Schwab Reports Record First Quarter Earnings Per Share

Unprecedented Client Engagement Included $148.2 Billion in Core Net New Assets,

3.2 Million New Brokerage Accounts and 8.4 Million Daily Average Trades, All Records

WESTLAKE, Texas–(BUSINESS WIRE)–#CharlesSchwab–The Charles Schwab Corporation announced today that its net income for the first quarter of 2021 was a record $1.5 billion, compared with $1.1 billion for the fourth quarter of 2020, and $795 million for the first quarter of 2020. The company’s financial results include TD Ameritrade from closing on October 6, 2020 forward, as well as certain acquisition and integration-related costs and the amortization of acquired intangibles. Together these transaction-related expenses totaled $273 million pre-tax for the first quarter of 2021.

		Three Months Ended March 31,								%
Financial Highlights		2021				2020				Change
Net revenues (in millions)		$	4,715			$	2,617			80%
Net income (in millions)
GAAP		$	1,484			$	795			87%
Adjusted (1)		$	1,690			$	827			104%
Diluted earnings per common share
GAAP		$	.73			$	.58			26%
Adjusted (1)		$	.84			$	.61			38%
Pre-tax profit margin
GAAP		41.6		%		40.0		%
Adjusted (1)		47.4		%		41.7		%
Return on average common
stockholders’ equity (annualized)		12		%		14		%
Return on tangible
common equity (annualized) (1)		24		%		16		%

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

CEO Walt Bettinger said, “The first three months of 2021 have in many ways been both the most successful and the most challenging in our history. As the U.S. economic recovery advanced, supported by expanding COVID-19 vaccine rollouts and government aid packages, the equity markets continued to climb, with the S&P 500^® rising 78% between the pandemic-driven low in March 2020 and the end of this year’s first quarter. Interest rates began to lift as well, with the 10-year Treasury yield moving to 1.74% by quarter-end – its highest level since January 2020. This environment contributed to another rise in client engagement and activity beyond the record levels of late last year. As investors turned to Schwab for help in navigating current conditions, they opened 3.2 million new brokerage accounts – a level that exceeds our reported total for all of 2020, excluding the accounts we acquired as part of our recent M&A activity. At the same time, elevated interest in technology and other growth-oriented stocks, as well as heightened market attention to certain names via social media, significantly bolstered trading activity. Daily trades rose to an average of 8.4 million in the first three months of 2021, with a single day peak of 12.3 million. That average is approximately four times higher than the pro forma combined pace for the fourth quarter of 2019 – the onset of the $0 online equity commission era. Amidst this surge in activity, investors entrusted us with $148.2 billion in core net new assets – including $62.6 billion in March alone – up 102% from a year ago, and 24% higher than the record we just set last quarter. This strength in asset gathering enabled us to end March serving a record $7.07 trillion in client assets, up 102% from a year ago, and up 6% in just three months.”

Mr. Bettinger continued, “Early in the first quarter, we were challenged to keep pace with extraordinary activity from both new and existing clients. On the heels of an already strong 2020, retail call volumes accelerated further to 8.3 million across the combined company, up 19% from a year ago and 51% above the busiest quarter in 2019. In addition, mobile and web logins topped 1.1 billion, up 138% year-over-year. This strength in engagement was felt broadly – all of our top 25 market opens occurred during the first quarter, and we have seen multiple days where we handled at least 10 million trades and concurrently accommodated more than 15 million logins across mobile and web. With activity levels running well beyond anything we’ve ever seen, our service quality was impacted at times. As a result, we took multiple steps to better deliver the service experience our clients deserve and rely on, including enhancing online self-service capabilities, streamlining our call-routing processes, and actively ramping up hiring to expand capacity. We’ve increased our team of client service professionals by 10% since month-end December and are developing a pipeline of talent to support ongoing growth. Our efforts were already yielding results by quarter-end, with average speed-to-answer progressing back towards a more normalized range and call handle times declining back to late 2020 levels. Whatever lies ahead for us during the remainder of the year, living up to our ‘no trade-offs’ approach to service is our priority. Our team comes to work each day committed to earning the trust clients place in us to do just that.”

CFO Peter Crawford commented, “Schwab’s strong financial performance in early 2021 reflects the power of our diversified revenue streams. Net interest revenue grew 6% versus the fourth quarter of 2020, largely due to elevated margin utilization and higher overall interest-earning assets stemming from rising client cash balances. These factors more than offset the ongoing impacts of the Fed’s Zero Interest Rate Policy, including elevated prepayments of mortgage-backed securities. Asset management and administration fees increased 3% from the fourth quarter of 2020 as growth in advisory solution balances and strong equity markets more than offset a small increase in money market fund fee waivers. Trading revenue rose dramatically, up 42% sequentially, boosted by early-2021 market events on top of an already busy trading environment. Bank deposit account fee revenue declined 1% as balances ended the first quarter relatively flat to December 31 at $164.2 billion and certain balances repriced to current rates. Altogether, total revenues grew 13% from the prior quarter to a record $4.7 billion. On the expense side, total GAAP spending increased 2% to $2.8 billion for the quarter, including $119 million in acquisition and integration-related costs and $154 million in amortization of acquired intangibles. Exclusive of these items ⁽¹⁾, adjusted total expenses were up 9% quarter-over-quarter, reflecting the impact of extraordinary client activity alongside our planned spending. Overall, our ability to maintain disciplined expense management while investing to support current and future growth through this period enabled us to produce a 41.6% pre-tax profit margin – our highest level in four quarters – or 47.4% on an adjusted basis ⁽¹⁾.”

Mr. Crawford concluded, “During the first quarter we took advantage of favorable market conditions to help optimize our capital mix. We executed two preferred offerings equal to $2.25 billion and $600 million – which placed outstanding balances at the upper-end of our 25%-30% guideline relative to Total Tier 1 Capital. As previously announced, proceeds from the more recent Series J issuance will be used to redeem our $600 million Series C preferred. Additionally, we moved to enhance our liquidity position ahead of pending debt maturities by issuing 3- and 7- year senior notes totaling $4 billion in March. Our priority for capital management remains centered on maintaining flexibility to support ongoing growth – which will soon include the first Bank Deposit Account transfers, set to begin as early as June 30 – while also helping us move towards our long-term Tier 1 Leverage Ratio operating objective of 6.75%-7.00%. Consolidated balance sheet assets ended the quarter at $563 billion, up 3% from December 31 and our preliminary Tier 1 Leverage Ratio increased to 6.4%. Overall, our healthy financial performance, high-quality balance sheet, and solid capital base enabled us to achieve a 12% return on equity and a 24% ROTCE ⁽¹⁾ for the first quarter. Confidence in our all-weather business model, coupled with a focus on balancing near-term profitability and long-term investment, enables us to continue driving scale while endeavoring to meet our clients’ needs.”

(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 trends in client trading activity, was posted on March 12, 2021.

Forward-Looking Statements

This press release contains forward-looking statements relating to actions being taken to expand capacity, enhance service quality and support ongoing growth; maintaining disciplined expense management while investing to support current and future growth, meet client needs, and drive scale and efficiency; guideline percentage of preferred stock relative to Total Tier 1 Capital; Tier 1 Leverage Ratio operating objective; capital management; Bank Deposit Account transfers; and balancing near-term profitability and long-term investment. 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 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 talent; support client activity levels; successfully implement integration strategies and plans; manage expenses; attract and retain clients and registered investment advisors and grow those relationships and client assets; and monetize client assets. Other important factors include general market conditions, including equity valuations, trading activity, the level of interest rates – which can impact money market fund fee waivers, and credit spreads; market volatility; client use of the company’s advisory solutions and other products and services; capital and liquidity needs and management; client sensitivity to rates; level of client assets, including cash balances; the transfer of Bank Deposit Account balances; balance sheet cash; the scope and duration of the COVID-19 pandemic and actions taken by governmental authorities to contain the spread of the virus and the economic impact; 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 31.9 million active brokerage accounts, 2.1 million corporate retirement plan participants, 1.6 million banking accounts, and approximately $7.07 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 March 31,
		2021				2020
Net Revenues
Interest revenue		$	2,015			$	1,708
Interest expense		(104)				(136)
Net interest revenue		1,911				1,572
Asset management and administration fees (1)		1,016				827
Trading revenue		1,216				188
Bank deposit account fees		351				—
Other		221				30
Total net revenues		4,715				2,617
Expenses Excluding Interest
Compensation and benefits		1,430				897
Professional services		226				182
Occupancy and equipment		237				142
Advertising and market development		116				67
Communications		147				75
Depreciation and amortization (2)		129				90
Amortization of acquired intangible assets (2)		154				6
Regulatory fees and assessments		78				34
Other		238				77
Total expenses excluding interest		2,755				1,570
Income before taxes on income		1,960				1,047
Taxes on income		476				252
Net Income		1,484				795
Preferred stock dividends and other		96				38
Net Income Available to Common Stockholders		$	1,388			$	757
Weighted-Average Common Shares Outstanding:
Basic		1,882				1,287
Diluted		1,892				1,294
Earnings Per Common Shares Outstanding (3):
Basic		$	.74			$	.59
Diluted		$	.73			$	.58

(1)		Includes fee waivers of $78 million for the three months ended March 31, 2021.
(2)		Beginning in the third quarter of 2020, amortization of acquired intangible assets was reclassified from depreciation and amortization. Prior periods have been reclassified to reflect this change.
(3)		For the three months ended March 31, 2021, the Company had 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)
			Q1-21 % change							2021				2020
			vs.			vs.				First				Fourth				Third				Second				First
(In millions, except per share amounts and as noted)			Q1-20			Q4-20				Quarter				Quarter				Quarter				Quarter				Quarter
Net Revenues
Net interest revenue			22	%		6	%			$	1,911			$	1,809			$	1,343			$	1,389			$	1,572
Asset management and administration fees			23	%		3	%			1,016				987				860				801				827
Trading revenue			N/M			42	%			1,216				854				181				193				188
Bank deposit account fees			N/M			(1)	%			351				355				—				—				—
Other			N/M			29	%			221				171				64				67				30
Total net revenues			80	%		13	%			4,715				4,176				2,448				2,450				2,617
Expenses Excluding Interest
Compensation and benefits			59	%		2	%			1,430				1,398				840				819				897
Professional services			24	%		(16)	%			226				269				194				198				182
Occupancy and equipment			67	%		(7)	%			237				254				155				152				142
Advertising and market development			73	%		(6)	%			116				123				66				70				67
Communications			96	%		16	%			147				127				73				78				75
Depreciation and amortization (1)			43	%		(1)	%			129				130				97				97				90
Amortization of acquired intangible assets (1)			N/M			5	%			154				147				25				12				6
Regulatory fees and assessments			129	%		37	%			78				57				36				36				34
Other			N/M			22	%			238				195				73				100				77
Total expenses excluding interest			75	%		2	%			2,755				2,700				1,559				1,562				1,570
Income before taxes on income			87	%		33	%			1,960				1,476				889				888				1,047
Taxes on income			89	%		40	%			476				341				191				217				252
Net Income			87	%		31	%			$	1,484			$	1,135			$	698			$	671			$	795
Preferred stock dividends and other			153	%		13	%			96				85				83				50				38
Net Income Available to Common Stockholders			83	%		32	%			$	1,388			$	1,050			$	615			$	621			$	757
Earnings per common share (2):
Basic			25	%		30	%			$	.74			$	.57			$	.48			$	.48			$	.59
Diluted			26	%		28	%			$	.73			$	.57			$	.48			$	.48			$	.58
Dividends declared per common share			—			—				$	.18			$	.18			$	.18			$	.18			$	.18
Weighted-average common shares outstanding:
Basic			46	%		2	%			1,882				1,848				1,289				1,288				1,287
Diluted			46	%		2	%			1,892				1,855				1,294				1,294				1,294
Performance Measures
Pre-tax profit margin										41.6		%		35.3		%		36.3		%		36.2		%		40.0		%
Return on average common stockholders’ equity (annualized) (3)										12		%		11		%		10		%		10		%		14		%
Financial Condition (at quarter end, in billions)
Cash and cash equivalents			(29)	%		21	%			$	48.6			$	40.3			$	27.5			$	33.6			$	68.5
Cash and investments segregated			18	%		(20)	%			40.4				50.4				29.6				33.2				34.3
Receivables from brokerage clients — net			N/M			16	%			74.7				64.4				25.4				21.4				19.0
Available for sale securities			54	%		1	%			341.6				337.4				303.8				281.2				221.2
Bank loans — net			30	%		7	%			25.4				23.8				22.3				20.9				19.5
Total assets			52	%		3	%			563.5				549.0				419.4				400.5				370.8
Bank deposits			33	%		3	%			369.9				358.0				320.7				301.6				277.5
Payables to brokerage clients			105	%		(3)	%			101.3				104.2				52.0				50.1				49.3
Short-term borrowings			N/M			N/M				2.5				—				—				—				—
Long-term debt			108	%		30	%			17.7				13.6				7.8				8.5				8.5
Stockholders’ equity			111	%		(1)	%			55.6				56.1				31.3				30.8				26.3
Other
Full-time equivalent employees (at quarter end, in thousands)			58	%		—				32.0				32.0				22.1				21.8				20.2
Capital expenditures — purchases of equipment, office facilities, and property, net (in millions)			(16)	%		5	%			$	209			$	200			$	122			$	169			$	250
Expenses excluding interest as a percentage of average client assets (annualized)										0.16		%		0.17		%		0.14		%		0.16		%		0.16		%
Clients’ Daily Average Trades (DATs) (in thousands)			N/M			45	%			8,414				5,796				1,460				1,619				1,540
Number of Trading Days			(2)	%		(3)	%			61.0				63.0				64.0				63.0				62.0
Revenue Per Trade (4)			20	%		1	%			$	2.37			$	2.34			$	1.94			$	1.89			$	1.97

Note: The above table reflects the recognition of TD Ameritrade’s assets acquired and liabilities assumed at provisional fair value as of October 6, 2020. Results of operations and metrics are inclusive of TD Ameritrade beginning October 6, 2020.
(1)		Beginning in the third quarter of 2020, amortization of acquired intangible assets was reclassified from depreciation and amortization. Prior periods have been reclassified to reflect this change.
(2)		Beginning in the fourth quarter of 2020, the Company had 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.
(3)		Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(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 March 31,
		2021												2020
		Average Balance				Interest Revenue/ Expense				Average Yield/ Rate				Average Balance				Interest Revenue/ Expense				Average Yield/ Rate
Interest-earning assets
Cash and cash equivalents		$	38,898			$	7			0.08	%			$	32,134			$	85			1.04	%
Cash and investments segregated		48,149				10				0.08	%			23,716				87				1.45	%
Receivables from brokerage clients		67,738				563				3.32	%			19,151				168				3.47	%
Available for sale securities (1)		338,245				1,091				1.29	%			197,745				1,185				2.39	%
Bank loans		24,476				139				2.27	%			18,897				144				3.06	%
Total interest-earning assets		517,506				1,810				1.40	%			291,643				1,669				2.28	%
Securities lending revenue (2)						204												37
Other interest revenue (2)						1												2
Total interest-earning assets (3)		$	517,506			$	2,015			1.56	%			$	291,643			$	1,708			2.33	%
Funding sources
Bank deposits		$	363,099			$	13			0.01	%			$	227,523			$	57			0.10	%
Payables to brokerage clients		87,339				2				0.01	%			30,287				8				0.10	%
Short-term borrowings (4)		1,093				—				0.22	%			3				—				1.07	%
Long-term debt		14,245				85				2.37	%			7,527				66				3.53	%
Total interest-bearing liabilities		465,776				100				0.09	%			265,340				131				0.20	%
Non-interest-bearing funding sources (3)		51,730												26,303
Securities lending expense (2)						5												7
Other interest expense (2)						(1)												(2)
Total funding sources (3)		$	517,506			$	104			0.08	%			$	291,643			$	136			0.19	%
Net interest revenue						$	1,911			1.48	%							$	1,572			2.14	%

(1)		Amounts have been calculated based on amortized cost.
(2)		Beginning in the fourth quarter of 2020, securities lending revenue has been reclassified from broker-related receivables and other revenue. Securities lending expense has been reclassified from other expense. Prior period amounts have been reclassified to reflect this change.
(3)		Beginning in the fourth quarter of 2020, broker-related receivables were removed from total interest-earning assets and netted against non-interest-bearing funding sources, resulting in an immaterial reduction to total interest-earning assets and total funding sources. Prior period amounts have been reclassified to reflect this change.
(4)		Interest revenue or expense was less than $500 thousand in the period or periods presented.

THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions, except ratios or as noted)
(Unaudited)
		Three Months Ended March 31,
		2021												2020
		Average Client Assets				Revenue				Average Fee				Average Client Assets				Revenue				Average Fee
Schwab money market funds before fee waivers		$	169,683			$	122			0.29	%			$	203,772			$	152			0.30	%
Fee waivers						(78)												—
Schwab money market funds		169,683				44				0.11	%			203,772				152				0.30	%
Schwab equity and bond funds, ETFs, and collective trust funds (CTFs)		377,282				86				0.09	%			290,808				76				0.11	%
Mutual Fund OneSource® and other non- transaction fee funds		222,455				172				0.31	%			188,583				147				0.31	%
Other third-party mutual funds and ETFs (1)		849,409				168				0.08	%			451,959				77				0.07	%
Total mutual funds, ETFs, and CTFs (2)		$	1,618,829			470				0.12	%			$	1,135,122			452				0.16	%
Advice solutions (2)
Fee-based		$	424,629			468				0.45	%			$	263,256			312				0.48	%
Non-fee-based		84,767				—				—				71,229				—				—
Total advice solutions		$	509,396			468				0.37	%			$	334,485			312				0.38	%
Other balance-based fees (3)		576,562				64				0.05	%			432,847				54				0.05	%
Other (4)						14												9
Total asset management and administration fees						$	1,016											$	827

(1)		Beginning in the fourth quarter of 2020, includes third-party money funds related to the acquisition of TD Ameritrade.
(2)		Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private ClientTM, Schwab Managed PortfoliosTM, Managed Account Select®, Schwab Advisor Network®, Windhaven® Strategies, ThomasPartners® Strategies, Schwab Index Advantage® advised retirement plan balances, Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, 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.
(3)		Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees.
(4)		Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

Contacts

MEDIA:

Mayura Hooper

Charles Schwab

Phone: 415-667-1525

INVESTORS/ANALYSTS:

Jeff Edwards

Charles Schwab

Phone: 415-667-1524

 

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