Schwab Reports Strongest Quarterly Performance in Company History

Rhea-AI Summary

The Charles Schwab Corporation reported a record net income of $2.0 billion for Q3 2022, up 32% from the previous year. Revenues increased 20% year-over-year to $5.5 billion, while diluted earnings per share rose to $0.99 GAAP, a 34% increase. Core net new assets reached $115 billion, marking a 7% annualized growth rate, despite total client assets falling to $6.6 trillion, down 13% from the previous year. The company also announced a 10% dividend increase and a $15 billion stock repurchase authorization, indicating strong financial health.

Positive

• Record net income of $2.0 billion, up 32% year-over-year.
• Revenues increased 20% to $5.5 billion.
• Diluted earnings per share reached $0.99, 34% higher than last year.
• Core net new assets totaled $115 billion, reflecting a 7% annualized growth rate.
• 10% increase in common dividend announced.

Negative

• Total client assets decreased to $6.6 trillion, down 13% from the previous year.
• Asset management and administration fees fell 5% due to challenging equity markets.
• Trading revenue declined slightly to $930 million.

$115 Billion in Core Net New Assets Represents a 7% Annualized Growth Rate

Revenues Rise 20% Year-Over-Year to $5.5 Billion; Net Income Reaches $2.0 Billion, up 32%

Record GAAP Earnings Per Share of $.99, $1.10 Adjusted ⁽¹⁾ as Company Delivers Growth Plus Capital Return

WESTLAKE, Texas--(BUSINESS WIRE)-- The Charles Schwab Corporation announced today that its net income for the third quarter of 2022 was a record $2.0 billion compared with $1.8 billion for the second quarter of 2022, and $1.5 billion for the third quarter of 2021. Net income for the nine months ended September 30, 2022 was $5.2 billion, compared with $4.3 billion for the year-earlier period.

		Three Months Ended September 30,								%			Nine Months Ended September 30,								%
Financial Highlights (1)		2022				2021				Change			2022				2021				Change
Net revenues (in millions)		$	5,500			$	4,570			20	%		$	15,265			$	13,812			11	%
Net income (in millions)
GAAP		$	2,020			$	1,526			32	%		$	5,215			$	4,275			22	%
Adjusted (1)		$	2,211			$	1,722			28	%		$	5,783			$	4,895			18	%
Diluted earnings per common share (2)
GAAP		$	.99			$	.74			34	%		$	2.53			$	2.06			23	%
Adjusted (1)		$	1.10			$	.84			31	%		$	2.83			$	2.39			18	%
Pre-tax profit margin
GAAP			48.7	%			44.0	%						44.5	%			41.2	%
Adjusted (1)			53.3	%			49.6	%						49.4	%			47.2	%
Return on average common stockholders’ equity (annualized)			25	%			12	%						18	%			11	%
Return on tangible common equity (annualized) (1)			74	%			23	%						42	%			21	%

(1)		Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 of this release.
(2)		All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.

Co-Chairman and CEO Walt Bettinger said, “Schwab’s performance during the third quarter reflected the continued success of our 'Through Clients’ Eyes' strategy and our contemporary full-service approach to helping clients achieve their financial goals. As we assisted investors with navigating persistent macroeconomic headwinds, we continued to drive robust business growth. Bolstered by record third quarter retail inflows, core net new assets equaled $115 billion for the period – a 7% annualized growth rate. Total client assets were $6.6 trillion at quarter-end, down 13% from a year ago, as robust asset gathering was more than offset by the $1.4 trillion impact of lower market valuations on client portfolios over the past 12 months. At the same time, our success in attracting and retaining clients supported a 4% year-over-year rise in active brokerage accounts – we ended the quarter at approximately 34 million.”

“Our modern wealth management approach provides a wide array of investing and financial capabilities to support investors through a range of market conditions – particularly in difficult times like these,” Mr. Bettinger continued. “Equity markets remained under pressure throughout the quarter – including the largest percentage drop for a September since 2008 – with the S&P 500^® extending its year-to-date losses to 25%. The Federal Reserve assumed an increasingly hawkish stance, tightening monetary policy at the fastest rate in four decades, as it wrestled with elevated inflation and lingering effects from the global pandemic. Additionally, the continued war in Ukraine, along with increasing challenges across other major global economies weighed on overall market sentiment. That being said, clients remained engaged – with daily average trading volume of 5.5 million essentially flat versus the third quarter of last year, including net buying activity across both equities and fixed income securities.”

“Given our four decades of experience assisting individual investors and the advisors who serve them, we know prolonged environmental challenges can impact clients’ financial confidence, reinforcing the importance of continued investment across our three strategic initiatives: scale and efficiency, client segmentation, and win-win monetization,” Mr. Bettinger added. “Schwab’s extensive suite of advisory solutions, along with the recently introduced personalized investing capabilities, are designed to help clients achieve their evolving goals throughout their financial lives. This suite includes Wasmer Schroeder^TM Strategies, which offers investors a range of tax-exempt and taxable fixed income solutions. This team’s expertise, along with an attractive value proposition, increasing client demand for income solutions, and rising interest rates has helped these strategies attract over $5 billion in net flows over the last two years, including $1 billion during the third quarter of 2022 alone. Another example of win-win monetization is the recent steps we have taken to bolster our fund offering for RIAs by expanding our institutional no transaction fee (INTF) mutual fund platform to include over 800 additional highly rated equity and bond funds across 15 leading third-party asset managers.”

Mr. Bettinger concluded, “Through consistent strategic focus and disciplined execution, we believe we can drive sustained business momentum while continuing to deliver a high-quality wealth experience for clients and to build long-term value for stockholders.”

CFO Peter Crawford noted, “Schwab’s diversified financial model and a significant benefit from higher rates helped us convert ongoing success with clients into record total revenues of $5.5 billion, up 20% on a year-over-year basis. Net interest revenue increased by 44% to $2.9 billion, as rising rates helped our net interest margin to expand sequentially by 35 basis points to 1.97%. This movement more than offset the 6% contraction in interest-earning assets driven by clients’ cash sorting behavior and their continued market engagement. Asset management and administration fees decreased 5% to $1.0 billion as the challenging equity markets weighed on client asset balances. Trading revenue also declined slightly to $930 million primarily due to a mix shift within client trading activity.”

Mr. Crawford continued, “Driven largely by ongoing investments in our people and technology, GAAP expenses for the quarter increased 10% year-over-year to $2.8 billion. This amount includes $101 million in acquisition and integration-related costs and $152 million in amortization of acquired intangibles. Exclusive of these items, adjusted total expenses ⁽¹⁾ were up 12% versus the third quarter of 2021 – consistent with our planned spending in 2022. Our pre-tax profit margin expanded to 48.7%, or 53.3% on an adjusted basis ⁽¹⁾ – both all-time highs.”

“Diligent balance sheet management keeps us positioned to navigate a rapidly evolving environment while concurrently enhancing our financial performance and returning excess capital to our owners,” added Mr. Crawford. “In late July, the board of directors approved a 10% increase in our common dividend and a $15 billion stock repurchase authorization. During the third quarter, we repurchased 21.9 million shares for $1.5 billion. We’ve also announced the redemption of the $400 million Series A Preferred stock effective November 1. Inclusive of these actions, the company’s preliminary Tier 1 Leverage Ratio at quarter-end was 6.8%, above our recently updated operating objective of 6.50% – 6.75%. This quarter’s record overall results further demonstrate the durability of our all-weather model and its ability to deliver both profitable growth and meaningful return of excess capital through the cycle.”

⁽¹⁾ Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 10-11 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 recent repurchase of nonvoting common stock, was posted on August 1, 2022.

Fall Business Update

The company has scheduled a Fall Business Update for institutional investors on Thursday, October 27, 2022. The Update, which will be held via webcast, is scheduled to run from approximately 10:00 a.m. - 11:00 a.m. PT, 1:00 p.m. - 2:00 p.m. ET. Registration for this Update is accessible at https://www.aboutschwab.com/schwabevents.

Forward-Looking Statements

This press release contains forward-looking statements relating to success with clients; strategic initiatives; investments to attract and retain talent, improve service and the client experience, expand products, services and offerings to meet client needs, diversify revenues, and drive scale and efficiency; business momentum; stockholder value; balance sheet management; financial performance; returning excess capital to stockholders; Tier 1 Leverage Ratio operating objective; and all-weather model. These forward-looking statements reflect management’s expectations as of the date hereof. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, the company’s ability to attract and retain clients and independent investment advisors and grow those relationships and client assets; develop and launch new and enhanced products, services, and capabilities, as well as enhance its infrastructure and capacity, in a timely and successful manner; hire and retain talent; support client activity levels; successfully implement integration strategies and plans; manage expenses; and monetize client assets. Other important factors include client use of the company’s advisory solutions and other products and services; general market conditions, including 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 sorting; 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 33.9 million active brokerage accounts, 2.3 million corporate retirement plan participants, 1.7 million banking accounts, and $6.64 trillion in client assets. 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
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net Revenues
Interest revenue		$	3,357			$	2,153			$	8,386			$	6,236
Interest expense			(431	)			(123	)			(733	)			(348	)
Net interest revenue			2,926				2,030				7,653				5,888
Asset management and administration fees (1)			1,047				1,101				3,167				3,164
Trading revenue			930				964				2,778				3,135
Bank deposit account fees			413				323				1,059				1,011
Other			184				152				608				614
Total net revenues			5,500				4,570				15,265				13,812
Expenses Excluding Interest
Compensation and benefits			1,476				1,303				4,448				4,051
Professional services			264				250				766				723
Occupancy and equipment			292				246				855				722
Advertising and market development			89				119				296				363
Communications			131				144				444				457
Depreciation and amortization			167				140				476				404
Amortization of acquired intangible assets			152				153				460				461
Regulatory fees and assessments			65				64				200				208
Other			187				140				530				733
Total expenses excluding interest			2,823				2,559				8,475				8,122
Income before taxes on income			2,677				2,011				6,790				5,690
Taxes on income			657				485				1,575				1,415
Net Income			2,020				1,526				5,215				4,275
Preferred stock dividends and other			136				120				401				364
Net Income Available to Common Stockholders		$	1,884			$	1,406			$	4,814			$	3,911
Weighted-Average Common Shares Outstanding:
Basic			1,887				1,888				1,892				1,885
Diluted			1,895				1,898				1,901				1,895
Earnings Per Common Shares Outstanding (2):
Basic		$	1.00			$	.74			$	2.54			$	2.07
Diluted		$	.99			$	.74			$	2.53			$	2.06

(1)		No fee waivers were recognized for the three months ended September 30, 2022. Includes fee waivers of $57 million for the nine months ended September 30, 2022, and $83 million and $246 million for the three and nine months ended September 30, 2021, respectively.
(2)		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.

THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
		Q3-22 % change						2022												2021
		vs.			vs.			Third				Second				First				Fourth				Third
(In millions, except per share amounts and as noted)		Q3-21			Q2-22			Quarter				Quarter				Quarter				Quarter				Quarter
Net Revenues
Net interest revenue		44	%		15	%		$	2,926			$	2,544			$	2,183			$	2,142			$	2,030
Asset management and administration fees		(5	) %		—				1,047				1,052				1,068				1,110				1,101
Trading revenue		(4	) %		5	%			930				885				963				1,017				964
Bank deposit account fees		28	%		17	%			413				352				294				304				323
Other		21	%		(29	) %			184				260				164				135				152
Total net revenues		20	%		8	%			5,500				5,093				4,672				4,708				4,570
Expenses Excluding Interest
Compensation and benefits		13	%		4	%			1,476				1,426				1,546				1,399				1,303
Professional services		6	%		2	%			264				258				244				271				250
Occupancy and equipment		19	%		(1	) %			292				294				269				254				246
Advertising and market development		(25	) %		(15	) %			89				105				102				122				119
Communications		(9	) %		(22	) %			131				169				144				130				144
Depreciation and amortization		19	%		5	%			167				159				150				145				140
Amortization of acquired intangibles assets		(1	) %		(1	) %			152				154				154				154				153
Regulatory fees and assessments		2	%		(3	) %			65				67				68				67				64
Other		34	%		—				187				187				156				143				140
Total expenses excluding interest		10	%		—				2,823				2,819				2,833				2,685				2,559
Income before taxes on income		33	%		18	%			2,677				2,274				1,839				2,023				2,011
Taxes on income		35	%		37	%			657				481				437				443				485
Net Income		32	%		13	%		$	2,020			$	1,793			$	1,402			$	1,580			$	1,526
Preferred stock dividends and other		13	%		(4	) %			136				141				124				131				120
Net Income Available to Common Stockholders		34	%		14	%		$	1,884			$	1,652			$	1,278			$	1,449			$	1,406
Earnings per common share (1):
Basic		35	%		15	%		$	1.00			$	.87			$	.67			$	.77			$	.74
Diluted		34	%		14	%		$	.99			$	.87			$	.67			$	.76			$	.74
Dividends declared per common share		22	%		10	%		$	.22			$	.20			$	.20			$	.18			$	.18
Weighted-average common shares outstanding:
Basic		—			—				1,887				1,896				1,894				1,892				1,888
Diluted		—			—				1,895				1,904				1,905				1,902				1,898
Performance Measures
Pre-tax profit margin									48.7	%			44.6	%			39.4	%			43.0	%			44.0	%
Return on average common stockholders’ equity (annualized) (2)									25	%			19	%			12	%			12	%			12	%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents		36	%		(28	) %		$	46.5			$	64.6			$	91.1			$	63.0			$	34.3
Cash and investments segregated		4	%		(18	) %			44.1				53.5				54.4				53.9				42.3
Receivables from brokerage clients — net		(15	) %		(3	) %			73.9				76.1				84.1				90.6				86.6
Available for sale securities (3)		(37	) %		(11	) %			236.5				265.3				272.0				390.1				377.0
Held to maturity securities (3)		N/M			(4	) %			96.3				100.1				105.3				—				—
Bank loans — net		28	%		2	%			40.4				39.6				37.2				34.6				31.6
Total assets		(5	) %		(9	) %			577.6				637.6				681.0				667.3				607.5
Bank deposits		—			(10	) %			395.7				442.0				465.8				443.8				395.3
Payables to brokerage clients		(3	) %		(4	) %			110.0				114.9				125.3				125.7				113.1
Short-term borrowings		(83	) %		(64	) %			0.5				1.4				4.2				4.9				3.0
Long-term debt		7	%		(1	) %			20.8				21.1				21.9				18.9				19.5
Stockholders’ equity		(36	) %		(17	) %			37.0				44.5				48.1				56.3				57.4
Other
Full-time equivalent employees (at quarter end, in thousands)		9	%		—				35.2				35.2				34.2				33.4				32.4
Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)		10	%		(43	) %		$	193			$	339			$	209			$	431			$	176
Expenses excluding interest as a percentage of average client assets (annualized)									0.16	%			0.16	%			0.15	%			0.13	%			0.13	%
Clients’ Daily Average Trades (DATs) (in thousands)		—			(11	) %			5,523				6,227				6,578				6,102				5,549
Number of Trading Days		—			3	%			64.0				62.0				62.0				63.5				64.0
Revenue Per Trade (4)		(3	) %		15	%		$	2.63			$	2.29			$	2.36			$	2.62			$	2.71

(1)		The Company has voting and nonvoting common stock outstanding. As the participation rights, including dividend and liquidation rights, are identical between the voting and nonvoting stock classes, basic and diluted earnings per share are the same for each class.
(2)		Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(3)		In January 2022, the Company transferred a portion of its investment securities designated as available for sale to the held to maturity category, as described in Part I – Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.
(4)		Revenue per trade is calculated as trading revenue divided by DATs multiplied by the number of trading days.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions, except ratios or as noted)
(Unaudited)
		Three Months Ended September 30,																				Nine Months Ended September 30,
		2022										2021										2022											2021
		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		$	53,127		$	294		2.16	%			$	38,732		$	11		0.12	%			$	63,598		$	461			0.95	%			$	39,848		$	27			0.09	%
Cash and investments segregated			49,554			214		1.69	%				42,617			5		0.04	%				50,891			308			0.80	%				43,914			19			0.06	%
Receivables from brokerage clients			72,751			912		4.91	%				80,873			628		3.04	%				78,630			2,244			3.76	%				74,831			1,800			3.17	%
Available for sale securities (1,2)			273,968			1,161		1.69	%				362,204			1,187		1.30	%				281,897			3,196			1.51	%				348,477			3,381			1.29	%
Held to maturity securities (2)			97,568			345		1.41	%				—			—		—					100,890			1,062			1.40	%				—			—			—
Bank loans			39,984			300		2.99	%				30,235			161		2.12	%				38,238			717			2.50	%				27,336			448			2.18	%
Total interest-earning assets			586,952			3,226		2.17	%				554,661			1,992		1.42	%				614,144			7,988			1.73	%				534,406			5,675			1.41	%
Securities lending revenue						124										159										383											557
Other interest revenue						7										2										15											4
Total interest-earning assets		$	586,952		$	3,357		2.26	%			$	554,661		$	2,153		1.54	%			$	614,144		$	8,386			1.81	%			$	534,406		$	6,236			1.55	%
Funding sources
Bank deposits		$	420,132		$	241		0.23	%			$	384,561		$	14		0.01	%			$	440,801		$	285			0.09	%			$	371,974		$	40			0.01	%
Payables to brokerage clients			96,802			41		0.17	%				92,498			3		0.01	%				101,472			47			0.06	%				89,087			7			0.01	%
Short-term borrowings			708			4		1.95	%				3,485			3		0.34	%				2,656			12			0.60	%				2,617			6			0.32	%
Long-term debt			21,024			131		2.49	%				19,030			99		2.10	%				20,673			363			2.34	%				17,225			281			2.18	%
Total interest-bearing liabilities			538,666			417		0.31	%				499,574			119		0.09	%				565,602			707			0.17	%				480,903			334			0.09	%
Non-interest-bearing funding sources			48,286										55,087										48,542											53,503
Securities lending expense						13										4										28											16
Other interest expense						1										—										(2	)										(2	)
Total funding sources		$	586,952		$	431		0.29	%			$	554,661		$	123		0.09	%			$	614,144		$	733			0.16	%			$	534,406		$	348			0.09	%
Net interest revenue					$	2,926		1.97	%						$	2,030		1.45	%						$	7,653			1.65	%						$	5,888			1.46	%

(1)		Amounts have been calculated based on amortized cost.
(2)		In January 2022, the Company transferred a portion of its investment securities designated as available for sale to the held to maturity category, as described in Part I – Item 1 – Note 4 of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
		Three Months Ended September 30,																					Nine Months Ended September 30,
		2022										2021											2022											2021
		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		$	184,834		$	132		0.28	%			$	149,508		$	112			0.30	%			$	158,525		$	340			0.29	%			$	158,749		$	348			0.29	%
Fee waivers						—										(83	)										(57	)										(246	)
Schwab money market funds			184,834			132		0.28	%				149,508			29			0.08	%				158,525			283			0.24	%				158,749			102			0.09	%
Schwab equity and bond funds, ETFs, and collective trust funds (CTFs)			422,711			89		0.08	%				441,344			99			0.09	%				436,928			278			0.09	%				411,312			279			0.09	%
Mutual Fund OneSource® and other non-transaction fee funds			183,019			139		0.30	%				234,582			188			0.32	%				196,032			453			0.31	%				228,643			540			0.32	%
Other third-party mutual funds and ETFs			747,676			160		0.08	%				918,363			187			0.08	%				805,204			510			0.08	%				888,003			533			0.08	%
Total mutual funds, ETFs, and CTFs (1)		$	1,538,240			520		0.13	%			$	1,743,797			503			0.11	%			$	1,596,689			1,524			0.13	%			$	1,686,707			1,454			0.12	%
Advice solutions (1)
Fee-based		$	431,276			452		0.42	%			$	463,827			511			0.44	%			$	446,979			1,409			0.42	%			$	445,521			1,469			0.44	%
Non-fee-based			85,567			—		—					90,649			—			—					87,528			—			—					87,758			—			—
Total advice solutions		$	516,843			452		0.35	%			$	554,476			511			0.37	%			$	534,507			1,409			0.35	%			$	533,279			1,469			0.37	%
Other balance-based fees (2)			537,809			58		0.04	%				632,806			68			0.04	%				573,733			186			0.04	%				604,995			195			0.04	%
Other (3)						17										19											48											46
Total asset management and administration fees					$	1,047									$	1,101										$	3,167										$	3,164

(1)		Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Wealth AdvisoryTM, 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®, Schwab Intelligent Portfolios Premium®, TD Ameritrade AdvisorDirect®, Essential Portfolios, Selective Portfolios, and Personalized Portfolios; 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.
(2)		Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(3)		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)
		Q3-22 % Change						2022												2021
		vs.			vs.			Third				Second				First				Fourth				Third
(In billions, at quarter end, except as noted)		Q3-21			Q2-22			Quarter				Quarter				Quarter				Quarter				Quarter
Assets in client accounts
Schwab One®, certain cash equivalents and bank deposits		—			(9	) %		$	501.4			$	552.5			$	584.3			$	566.1			$	503.9
Bank deposit account balances		(9	) %		(10	) %			139.6				155.6				154.8				158.5				153.3
Proprietary mutual funds (Schwab Funds® and Laudus Funds®) and CTFs
Money market funds (1)		43	%		33	%			211.1				159.2				143.1				146.5				147.7
Equity and bond funds and CTFs (2)		(15	) %		(5	) %			141.5				149.5				175.8				183.1				167.4
Total proprietary mutual funds and CTFs		12	%		14	%			352.6				308.7				318.9				329.6				315.1
Mutual Fund Marketplace® (3)
Mutual Fund OneSource® and other non-transaction fee funds		(23	) %		(8	) %			181.5				196.6				235.5				234.9				234.7
Mutual fund clearing services		(36	) %		(5	) %			175.3				184.4				235.4				254.2				271.9
Other third-party mutual funds (4)		(24	) %		(7	) %			1,105.7				1,189.4				1,383.3				1,497.7				1,450.1
Total Mutual Fund Marketplace		(25	) %		(7	) %			1,462.5				1,570.4				1,854.2				1,986.8				1,956.7
Total mutual fund assets		(20	) %		(3	) %			1,815.1				1,879.1				2,173.1				2,316.4				2,271.8
Exchange-traded funds (ETFs)
Proprietary ETFs (2)		(8	) %		(2	) %			232.2				237.7				268.5				271.8				251.6
Other third-party ETFs		(8	) %		(3	) %			1,094.6				1,129.0				1,270.6				1,296.4				1,183.7
Total ETF assets		(8	) %		(3	) %			1,326.8				1,366.7				1,539.1				1,568.2				1,435.3
Equity and other securities		(18	) %		(4	) %			2,451.3				2,548.5				3,131.1				3,259.8				2,976.7
Fixed income securities		35	%		19	%			481.5				403.5				360.7				356.4				356.8
Margin loans outstanding		(15	) %		(3	) %			(71.5	)			(73.4	)			(81.0	)			(87.4	)			(83.8	)
Total client assets		(13	) %		(3	) %		$	6,644.2			$	6,832.5			$	7,862.1			$	8,138.0			$	7,614.0
Client assets by business
Investor Services		(15	) %		(3	) %		$	3,508.1			$	3,598.7			$	4,235.5			$	4,400.7			$	4,137.7
Advisor Services		(10	) %		(3	) %			3,136.1				3,233.8				3,626.6				3,737.3				3,476.3
Total client assets		(13	) %		(3	) %		$	6,644.2			$	6,832.5			$	7,862.1			$	8,138.0			$	7,614.0
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services (5)		(5	) %		N/M			$	55.1			$	8.8			$	54.6			$	33.4			$	57.9
Advisor Services		(27	) %		72	%			59.5				34.6				65.9				101.2				81.1
Total net new assets		(18	) %		164	%		$	114.6			$	43.4			$	120.5			$	134.6			$	139.0
Net market gains (losses)									(302.9	)			(1,073.0	)			(396.4	)			389.4				(99.8	)
Net growth (decline)								$	(188.3	)		$	(1,029.6	)		$	(275.9	)		$	524.0			$	39.2
New brokerage accounts (in thousands, for the quarter ended)		(24	) %		(12	) %			897				1,014				1,202				1,318				1,178
Client accounts (in thousands)
Active brokerage accounts (6)		4	%		—				33,875				33,896				33,577				33,165				32,675
Banking accounts		7	%		2	%			1,696				1,669				1,641				1,614				1,580
Corporate retirement plan participants		4	%		1	%			2,305				2,275				2,246				2,200				2,207

(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 September 30, 2022, off-platform equity and bond funds, CTFs, and ETFs were $20.7 billion, $4.5 billion, and $89.6 billion, respectively.
(3)		Excludes all proprietary mutual funds and ETFs.
(4)		As of September 30, 2022, third-party money funds were $3.6 billion.
(5)		Second quarter of 2022 includes an outflow of $20.8 billion from a mutual fund clearing services client. Fourth quarter of 2021 includes outflows of $27.6 billion from mutual fund clearing services clients.
(6)		Third quarter of 2022 includes the company-initiated closure of approximately 152 thousand low-balance accounts.
N/M Not meaningful. Percentage changes greater than 200% are presented as not meaningful.

The Charles Schwab Corporation Monthly Activity Report For September 2022
		2021												2022																											Change
		Sep			Oct			Nov			Dec			Jan			Feb			Mar			Apr			May			Jun			Jul			Aug			Sep			Mo.			Yr.
Market Indices (at month end)
Dow Jones Industrial Average®		33,844			35,820			34,484			36,338			35,132			33,893			34,678			32,977			32,990			30,775			32,845			31,510			28,726			(9	)%		(15	)%
Nasdaq Composite®		14,449			15,498			15,538			15,645			14,240			13,751			14,221			12,335			12,081			11,029			12,391			11,816			10,576			(10	)%		(27	)%
Standard & Poor’s® 500		4,308			4,605			4,567			4,766			4,516			4,374			4,530			4,132			4,132			3,785			4,130			3,955			3,586			(9	)%		(17	)%
Client Assets (in billions of dollars)
Beginning Client Assets		7,838.2			7,614.0			7,982.3			7,918.3			8,138.0			7,803.8			7,686.6			7,862.1			7,284.4			7,301.7			6,832.5			7,304.8			7,127.6
Net New Assets (1)		42.9			22.9			31.4			80.3			33.6			40.6			46.3			(9.2	)		32.8			19.8			31.5			43.3			39.8			(8	)%		(7	)%
Net Market Gains (Losses)		(267.1	)		345.4			(95.4	)		139.4			(367.8	)		(157.8	)		129.2			(568.5	)		(15.5	)		(489.0	)		440.8			(220.5	)		(523.2	)
Total Client Assets (at month end)		7,614.0			7,982.3			7,918.3			8,138.0			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	)%		(13	)%
Core Net New Assets (2)		42.9			36.8			45.1			80.3			33.6			40.6			46.3			(9.2	)		32.8			40.6			31.5			43.3			39.8			(8	)%		(7	)%
Receiving Ongoing Advisory Services (at month end)
Investor Services		530.1			548.3			543.1			559.2			541.9			533.7			538.9			509.3			513.0			483.8			514.8			499.2			466.6			(7	)%		(12	)%
Advisor Services (3)		3,253.2			3,399.8			3,374.3			3,505.2			3,382.4			3,342.5			3,404.6			3,190.5			3,213.8			3,040.4			3,222.5			3,150.5			2,950.9			(6	)%		(9	)%
Client Accounts (at month end, in thousands)
Active Brokerage Accounts (4)		32,675			32,796			32,942			33,165			33,308			33,421			33,577			33,759			33,822			33,896			33,934			33,984			33,875			—			4	%
Banking Accounts		1,580			1,593			1,608			1,614			1,628			1,641			1,641			1,652			1,658			1,669			1,680			1,690			1,696			—			7	%
Corporate Retirement Plan Participants		2,207			2,213			2,198			2,200			2,216			2,235			2,246			2,261			2,275			2,275			2,267			2,285			2,305			1	%		4	%
Client Activity
New Brokerage Accounts (in thousands)		374			397			448			473			426			356			420			386			323			305			278			332			287			(14	)%		(23	)%
Client Cash as a Percentage of Client Assets (5)		10.8	%		10.4	%		10.5	%		10.9	%		11.3	%		11.5	%		11.4	%		11.9	%		12.0	%		12.8	%		12.0	%		12.1	%		12.9	%		80 bp			210 bp
Derivative Trades as a Percentage of Total Trades		23.1	%		22.5	%		23.4	%		23.0	%		22.4	%		24.0	%		22.4	%		21.9	%		22.6	%		22.3	%		24.2	%		23.3	%		23.6	%		30 bp			50 bp
Selected Average Balances (in millions of dollars)
Average Interest-Earning Assets (6)		565,379			574,181			584,362			605,709			622,997			629,042			644,768			636,668			620,157			614,100			605,751			586,154			568,351			(3	)%		1	%
Average Margin Balances		81,705			83,835			87,311			88,328			86,737			84,354			81,526			83,762			78,841			74,577			72,177			72,855			73,224			1	%		(10	)%
Average Bank Deposit Account Balances (7)		152,330			154,040			153,877			154,918			157,706			153,824			155,657			152,653			154,669			155,306			154,542			148,427			141,198			(5	)%		(7	)%
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells) (8,9) (in millions of dollars)
Equities		7,596			8,840			13,099			11,519			7,384			9,371			14,177			(786	)		1,889			(1,586	)		5,589			10,465			(2,662	)
Hybrid		335			81			308			(1,207	)		(367	)		(478	)		(497	)		(529	)		(1,718	)		(1,054	)		(2,041	)		(783	)		(938	)
Bonds		6,232			4,425			4,097			5,600			1,804			(1,973	)		(7,851	)		(6,933	)		(6,121	)		(5,631	)		729			(141	)		(5,801	)
Net Buy (Sell) Activity (in millions of dollars)
Mutual Funds (8)		(308	)		302			189			(2,859	)		(4,961	)		(6,318	)		(11,888	)		(16,657	)		(20,761	)		(16,258	)		(8,674	)		(7,117	)		(15,200	)
Exchange-Traded Funds (9)		14,471			13,044			17,315			18,771			13,782			13,238			17,717			8,409			14,811			7,987			12,951			16,658			5,799
Money Market Funds		(1,512	)		(451	)		(1,725	)		(144	)		(1,984	)		(1,086	)		(1,344	)		(3,430	)		7,106			11,544			13,711			19,702			17,018

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. November 2021 includes an outflow of $13.7 billion from a mutual fund clearing services client. October 2021 includes an outflow of $13.9 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)		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.
(7)		Represents average TD Ameritrade 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.

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 third 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 Investors and Uses by Management
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 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 is 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 ongoing 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 Company also uses adjusted diluted EPS and return on tangible common equity as components of performance criteria for employee bonus and certain executive management incentive compensation arrangements. The Compensation Committee of CSC’s Board of Directors maintains discretion in evaluating performance against these criteria.

THE CHARLES SCHWAB CORPORATION
Non-GAAP Financial Measures
(In millions, except ratios and per share amounts)
(Unaudited)
The tables below present reconciliations of GAAP measures to non-GAAP measures:
		Three Months Ended September 30,																Nine Months Ended September 30,
		2022								2021								2022								2021
		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)		$	2,823			$	2,020			$	2,559			$	1,526			$	8,475			$	5,215			$	8,122			$	4,275
Acquisition and integration-related costs (1)			(101	)			101				(104	)			104				(291	)			291				(367	)			367
Amortization of acquired intangible assets			(152	)			152				(153	)			153				(460	)			460				(461	)			461
Income tax effects (2)			N/A				(62	)			N/A				(61	)			N/A				(183	)			N/A				(208	)
Adjusted total expenses (non-GAAP), Adjusted net income (non-GAAP)		$	2,570			$	2,211			$	2,302			$	1,722			$	7,724			$	5,783			$	7,294			$	4,895

(1)		Acquisition and integration-related costs for the three and nine months ended September 30, 2022 primarily consist of $57 million and $166 million of compensation and benefits, $36 million and $102 million of professional services, and $6 million and $14 million of occupancy and equipment. Acquisition and integration-related costs for the three and six months ended September 30, 2021 primarily consist of $58 million and $227 million of compensation and benefits, $35 million and $99 million of professional services, and $7 million and $30 million of occupancy and equipment.
(2)		The income tax effects of the non-GAAP adjustments are determined using an effective tax rate reflecting the exclusion of non-deductible acquisition costs and are used to present the acquisition and integration-related costs and amortization of acquired intangible assets on an after-tax basis.
N/A Not applicable.

		Three Months Ended September 30,												Nine Months Ended September 30,
		2022						2021						2022						2021
		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)		$	2,677		48.7	%		$	2,011		44.0	%		$	6,790		44.5	%		$	5,690		41.2	%
Acquisition and integration-related costs			101		1.8	%			104		2.3	%			291		1.9	%			367		2.7	%
Amortization of acquired intangible assets			152		2.8	%			153		3.3	%			460		3.0	%			461		3.3	%
Adjusted income before taxes on income (non-GAAP), Adjusted pre-tax profit margin (non-GAAP)		$	2,930		53.3	%		$	2,268		49.6	%		$	7,541		49.4	%		$	6,518		47.2	%

		Three Months Ended September 30,																Nine Months Ended September 30,
		2022								2021								2022								2021
		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)		$	1,884			$	.99			$	1,406			$	.74			$	4,814			$	2.53			$	3,911			$	2.06
Acquisition and integration-related costs			101				.05				104				.05				291				.15				367				.19
Amortization of acquired intangible assets			152				.08				153				.08				460				.24				461				.24
Income tax effects			(62	)			(.02	)			(61	)			(.03	)			(183	)			(.09	)			(208	)			(.10	)
Adjusted net income available to common stockholders (non-GAAP), Adjusted diluted EPS (non-GAAP)		$	2,075			$	1.10			$	1,602			$	.84			$	5,382			$	2.83			$	4,531			$	2.39

		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Return on average common stockholders’ equity (GAAP)			25	%			12	%			18	%			11	%
Average common stockholders’ equity		$	30,282			$	47,492			$	36,526			$	47,908
Less: Average goodwill			(11,951	)			(11,952	)			(11,952	)			(11,952	)
Less: Average acquired intangible assets — net			(8,999	)			(9,609	)			(9,151	)			(9,762	)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net			1,848				1,895				1,867				1,913
Average tangible common equity		$	11,180			$	27,826			$	17,290			$	28,107
Adjusted net income available to common stockholders (1)		$	2,075			$	1,602			$	5,382			$	4,531
Return on tangible common equity (non-GAAP)			74	%			23	%			42	%			21	%

(1)

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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221017005243/en/

MEDIA:

Mayura Hooper

Charles Schwab

Phone: 415-667-1525

INVESTORS/ANALYSTS:

Jeff Edwards

Charles Schwab

Phone: 415-667-1524

Source: The Charles Schwab Corporation

FAQ

What were Schwab's Q3 2022 net income results?

Schwab reported a net income of $2.0 billion for Q3 2022, up 32% year-over-year.

How much did Schwab's revenues grow in Q3 2022?

Revenues increased by 20% year-over-year to $5.5 billion.

What was the diluted earnings per share for Schwab in Q3 2022?

The diluted earnings per share for Q3 2022 were $0.99 GAAP, a 34% increase from the previous year.

What were the core net new assets for Schwab in Q3 2022?

Core net new assets reached $115 billion, representing a 7% annualized growth rate.

Did Schwab announce any changes to their dividend in 2022?

Yes, Schwab announced a 10% increase in their common dividend.