % | 2,877 | 26 | 3.63 | % | ||||||||||||||
| Total interest-bearing liabilities | 195,770 | 51 | 0.11 | % | 161,245 | 34 | 0.08 | % | ||||||||||||||
| Non-interest-bearing funding sources | 21,055 | 17,871 | ||||||||||||||||||||
| Other interest expense | 4 | 4 | ||||||||||||||||||||
| Total funding sources | $ | 216,825 | $ | 55 | 0.10 | % | $ | 179,116 | $ | 38 | 0.09 | % | ||||||||||
| Net interest revenue | $ | 1,000 | 1.87 | % | $ | 772 | 1.73 | % | ||||||||||||||
|
(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. |
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THE CHARLES SCHWAB CORPORATION Asset Management and Administration Fees Information (In millions) (Unaudited) |
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| Three Months Ended March 31, | ||||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||||
|
Average Client Assets |
Revenue |
Average Fee |
Average Client Assets |
Revenue |
Average Fee |
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| Schwab money market funds before fee waivers | $ | 162,789 | $ | 231 | 0.58 | % | $ | 168,440 | $ | 246 | 0.59 | % | ||||||||||
| Fee waivers | (8 | ) | (97 | ) | ||||||||||||||||||
| Schwab money market funds | 162,789 | 223 | 0.56 | % | 168,440 | 149 | 0.36 | % | ||||||||||||||
| Schwab equity and bond funds and ETFs | 140,054 | 55 | 0.16 | % | 103,392 | 51 | 0.20 | % | ||||||||||||||
| Mutual Fund OneSource ® | 202,416 | 170 | 0.34 | % | 194,644 | 164 | 0.34 | % | ||||||||||||||
| Other third-party mutual funds and ETFs (1) | 272,626 | 58 | 0.09 | % | 235,317 | 51 | 0.09 | % | ||||||||||||||
| Total mutual funds and ETFs (2) | $ | 777,885 | 506 | 0.26 | % | $ | 701,793 | 415 | 0.24 | % | ||||||||||||
| Advice solutions (2) : | ||||||||||||||||||||||
| Fee-based | $ | 191,727 | 244 | 0.52 | % | $ | 166,419 | 215 | 0.52 | % | ||||||||||||
| Intelligent Portfolios | 14,245 | — | — | 5,116 | — | — | ||||||||||||||||
| Legacy Non-Fee | 17,441 | — | — | 16,469 | — | — | ||||||||||||||||
| Total advice solutions (3) | $ | 223,413 | 244 | 0.44 | % | $ | 188,004 | 215 | 0.46 | % | ||||||||||||
| Other balance-based fees (4) | 388,739 | 61 | 0.06 | % | 318,027 | 56 | 0.07 | % | ||||||||||||||
| Other (5) | 12 | 13 | ||||||||||||||||||||
| Total asset management and administration fees | $ | 823 | $ | 699 | ||||||||||||||||||
|
(1) |
Includes Schwab ETF OneSource™. |
|
(2) |
Advice solutions include managed portfolios, specialized strategies, and customized investment advice. Fee-based advice solutions include Schwab Private Client, Schwab Managed Portfolios, Managed Account Select®, Schwab Advisor Network®, Windhaven® Strategies, ThomasPartners® Dividend Growth Strategy, Schwab Index Advantage® advised retirement plan balances, and Schwab Intelligent AdvisoryTM, launched in March 2017; average client assets are shown exclusive of enrolled balances that do not generate advice fees. Intelligent Portfolios include Schwab Intelligent Portfolios® and Institutional Intelligent Portfolios®. Legacy Non-Fee advice solutions include superseded programs such as 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. |
|
(3) |
For total end of period client assets receiving ongoing advisory services, including those not generating advice fees, please see the Monthly Activity Report. |
|
(4) |
Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees. Beginning in the first quarter of 2017, a prospective methodology change was made to average client assets relating to 401(k) recordkeeping fees to provide improved insight into the associated fee driver, which resulted in an increase of approximately $25 billion. There was no impact to revenue or the average fee. |
|
(5) |
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) |
||||||||||||||||||||||||||
| Q1-17 % Change | 2017 | 2016 | ||||||||||||||||||||||||
| (In billions, at quarter end, except as noted) |
vs. Q1-16 |
vs. Q4-16 |
First Quarter |
Fourth Quarter |
Third Quarter |
Second Quarter |
First Quarter |
|||||||||||||||||||
| Assets in client accounts | ||||||||||||||||||||||||||
| Schwab One®, certain cash equivalents and bank deposits | 20 | % | 1 | % | $ | 199.6 | $ | 197.4 | $ | 181.1 | $ | 168.4 | $ | 166.4 | ||||||||||||
| Proprietary mutual funds (Schwab Funds® and Laudus Funds®): | ||||||||||||||||||||||||||
| Money market funds | (3 | )% | — | 162.9 | 163.5 | 160.3 | 161.0 | 167.4 | ||||||||||||||||||
| Equity and bond funds (1) | 13 | % | 6 | % | 70.1 | 66.1 | 64.6 | 62.8 | 62.1 | |||||||||||||||||
| Total proprietary mutual funds | 2 | % | 1 | % | 233.0 | 229.6 | 224.9 | 223.8 | 229.5 | |||||||||||||||||
| Mutual Fund Marketplace® (2) | ||||||||||||||||||||||||||
| Mutual Fund OneSource® | 1 | % | 3 | % | 204.9 | 198.9 | 206.1 | 203.4 | 203.8 | |||||||||||||||||
| Mutual fund clearing services | 6 | % | — | 197.5 | 196.6 | 198.8 | 192.0 | 186.3 | ||||||||||||||||||
| Other third-party mutual funds | 17 | % | 7 | % | 596.2 | 558.2 | 556.1 | 529.7 | 510.7 | |||||||||||||||||
| Total Mutual Fund Marketplace | 11 | % | 5 | % | 998.6 | 953.7 | 961.0 | 925.1 | 900.8 | |||||||||||||||||
| Total mutual fund assets | 9 | % | 4 | % | 1,231.6 | 1,183.3 | 1,185.9 | 1,148.9 | 1,130.3 | |||||||||||||||||
| Exchange-traded funds (ETFs) | ||||||||||||||||||||||||||
| Proprietary ETFs (1) | 62 | % | 16 | % | 69.3 | 59.8 | 53.9 | 47.9 | 42.9 | |||||||||||||||||
| ETF OneSource™ (2) | 32 | % | 9 | % | 23.1 | 21.2 | 20.2 | 19.0 | 17.5 | |||||||||||||||||
| Other third-party ETFs | 22 | % | 8 | % | 257.0 | 238.3 | 230.8 | 220.5 | 211.5 | |||||||||||||||||
| Total ETF assets | 29 | % | 9 | % | 349.4 | 319.3 | 304.9 | 287.4 | 271.9 | |||||||||||||||||
| Equity and other securities | 16 | % | 6 | % | 939.7 | 886.5 | 860.3 | 830.7 | 808.5 | |||||||||||||||||
| Fixed income securities | 12 | % | 4 | % | 217.5 | 208.3 | 208.0 | 202.0 | 194.1 | |||||||||||||||||
| Margin loans outstanding | 6 | % | — | (15.3 | ) | (15.3 | ) | (14.9 | ) | (15.4 | ) | (14.5 | ) | |||||||||||||
| Total client assets | 14 | % | 5 | % | $ | 2,922.5 | $ | 2,779.5 | $ | 2,725.3 | $ | 2,622.0 | $ | 2,556.7 | ||||||||||||
| Client assets by business | ||||||||||||||||||||||||||
| Investor Services | 14 | % | 5 | % | $ | 1,565.9 | $ | 1,495.4 | $ | 1,470.8 | $ | 1,415.5 | $ | 1,377.3 | ||||||||||||
| Advisor Services | 15 | % | 6 | % | 1,356.6 | 1,284.1 | 1,254.5 | 1,206.5 | 1,179.4 | |||||||||||||||||
| Total client assets | 14 | % | 5 | % | $ | 2,922.5 | $ | 2,779.5 | $ | 2,725.3 | $ | 2,622.0 | $ | 2,556.7 | ||||||||||||
| Net growth in assets in client accounts (for the quarter ended) | ||||||||||||||||||||||||||
| Net new assets by business | ||||||||||||||||||||||||||
| Investor Services (3) | (11 | )% | 2 | % | $ | 14.0 | $ | 13.7 | $ | 14.2 | $ | 14.8 | $ | 15.7 | ||||||||||||
| Advisor Services | 53 | % | 7 | % | 24.9 | 23.2 | 15.8 | 11.8 | 16.3 | |||||||||||||||||
| Total net new assets | 22 | % | 5 | % | $ | 38.9 | $ | 36.9 | $ | 30.0 | $ | 26.6 | $ | 32.0 | ||||||||||||
| Net market gains | N/M | N/M | 104.1 | 17.3 | 73.3 | 38.7 | 10.9 | |||||||||||||||||||
| Net growth | N/M | 164 | % | $ | 143.0 | $ | 54.2 | $ | 103.3 | $ | 65.3 | $ | 42.9 | |||||||||||||
| New brokerage accounts (in thousands, for the quarter ended) | 37 | % | 24 | % | 362 | 293 | 264 | 271 | 265 | |||||||||||||||||
| Clients (in thousands) | ||||||||||||||||||||||||||
| Active Brokerage Accounts | 5 | % | 2 | % | 10,320 | 10,155 | 10,046 | 9,977 | 9,869 | |||||||||||||||||
| Banking Accounts | 7 | % | 1 | % | 1,120 | 1,106 | 1,088 | 1,065 | 1,047 | |||||||||||||||||
| Corporate Retirement Plan Participants | 1 | % | — | 1,545 | 1,543 | 1,561 | 1,553 | 1,532 | ||||||||||||||||||
|
(1) |
Includes proprietary equity and bond funds and ETFs held on and off the Schwab platform. As of March 31, 2017, off-platform equity and bond funds and ETFs were $8.3 billion and $15.0 billion, respectively. |
|
(2) |
Excludes all proprietary mutual funds and ETFs. |
|
(3) |
First quarter of 2017 includes an outflow of $9.0 billion from a mutual fund clearing services client. Second quarter of 2016 includes an inflow of $2.7 billion from a mutual fund clearing services client. |
| N/M | Not meaningful. |
|
The Charles Schwab Corporation Monthly Activity Report for March 2017 |
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| 2016 | 2017 |
Change |
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|
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
Jan |
Feb |
Mar |
Mo. |
Yr. |
|||||||||||||||||||||||||||||
| Market Indices | |||||||||||||||||||||||||||||||||||||||||||
| (at month end) | |||||||||||||||||||||||||||||||||||||||||||
| Dow Jones Industrial Average | 17,685 | 17,774 | 17,787 | 17,930 | 18,432 | 18,401 | 18,308 | 18,142 | 19,124 | 19,763 | 19,864 | 20,812 | 20,663 | (1)% | 17% | ||||||||||||||||||||||||||||
| Nasdaq Composite | 4,870 | 4,775 | 4,948 | 4,843 | 5,162 | 5,213 | 5,312 | 5,189 | 5,324 | 5,383 | 5,615 | 5,825 | 5,912 | 1% | 21% | ||||||||||||||||||||||||||||
| Standard & Poor’s 500 | 2,060 | 2,065 | 2,097 | 2,099 | 2,174 | 2,171 | 2,168 | 2,126 | 2,199 | 2,239 | 2,279 | 2,364 | 2,363 | — | 15% | ||||||||||||||||||||||||||||
| Client Assets | |||||||||||||||||||||||||||||||||||||||||||
| (in billions of dollars) | |||||||||||||||||||||||||||||||||||||||||||
| Beginning Client Assets | 2,433.6 | 2,556.7 | 2,576.2 | 2,607.2 | 2,622.0 | 2,698.2 | 2,710.4 | 2,725.3 | 2,686.7 | 2,734.6 | 2,779.5 | 2,831.3 | 2,895.2 | ||||||||||||||||||||||||||||||
| Net New Assets (1) | 13.0 | 1.3 | 16.0 | 9.3 | 9.0 | 10.4 | 10.6 | 6.1 | 11.9 | 18.9 | 11.1 | 6.6 | 21.2 | N/M | 63% | ||||||||||||||||||||||||||||
| Net Market Gains (Losses) | 110.1 | 18.2 | 15.0 | 5.5 | 67.2 | 1.8 | 4.3 | (44.7 | ) | 36.0 | 26.0 | 40.7 | 57.3 | 6.1 | |||||||||||||||||||||||||||||
| Total Client Assets (at month end) | 2,556.7 | 2,576.2 | 2,607.2 | 2,622.0 | 2,698.2 | 2,710.4 | 2,725.3 | 2,686.7 | 2,734.6 | 2,779.5 | 2,831.3 | 2,895.2 | 2,922.5 | 1% | 14% | ||||||||||||||||||||||||||||
| Receiving Ongoing Advisory Services | |||||||||||||||||||||||||||||||||||||||||||
| (at month end) | |||||||||||||||||||||||||||||||||||||||||||
| Investor Services | 197.9 | 200.3 | 202.7 | 205.0 | 210.2 | 211.7 | 213.4 | 211.3 | 213.2 | 217.1 | 220.8 | 227.9 | 230.9 | 1% | 17% | ||||||||||||||||||||||||||||
| Advisor Services (2) | 1,084.0 | 1,093.2 | 1,103.7 | 1,110.5 | 1,142.3 | 1,149.4 | 1,155.4 | 1,140.5 | 1,161.8 | 1,184.3 | 1,208.4 | 1,239.0 | 1,250.9 | 1% | 15% | ||||||||||||||||||||||||||||
| Client Accounts | |||||||||||||||||||||||||||||||||||||||||||
| (at month end, in thousands) | |||||||||||||||||||||||||||||||||||||||||||
| Active Brokerage Accounts | 9,869 | 9,916 | 9,948 | 9,977 | 9,989 | 10,021 | 10,046 | 10,068 | 10,102 | 10,155 | 10,198 | 10,254 | 10,320 | 1% | 5% | ||||||||||||||||||||||||||||
| Banking Accounts | 1,047 | 1,053 | 1,060 | 1,065 | 1,074 | 1,083 | 1,088 | 1,092 | 1,099 | 1,106 | 1,109 | 1,117 | 1,120 | — | 7% | ||||||||||||||||||||||||||||
| Corporate Retirement Plan Participants | 1,532 | 1,532 | 1,555 | 1,553 | 1,559 | 1,565 | 1,561 | 1,547 | 1,550 | 1,543 | 1,543 | 1,534 | 1,545 | 1% | 1% | ||||||||||||||||||||||||||||
| Client Activity | |||||||||||||||||||||||||||||||||||||||||||
| New Brokerage Accounts (in thousands) | 98 | 103 | 81 | 87 | 84 | 96 | 84 | 84 | 93 | 116 | 111 | 113 | 138 | 22% | 41% | ||||||||||||||||||||||||||||
| Inbound Calls (in thousands) | 1,902 | 1,867 | 1,554 | 1,665 | 1,605 | 1,755 | 1,633 | 1,565 | 1,642 | 1,931 | 1,817 | 1,787 | 2,111 | 18% | 11% | ||||||||||||||||||||||||||||
| Web Logins (in thousands) | 38,078 | 37,854 | 38,000 | 43,220 | 46,217 | 42,627 | 38,237 | 35,429 | 37,687 | 40,720 | 40,047 | 40,717 | 45,441 | 12% | 19% | ||||||||||||||||||||||||||||
| Client Cash as Percentage of Client Assets (3) | 13.1 | % | 12.8 | % | 12.7 | % | 12.6 | % | 12.5 | % | 12.5 | % | 12.5 | % | 12.8 | % | 12.8 | % | 13.0 | % | 12.7 | % | 12.4 | % | 12.4 | % | — | (70) bp | |||||||||||||||
| Mutual Fund and Exchange-Traded Fund | |||||||||||||||||||||||||||||||||||||||||||
| Net Buys (Sells) (4, 5) | |||||||||||||||||||||||||||||||||||||||||||
| (in millions of dollars) | |||||||||||||||||||||||||||||||||||||||||||
| Large Capitalization Stock | (462 | ) | (857 | ) | (799 | ) | 185 | (1,173 | ) | (755 | ) | (1,209 | ) | (652 | ) | 200 | 565 | 265 | 580 | (125 | ) | ||||||||||||||||||||||
| Small / Mid Capitalization Stock | 685 | (86 | ) | (272 | ) | (113 | ) | (320 | ) | (214 | ) | 460 | (190 | ) | 877 | 1,103 | 1,364 | 673 | (409 | ) | |||||||||||||||||||||||
| International | 833 | 324 | (207 | ) | (1,208 | ) | (347 | ) | 386 | (26 | ) | (1 | ) | 348 | (683 | ) | 1,296 | 1,633 | 1,703 | ||||||||||||||||||||||||
| Specialized | 191 | 815 | 265 | 470 | 357 | 189 | (274 | ) | (159 | ) | (1,019 | ) | 20 | 411 | 1,007 | 273 | |||||||||||||||||||||||||||
| Hybrid | 281 | 14 | 1,133 | (403 | ) | (463 | ) | (219 | ) | 58 | (432 | ) | (687 | ) | (456 | ) | (53 | ) | 258 | 563 | |||||||||||||||||||||||
| Taxable Bond | 1,628 | 1,098 | 1,526 | 1,421 | 1,420 | 1,888 | 1,585 | 1,475 | (1,110 | ) | 1,045 | 3,144 | 3,535 | 3,876 | |||||||||||||||||||||||||||||
| Tax-Free Bond | 949 | 479 | 940 | 700 | 766 | 920 | 539 | 20 | (1,090 | ) | (1,692 | ) | 864 | 472 | 300 | ||||||||||||||||||||||||||||
| Net Buy (Sell) Activity | |||||||||||||||||||||||||||||||||||||||||||
| (in millions of dollars) | |||||||||||||||||||||||||||||||||||||||||||
| Mutual Funds (4) | 1,769 | (207 | ) | 620 | (2,049 | ) | (1,683 | ) | (297 | ) | (656 | ) | (1,979 | ) | (5,864 | ) | (5,825 | ) | 2,522 | 4,005 | 2,368 | ||||||||||||||||||||||
| Exchange-Traded Funds (5) | 2,336 | 1,994 | 1,966 | 3,101 | 1,923 | 2,492 | 1,789 | 2,040 | 3,383 | 5,727 | 4,769 | 4,153 | 3,813 | ||||||||||||||||||||||||||||||
| Money Market Funds | (2,101 | ) | (3,959 | ) | (738 | ) | (1,799 | ) | 701 | (768 | ) | (658 | ) | 211 | 1,851 | 1,141 | (1,761 | ) | (181 | ) | 1,218 | ||||||||||||||||||||||
| Average Interest-Earning Assets (6) | |||||||||||||||||||||||||||||||||||||||||||
| (in millions of dollars) | 181,529 | 183,341 | 184,432 | 187,933 | 191,850 | 194,268 | 199,107 | 201,894 | 206,970 | 212,052 | 216,001 | 216,112 | 218,554 | 1% | 20% | ||||||||||||||||||||||||||||
| (1) | February 2017 includes an outflow of $9.0 billion from a mutual fund clearing services client. May 2016 includes an inflow of $2.7 billion from a mutual fund clearing services client. |
| (2) | Excludes Retirement Business Services Trust and Corporate Brokerage Retirement Services. |
| (3) | Schwab One®, certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets. |
| (4) | 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. |
| (5) | Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs. |
| (6) | Represents average total interest-earning assets on the Company’s balance sheet. |
| N/M | Not meaningful. |
