Schwab Reports First Quarter Results

Core Net New Assets Total $120.5 Billion

Total Client Assets Finish at $7.86 Trillion, up 11% Year-over-Year

The Charles Schwab Corporation announced today that its net income for the first quarter of 2022 was $1.4 billion compared with $1.6 billion for the fourth quarter of 2021, and $1.5 billion for the first quarter of 2021. During the quarter, certain acquisition and integration-related costs and the amortization of acquired intangibles totaled $96 million and $154 million, respectively, on a pre-tax basis.

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CEO Walt Bettinger said, “Our business momentum remained quite strong throughout the first quarter. We helped clients face a complex set of crosscurrents, which included an ongoing economic recovery supported by continued progress against the COVID pandemic, rising inflation, geopolitical turmoil driven by the Russian invasion of Ukraine, the Fed initiating its first tightening cycle since late 2015, and more volatile equity markets that remained below year-end 2021 levels for the vast majority of the period. Ongoing client engagement was reflected in trading activity that averaged more than 6.5 million a day – a level exceeded only by the ‘re-opening’ surge of last year’s first quarter. At the same time, Schwab’s contemporary full-service model and 'no trade-offs' approach to value, service, transparency, and trust helped attract 1.2 million new brokerage accounts during the first quarter, along with $121 billion in core net new assets, which represents a 6% annualized organic growth rate. We ended March with 33.6 million active brokerage accounts and $7.86 trillion in total client assets, up 5% and 11%, respectively, over year-earlier levels.”

“Along with supporting clients through a turbulent environment, we continued to drive progress across our strategic priorities during the quarter, including two significant steps in the exciting area of personalized investing,” Mr. Bettinger continued. “We announced Schwab Personalized Indexing^™ (SPI), a proprietary direct indexing solution designed to bring tax efficient personalized portfolio management capabilities – along with a highly competitive account minimum and fee schedule – to a wider spectrum of both registered investment advisors and retail investors. SPI includes daily monitoring of client portfolios and tax-loss harvesting technology that is managed by a team of investment professionals. Additionally, we introduced our initial thematic stock lists, which are built using a proprietary algorithm and designed to help self-directed investors pick stocks aligned with their interests and values. Clients can view potential investments from a list of 45 different categories and approximately 900 companies representing a range of themes including data advancement, medical breakthroughs, and environmental innovation.”

Mr. Bettinger added, “During the first quarter, we took steps to help our clients navigate the mutual fund selection process more efficiently as they look across the broad range of choices available on our open architecture platform. Clients using our enhanced Fund Finder tool on Schwab.com now have the option of referencing modules that highlight funds from Schwab and T. Rowe Price that meet their search criteria, have no transaction fees, and have Morningstar Overall Ratings of four or five stars. Of note, independent advisors who custody with Schwab have already gained access to T. Rowe Price’s lowest cost institutional share class funds through our platform without transaction fees.”

Mr. Bettinger concluded, “We see SPI and our thematic lists as initial steps in giving clients more power in personalizing their investments to reflect their unique circumstances and perspectives. Similarly, simplifying the research experience for clients when selecting mutual funds gives them more power to build their financial futures with investments that make sense for them. We remain committed to pushing forward with these and other strategic initiatives even as we keep our TD Ameritrade integration work on schedule, because we know that both fronts are essential elements of our 'Through Clients’ Eyes' strategy. Schwab’s strong growth reflects the enduring appeal of that strategy for millions of investors as well as the independent advisors who serve them.”

CFO Peter Crawford noted, “Our first quarter 2022 financial results reflected our ongoing success with clients while contending with the effects of a challenging environment. Total revenues of $4.7 billion were just under the record level set in the year-ago quarter amidst that extraordinary surge in client activity, with increases in net interest revenue (NIR) and asset management and administration fees (AMAF) essentially offsetting the effects of trading activity returning to more moderate levels. First quarter 2022 NIR and AMAF were strengthened by growing balances and modestly improved – but still low – short-term interest rates. The lift from these increases, however, was muted somewhat by recent equity market weakness and volatility, which affected margin loan balances and securities lending activity as well as client asset valuations.”

Mr. Crawford continued, “Our GAAP expenses rose 3% year-over-year to $2.8 billion, including $96 million in acquisition and integration-related costs and $154 million in amortization of acquired intangibles. Exclusive of these items, adjusted total expenses⁽¹⁾ were up 4% versus the first quarter of 2021, consistent with our expectations as we invest in our people and our ability to support current and ongoing growth in our client base. Our diversified revenue model, along with disciplined expense management that aims to balance near-term profitability and long-term investment, enabled us to achieve a pre-tax profit margin of 39.4% – 44.7% on an adjusted basis⁽¹⁾. We believe the relative resiliency of our first quarter revenues and profitability represents solid performance in the face of significant environmental headwinds.”

“Our priority for capital management remains centered on maintaining flexibility for supporting ongoing growth,” Mr. Crawford said. “During the first quarter, we migrated an additional $13 billion in Insured Deposit Account (IDA) balances onto our balance sheet, and total assets rose by a similar amount versus year-end 2021. To augment our capital position amidst this growth in assets, we issued $750 million in preferred stock. We also issued $3 billion in senior notes primarily for ongoing liquidity management purposes. The company’s preliminary Tier 1 Leverage Ratio was 6.1% as of March 31. With a first quarter return on equity of 12% and ROTCE⁽¹⁾ of 26%, our healthy financial performance and consistent attention to capital management have helped us deliver a double-digit return on equity and a ROTCE of at least 20% every quarter since acquiring TD Ameritrade. As we move deeper into 2022, we remain confident that Schwab has the financial strength and flexibility necessary to stay focused on serving our clients however conditions evolve.”

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 recent account activity, was posted on May 14, 2021.

Spring Business Update

The company has scheduled a Spring Business Update for institutional investors on Thursday, April 21, 2022. The Update, which will be held via webcast, is scheduled to run from approximately 8:00 a.m. - 9:00 a.m. PT, 11:00 am - 12:00 pm 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 business momentum; strategic initiatives; TD Ameritrade integration; growth in the client base, accounts, and assets; 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; expense management; balancing near-term profitability and long-term investment; capital management; and financial strength and flexibility. 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 general market conditions, including equity valuations, trading activity, and the level of interest rates; market volatility; client use of the company’s advisory solutions and other products and services; client sensitivity to rates; level of client assets, including cash balances; capital and liquidity needs and management; the migration of bank deposit account balances; 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 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 33.6 million active brokerage accounts, 2.2 million corporate retirement plan participants, 1.6 million banking accounts, and approximately $7.86 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.