The Charles Schwab Corporation released its Monthly Activity
Report today. Company highlights for the month of February 2023
include:
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the full release here:
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- Core net new assets brought to the company by new and existing
clients totaled $41.7 billion. Net new assets excluding mutual fund
clearing totaled $40.5 billion.
- Total client assets were $7.38 trillion as of month-end
February, down 4% from February 2022 and down 1% compared to
January 2023.
- Average margin balances were $60.6 billion in February, down
28% from February 2022 and up 1% compared to January 2023.
Chief Financial Officer Peter Crawford offered the following
thoughts on the current environment, our company’s performance, and
recent client activity:
“Given the events of the past few days, we thought it might be
helpful to highlight several factors that enable us to keep
delivering for clients and stockholders through a range of market
conditions:
- Schwab’s business continues to perform exceptionally
well, as our Through Clients’ Eyes strategy and ‘no trade-offs’
positioning resonates with both clients and prospects. February
core net new assets totaled $41.7 billion, our 2nd largest February
ever (trailing only February 2021, the height of the meme stock
craze). Our growth and momentum have continued into March, with
daily net new assets averaging nearly $2B per trading day
month-to-date. Our financial performance continues to be strong. As
we look ahead to our first quarter results, we anticipate
year-over-year revenue growth of about 10% relative to Q1 2022,
with adjusted1 pre-tax profit margin in the 45-47% range.
- Client bank sweep cash outflows in February were about $5
billion lower than January and March month-to-date daily average
outflows are tracking consistent with February. Importantly,
these outflows reflect a continuation of client decisions to
reallocate a portion of their cash into higher yielding cash
alternatives within Schwab. Based on our ongoing analysis of these
trends, we still believe client cash realignment decisions will
largely abate during 2023.
- This activity reflects the collective behavior of our
heterogenous client mix of individual retail investors and the
advisors who serve them. More than 80% of our total bank
deposits fall within the FDIC insurance limits, among the five
highest ratios of the top 100 banks in the United States. As a
reminder, our deposit base is primarily comprised of transactional
cash balances swept to our banks from one of our 34 million
brokerage accounts.
- We have access to significant liquidity, including an
estimated $100 billion of cash flow from cash on hand,
portfolio-related cash flows, and net new assets we anticipate
realizing over the next twelve months. We believe we have upwards
of $8 billion in potential retail CD issuances per month, plus over
$300 billion of incremental capacity with the Federal Home Loan
Bank (FHLB) and other short-term facilities – including the
recently announced Bank Term Funding Program (BTFP).
- Our approach to managing our assets is quite different than
traditional banks. So before closing, I wanted to provide some
thoughts on recent comments by some pundits regarding unrealized
losses within bank held-to-maturity (HTM) portfolios. As a
reminder, our banks’ loan-to-deposit ratio is approximately 10% and
nearly all the loans are over-collateralized by first-lien
mortgages or securities. The remainder of our assets are invested
in high-quality, liquid securities in either our available-for-sale
(AFS) portfolio, working capital at the parent or broker-dealer
subsidiaries, or in our HTM portfolio. Focusing attention on
unrealized losses within HTM has two logical flaws. First, those
securities will mature at par, and given our significant access to
other sources of liquidity there is very little chance that we’d
need to sell them prior to maturity (as the name implies). Second,
by looking at unrealized losses among HTM securities, but not doing
the same for traditional banks’ loan portfolios, the analysis
penalizes firms like Schwab that in fact have a higher quality,
more liquid, and more transparent balance sheet.
All of these factors demonstrate that Schwab is well-positioned
to navigate the current environment as we continue to serve clients
and build the future of modern wealth management. And we applaud
the efforts of our regulators to support depositors during this
critical time, helping to bolster confidence across the American
banking system.”
1 For the 1Q 2023, we currently expect GAAP pre-tax profit
margin of 41% – 43%. Further detail on Schwab’s non-GAAP financial
measures is included within our 10-K filed in February 2023.
Adjusted pre-tax profit margin is calculated as adjusted income
before taxes on income divided by net revenues. Adjusted income
before taxes on income equals net revenues less adjusted total
expenses. Adjusted total expenses equals total GAAP expenses
excluding interest less acquisition and integration-related costs
and amortization of acquired intangible assets.
Forward-Looking Statements
This press release contains forward-looking statements relating
to Schwab’s business momentum and growth; strategy and positioning;
financial performance; revenue growth; adjusted pre-tax profit
margin; client bank sweep cash outflows; client cash realignment
decisions; access to liquidity, including from cash flows, CD
issuances, and FHLB and other short-term facilities; HTM portfolio;
and balance sheet. These forward-looking statements reflect
management’s expectations as of the date hereof. Achievement of
these expectations and objectives is subject to risks and
uncertainties that could cause actual results to differ materially
from the expressed expectations.
Important factors that may cause such differences include, but
are not limited to, the company’s ability to attract and retain
clients and independent investment advisors and grow those
relationships and client assets; develop and launch new and
enhanced products, services, and capabilities, as well as enhance
its infrastructure and capacity, in a timely and successful manner;
hire and retain talent; support client activity levels;
successfully implement integration strategies and plans; monetize
client assets; and manage expenses. Other important factors include
client use of the company’s advisory solutions and other products
and services; general market conditions, including equity
valuations and the level of interest rates; the level and mix of
client trading activity; market volatility; margin loan balances;
securities lending; competitive pressures on pricing; client cash
allocation decisions; client sensitivity to rates; level of client
assets, including cash balances; capital and liquidity needs and
management; balance sheet positioning relative to changes in
interest rates; interest earning asset mix and growth; the
migration of bank deposit account balances; and other factors set
forth in the company’s most recent reports on Form 10-K and Form
10-Q.
About Charles Schwab
The Charles Schwab Corporation (NYSE: SCHW) is a leading
provider of financial services, with 34.0 million active brokerage
accounts, 2.4 million corporate retirement plan participants, 1.7
million banking accounts, and $7.38 trillion in client assets as of
February 28, 2023. 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 subsidiaries, Charles Schwab & Co., Inc., TD
Ameritrade, Inc., and TD Ameritrade Clearing, Inc., (members SIPC,
https://www.sipc.org), and their 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
primary banking subsidiary, Charles Schwab Bank, SSB (member FDIC
and an Equal Housing Lender), provides banking and lending services
and products. More information is available at
https://www.aboutschwab.com.
TD Ameritrade, Inc. and TD Ameritrade Clearing, Inc. are
separate but affiliated companies and subsidiaries of TD Ameritrade
Holding Corporation. TD Ameritrade Holding Corporation is a wholly
owned subsidiary of The Charles Schwab Corporation. TD Ameritrade
is a trademark jointly owned by TD Ameritrade IP Company, Inc. and
The Toronto-Dominion Bank.
The Charles Schwab Corporation
Monthly Activity Report For February 2023
2022
2023
Change
Feb
Mar Apr May
Jun Jul Aug
Sep Oct Nov
Dec Jan Feb
Mo. Yr.
Market Indices (at month end) Dow Jones Industrial Average®
33,893
34,678
32,977
32,990
30,775
32,845
31,510
28,726
32,733
34,590
33,147
34,086
32,657
(4
%)
(4
%)
Nasdaq Composite®
13,751
14,221
12,335
12,081
11,029
12,391
11,816
10,576
10,988
11,468
10,466
11,585
11,456
(1
%)
(17
%)
Standard & Poor’s® 500
4,374
4,530
4,132
4,132
3,785
4,130
3,955
3,586
3,872
4,080
3,840
4,077
3,970
(3
%)
(9
%)
Client Assets (in billions of dollars) Beginning Client
Assets
7,803.8
7,686.6
7,862.1
7,284.4
7,301.7
6,832.5
7,304.8
7,127.6
6,644.2
7,004.6
7,320.6
7,049.8
7,480.6
Net New Assets (1)
40.6
46.3
(9.2
)
32.8
19.8
31.5
43.3
39.8
42.0
33.1
53.3
36.1
41.7
16
%
3
%
Net Market (Losses) Gains
(157.8
)
129.2
(568.5
)
(15.5
)
(489.0
)
440.8
(220.5
)
(523.2
)
318.4
282.9
(324.1
)
394.7
(142.1
)
Total Client Assets (at month end)
7,686.6
7,862.1
7,284.4
7,301.7
6,832.5
7,304.8
7,127.6
6,644.2
7,004.6
7,320.6
7,049.8
7,480.6
7,380.2
(1
%)
(4
%)
Core Net New Assets (2)
40.6
46.3
(9.2
)
32.8
40.6
31.5
43.3
39.8
42.0
33.1
53.3
36.1
41.7
16
%
3
%
Receiving Ongoing Advisory Services (at month end) Investor
Services
533.7
538.9
509.3
513.0
483.8
514.8
499.2
466.6
487.3
514.0
499.8
524.6
515.5
(2
%)
(3
%)
Advisor Services (3)
3,342.5
3,404.6
3,190.5
3,213.8
3,040.4
3,222.5
3,150.5
2,950.9
3,106.0
3,270.5
3,173.4
3,345.4
3,289.6
(2
%)
(2
%)
Client Accounts (at month end, in thousands) Active
Brokerage Accounts (4)
33,421
33,577
33,759
33,822
33,896
33,934
33,984
33,875
33,896
33,636
33,758
33,878
34,010
-
2
%
Banking Accounts
1,641
1,641
1,652
1,658
1,669
1,680
1,690
1,696
1,706
1,705
1,716
1,729
1,733
-
6
%
Corporate Retirement Plan Participants
2,235
2,246
2,261
2,275
2,275
2,267
2,285
2,305
2,322
2,336
2,351
2,369
2,384
1
%
7
%
Client Activity New Brokerage Accounts (in thousands)
356
420
386
323
305
278
332
287
298
303
330
344
320
(7
%)
(10
%)
Client Cash as a Percentage of Client Assets (5)
11.5
%
11.4
%
11.9
%
12.0
%
12.8
%
12.0
%
12.1
%
12.9
%
12.2
%
11.5
%
12.3
%
11.6
%
11.7
%
10 bp 20 bp Derivative Trades as a Percentage of Total Trades
24.0
%
22.4
%
21.9
%
22.6
%
22.3
%
24.2
%
23.3
%
23.6
%
24.1
%
24.6
%
23.2
%
23.0
%
23.5
%
50 bp (50) bp
Selected Average Balances (in millions of
dollars) Average Interest-Earning Assets (6)
629,042
644,768
636,668
620,157
614,100
605,751
586,154
568,351
552,631
527,019
520,100
512,893
503,122
(2
%)
(20
%)
Average Margin Balances
84,354
81,526
83,762
78,841
74,577
72,177
72,855
73,224
69,188
66,011
64,759
60,211
60,575
1
%
(28
%)
Average Bank Deposit Account Balances (7)
153,824
155,657
152,653
154,669
155,306
154,542
148,427
141,198
136,036
130,479
126,953
122,387
115,816
(5
%)
(25
%)
Mutual Fund and Exchange-Traded Fund Net Buys (Sells)
(8,9) (in millions of dollars) Equities
9,371
14,177
(786
)
1,889
(1,586
)
5,589
10,465
(2,662
)
3,984
3,777
(1,837
)
7,236
5,850
Hybrid
(478
)
(497
)
(529
)
(1,718
)
(1,054
)
(2,041
)
(783
)
(938
)
(1,380
)
(2,052
)
(1,595
)
(433
)
47
Bonds
(1,973
)
(7,851
)
(6,933
)
(6,121
)
(5,631
)
729
(141
)
(5,801
)
(7,218
)
(3,721
)
(3,260
)
5,646
4,281
Net Buy (Sell) Activity (in millions of dollars) Mutual
Funds (8)
(6,318
)
(11,888
)
(16,657
)
(20,761
)
(16,258
)
(8,674
)
(7,117
)
(15,200
)
(18,473
)
(17,143
)
(21,851
)
552
(2,338
)
Exchange-Traded Funds (9)
13,238
17,717
8,409
14,811
7,987
12,951
16,658
5,799
13,859
15,147
15,159
11,897
12,516
Money Market Funds
(1,086
)
(1,344
)
(3,430
)
7,106
11,544
13,711
19,702
17,018
21,542
16,929
27,778
24,285
23,347
Note: Certain supplemental details related
to the information above can be found at:
https://www.aboutschwab.com/financial-reports.
(1)
June 2022 includes an outflow of $20.8
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)
November 2022 includes the
company-initiated closure of approximately 350 thousand low-balance
accounts. September 2022 includes the company-initiated closure of
approximately 152 thousand low-balance accounts.
(5)
Schwab One®, certain cash equivalents,
bank deposits, third-party bank deposit accounts, and money market
fund balances as a percentage of total client assets.
(6)
Represents average total interest-earning
assets on the company's balance sheet. November 2022 includes the
impact of transferring certain investment securities from the
available for sale category to the held-to-maturity category.
(7)
Represents average clients’ uninvested
cash sweep account balances held in deposit accounts at third-party
financial institutions.
(8)
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.
(9)
Represents the principal value of client
ETF transactions handled by Schwab, including transactions in
proprietary ETFs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230313005341/en/
MEDIA: Mayura Hooper Charles Schwab Phone:
415-667-1525
INVESTORS/ANALYSTS: Jeff Edwards Charles Schwab Phone:
415-667-1524
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