Charles Schwab Corporation (the) · NYSE:SCHW
Charles Schwab Corporation (the) — Q4 2024 Earnings Presentation
46 slides from Charles Schwab Corporation (the)'s earnings presentation, Jan 21, 2025
Slide 1: Winter Business Update
Winter Business Update January 21, 2025
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward- looking statements include statements that refer to expectations, projections or other c
Slide 3: Strategic Update - Rick Wurster
Strategic Update Rick Wurster President and Chief Executive Officer Charles Schwab Corporation 3
Slide 4: Key Takeaways
Key Takeaways 2024 Completed Ameritrade client conversion and integration Full-year asset gathering up 20% versus 2023, including ~$115B of Core NNA in 4Q24 Delivered strong Supported strong client activity across trading, advice, and lending solutions results during a Delivered 4Q24 and FY2
Slide 5: Completed the largest integration in the history of our industry
As the environment shifted during 2024, we completed the largest integration in the history of our industry,... Macroeconomic Environment1 Ameritrade Conversion S&P 500® +23% $1.9T 17M+ Index Returns Assets Accounts Successfully completed largest brokerage Federal Funds Rate 4.50% conversion in fi
Slide 6: Client, Solutions, Financial growth across all major fronts
…and drove strong growth across all major fronts. Client Solutions Financial Charles Schwab Corporation 6
Slide 7: Uptick in asset gathering and new account formation
During the past year, we saw an uptick in asset gathering and new account formation,… Core Net New Assets New Brokerage Accounts Client +20% $367BFY24 vs. FY23 +10% FY24 vs. FY23 4.2M Solutions +51% +23% $114.8B 1,094K 1,119K $95.6B $95.3B 985K 972K 910K $76.1B $61.2B Financial 4Q23 1Q24 2Q24 3Q24 4
Slide 8: Increased client interest in wealth and lending solutions
…increased client interest in Schwab’s array of wealth and lending solutions,… Managed Investing Net Flows1 Pledged Asset Line® Balances, EOP Client +69% $55.2B +26% $17.0B FY24 vs. FY23 FY24 vs. FY23 +80% Solutions $15.1B $15.3B $14.3B $17.0B $15.0B $15.7B $13.5B $13.8B $10.5B $8.5B Financial 4Q23
Slide 9: Significant expansion in our earnings power
…and a significant expansion in our earnings power. 4Q24 Total Revenue 4Q24 Earnings per Share, Adjusted1 Client +20% $5.3B vs. 4Q23 +49% $1.01 vs. 4Q23 +10% GAAP +31% Solutions Adjusted $5.3B $1.01 $4.7B $4.7B $4.8B $4.5B $0.74 $0.73 $0.77 $0.68 $0.94 $0.68 $0.66 $0.71 $0.51 Financial 4Q23 1Q24 2Q2
Slide 10: Well-positioned to accelerate growth in 2025 and beyond
Enabled by multiple factors, we are well-positioned to further accelerate growth in 2025 and beyond. 1 Strong Competitive Positioning 2 Healthy Business Fundamentals 3 Growing and Diverse Client Base 4 Investments in Strategic Initiatives Charles Schwab Corporation 10
Slide 11: Aligned to the two fastest-growing wealth segments
We remain aligned to the two fastest-growing wealth segments and offer an industry-leading value proposition. Strong Competitive U.S. Retail Investable Wealth 1 Positioning 2018-2023 CAGR1 Direct / 14% Healthy Business Self-directed 2 Fundamentals RIAs 11% Regional Broker-dealers 11% Growing and Div
Slide 12: Clients increase activity and engagement on our platform
Clients continue to increase their activity and engagement on our best-in-class platform. FY 2024 Strong Competitive 1 Positioning Daily Average 5.9M Managed Investing $55.2B Healthy Business Trades +9% vs. FY23 Net Flows1 2 Fundamentals +69% vs. FY23 Growing and Diverse 3 $45.2B $83.8B Client Base
Slide 13: Products resonate across individual investors and RIAs
Our products and services resonate across a wide range of individual investors and RIAs. FY 2024 Strong Competitive 1 NNA by Advisor Size1 Positioning 33% 22% 21% New-to-firm Retail Healthy Business 2 Fundamentals Households Under 30 Growing and Diverse 3 Client Base 25% 32% ~70% Retail Assets Held
Slide 14: Innovating solutions, capabilities, and experiences
We continue to innovate our solutions, capabilities, and experiences as clients’ needs evolve. Strong Competitive 1 Positioning Drive growth, Deliver the brilliant deepening relationships basics for with investors & RIAs dependability & ease Healthy Business 2 Fundamentals Growing and Diverse 3 Clie
Slide 15: Drive growth, deepening relationships
FY 2024 Drive growth, +42% Select Focus Areas Net Flows into deepening Schwab Wealth Financial Consultant Coverage relationships AdvisoryTM vs. FY23 Branch Footprint Wealth Solutions +26% Help existing clients grow, Marketing & Advertising welcome new clients, and RIA Support diversify how
Slide 16: Create value with scale and efficiency
FY 2024 Select Focus Areas Create value Schwab Cost Per Account1 with scale & -26% Operational Process Transformation efficiency $427 $334 $316 Artificial Intelligence $235 Embrace new Automation & technologies and System Modernization seek continuous 2014 2024 2024 2024 process GAAP Adjusted3
Slide 17: Deliver the brilliant basics
Deliver the 70 Select Focus Areas Client Promoter brilliant Score1 Client Service basics Investor Services Accessibility +4 pts Y/Y Omnichannel Client Experience 93 Be there for our clients whenever they need us and Digital Ease make investing at Schwab easy and Easy Score2 Tech Resiliency
Slide 18: Invest in our people
Select Focus Areas Invest in our people Unique Schwab Culture Workflow Optimization Talent Development & Attract, develop, Recognition Programs advance, and retain exceptional Named one of America’s talent who Best Large Employers embody our 2024 culture of service to our clients and each othe
Slide 19: Through Clients' Eyes strategy delivered strong results
Our “Through Clients’ Eyes” strategy helped deliver strong results in 2024, positioning us to further accelerate long-term growth. 2024 2025 Long-term Delivered strong Momentum Profitable growth results during a continuing to build through-the-cycle transitional year Charles Schwab Corporation 19
Slide 20: Financial Perspectives - Michael Verdeschi
Financial Perspectives Michael Verdeschi Managing Director, Chief Financial Officer Charles Schwab Corporation 20
Slide 21: Disciplined approach drives profitable growth through-the-cycle
Our consistent focus on clients and disciplined approach enables Schwab to drive profitable growth through-the-cycle. Delivered strong growth across client, solutions, and financial measures 2024 Grew 4Q24 revenue by 20% year-over-year Expanded 4Q24 GAAP earnings per share by 84%, 49% adjusted
Slide 22: 4Q24 revenue growth of 20% versus 4Q23
2024 Strong markets, robust client engagement, and encouraging cash trends drove 4Q24 revenue growth of 20% versus 4Q23. $5.3B 4Q24 vs. 4Q23 $4.8B $0.4B $4.7B $4.7B $4.5B $0.3B $0.4B NIR grew 19%, as client margin balances $0.4B $0.9B Other $0.3B increased 34% and we meaningfully $0.8B $0.8B $0.8B
Slide 23: Quarterly expense trends
2024 Quarterly expense trends reflect our balanced approach to investing for growth while driving efficiency. GAAP $3.3B 4Q24 vs. 4Q23 $2.9B $2.9B $3.0B $3.0B GAAP expenses down 7% Excluding $177M of pre-tax transaction- related and restructuring costs, adjusted1 expenses finished essentially Ad
Slide 24: 4Q24 adjusted EPS expanded by 49%
2024 4Q24 adjusted1 EPS expanded by 49% year-over-year,… 4Q24 Pre-tax Profit Earnings Per Revenue Expenses Margin Share $3.0B 43.3% $0.94 $5.3B GAAP GAAP GAAP $2.8B Adjusted1 46.6% Adjusted1 $1.01 Adjusted1 Note: B = Billion. Q = Quarter. EPS = Earnings per share. GAAP = Generally accepted accountin
Slide 25: FY24 progress toward long-term financial objectives
2024 …capping a year of progress back towards our long-term financial objectives. FY24 Pre-tax Profit Earnings Per Revenue Expenses Margin Share $11.9B 39.2% $2.99 $19.6B GAAP GAAP GAAP $11.3B Adjusted1 42.5% Adjusted1 $3.25 Adjusted1 Note: B = Billion. FY = Full year. GAAP = Generally accepted acco
Slide 26: 2024 Balance Sheet Highlights
2024 2024 Balance Sheet Highlights Balance Sheet Principles Supported Client-Driven Growth – Client margin loans reached $83.8 billion, up 34% since year-end 2023 Support our clients’ – Bank loans to clients increased 12% versus year-end 2023 – including an over evolving needs $1 billion increase
Slide 27: Bank Supplemental Funding down ~50% from peak
2024 Bank Supplemental Funding1 is down ~50% from peak levels. Factors Influencing Paydown Bank Supplemental Funding Balances1 ($B) 1 Securities Portfolio Cash Flows (Principal & Interest) -49% 2 Macroeconomic Environment $97.1 $73.7 3 Seasonality $64.8 $49.9 4 Client Engagement 5 Client Asset Alloc
Slide 28: Capital ratios within Adjusted Tier 1 Leverage objective
2024 Schwab’s capital ratios are now within our Adjusted Tier 1 Leverage1 operating objective range of 6.75% - 7.00%. Consolidated Tier 1 Leverage Ratio Regulatory T1LR Adjusted T1LR 1 We are now within our objective of 6.75% - 7.00%, inclusive of unrealized losses in our AFS portfolio 9.7% 9.9% 9.4
Slide 29: Macroeconomic environment informing 2025 results
2025 As always, the macroeconomic environment and other factors will inform our 2025 results. Trajectory of Current Forward Curve Expectations1 Interest Rates Fed Funds finishes 2025 at 4.25% (upper-bound) Equity 6.5% appreciation from year-end 2024 level Markets In-line with long-term equity market
Slide 30: Financial scenario for 2025
2025 Our financial scenario reflects our momentum entering 2025. Anticipate revenue to increase by 13% to 15% versus the prior year as clients continue to utilize our broad array of services and solutions Revenue Further reduction of Bank Supplemental Funding1 supports full-year NIM expansion into
Slide 31: Select Revenue Sensitivities
2025 Select Revenue Sensitivities As of December 31, 2024 Target Fed BDA Bank Sweep ~$350M Funds Rate Balances ~$40M Balances ~$45M – $450M +/- 25 bps +/- $1B +/- $1B Daily Margin S&P 500® Average ~$30M ~$55M Balances ~$25M +/- 1% Trades +/- $1B +/- 100K Note: Bps = Basis points. K = Thousand. B = B
Slide 32: Poised for opportunistic capital return
2025 As our capital position continues to strengthen, we are poised for opportunistic capital return in 2025 and beyond. Near-term Capital Return Considerations Capital Management Framework Support ongoing business growth Business Growth Capital Levels Common dividend payout range Seek opportunistic
Slide 33: Long-term diversified financial model remains intact
Long-term Our long-term diversified financial model remains intact. Sustainable organic Further revenue growth plus diversification as we Balance sustained deepen client investment to Efficient utilization of increasing relationships support growth while capital and liquidity engagement with our wea
Slide 34: Disciplined approach drives profitable growth through-the-cycle
Our consistent focus on clients and disciplined approach enables Schwab to drive profitable growth through-the-cycle. 2024 2025 Long-term Delivered strong Momentum Profitable growth results during a continuing to build through-the-cycle transitional year Charles Schwab Corporation 34
Slide 35: Q&A
Q&A Charles Schwab Corporation 35
Slide 36: Winter Business Update
Winter Business Update January 21, 2025
Slide 37: Appendix
Appendix Charles Schwab Corporation 37
Slide 38: Balance Sheet (as of December 31, 2024)
Appendix Balance Sheet (as of December 31, 2024) ($M, EOP) 4Q23 1Q24 2Q24 3Q24 4Q24 Total Assets $493,178 $468,784 $449,675 $466,055 $479,843 Bank Deposits $289,953 $269,460 $252,420 $246,462 $259,121 Payables to Brokerage Clients $84,786 $84,005 $79,966 $89,164 $101,559 Long-term Debt $26,128 $22,8
Slide 39: Average Interest-earning Assets & Bank Investment Portfolio
Appendix Average Interest-earning Assets & Bank Investment Portfolio (as of December 31, 2024) 4Q24 Avg. Interest-earning Assets (%)1, 2 Bank Investment Portfolio Spotlight Fixed vs. Other IEA Floating 96% Fixed / 4% Floating Cash & Equiv. 9% 7% 60% 27% 13% Securities Agency RMBS Agency CMBS Other M
Slide 40: Bank Deposit Account Summary
Appendix Bank Deposit Account Summary (as of December 31, 2024) Mix of Average BDA Balances ($B,%) BDA Balances by Maturity, EOP ($B) Total Balance: $87.5 Net Rate2: 1.30% Annual Revenue3: $1,156.4M $16.8 (20%) Fixed Maturities: $66.6 (76% of total)1 | Net Rate2: 0.44% $84.5 $21.0 $21.9 $17.7 $13.6
Slide 41: Non-GAAP Introduction
Appendix Non-GAAP Introduction In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), this presentation contains references to the non-GAAP financial measures described below. We believe these non-GAAP financial measures provide us
Slide 42: Adjusted total expenses and Adjusted net income
Appendix Non-GAAP Reconciliation: Adjusted total expenses and Adjusted net income Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Twelve Months Ended, Twelve Months Ended, December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 3
Slide 43: Adjusted income before taxes and pre-tax profit margin
Appendix Non-GAAP Reconciliation: Adjusted income before taxes on income and Adjusted pre-tax profit margin Three Months Ended, Twelve Months Ended, December 31, 2024 December 31, 2024 % of % of (In millions, except ratios and per share amounts) Amount Total Net Revenues Amount Total Net Revenues In
Slide 44: Adjusted net income to common stockholders and diluted EPS
Appendix Non-GAAP Reconciliation: Adjusted net income to common stockholders and Adjusted diluted EPS Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Twelve Months Ended, Twelve Months Ended, December 31, 2024 September 30, 2024 June 30, 2024 March
Slide 45: Consolidated Adjusted Tier 1 Leverage Ratio
Appendix Non-GAAP Reconciliation: Consolidated Adjusted Tier 1 Leverage Ratio Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Three Months Ended, Preliminary (In millions, except ratios and per share amounts) December 31, 2024 September 30, 2024 June 30, 2024 March 31
Slide 46: Winter Business Update
Winter Business Update January 21, 2025
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