EX-99.1 2 exhibit991123118.htm EXHIBIT 99.1 Exhibit
 
 
EXHIBIT 99.1

News Release

Contacts:
 
cslogoa03.jpg
MEDIA:
Mayura Hooper
Charles Schwab
Phone: 415-667-1525
INVESTORS/ANALYSTS:
Rich Fowler
Charles Schwab
Phone: 415-667-1841

SCHWAB FOURTH QUARTER NET INCOME OF $935 MILLION CAPS RECORD YEAR
2018 Revenues Rise 18% to $10.1 Billion, Net Income Grows 49% to $3.5 Billion, Both Records
Core Net New Assets Reach a Record $227.8 Billion, up 15%
 
SAN FRANCISCO, January 16, 2019 – The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2018 was $935 million, up 57% from $597 million for the fourth quarter of 2017. Net income for the twelve months ended December 31, 2018 was $3.5 billion, up 49% year-over-year.
 
 
Three Months Ended December 31,
 
%
 
Twelve Months Ended December 31,
 
%
Financial Highlights
 
2018
 
2017
 
Change
 
2018
 
2017
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Net revenues (in millions)
 
$
2,669

 
$
2,242

 
19%
 
$
10,132

 
$
8,618

 
18%
Net income (in millions)
 
$
935

 
$
597

 
57%
 
$
3,507

 
$
2,354

 
49%
Diluted earnings per common share
 
$
.65

 
$
.41

 
59%
 
$
2.45

 
$
1.61

 
52%
Pre-tax profit margin
 
45.3
%
 
42.5
%
 
 
 
45.0
%
 
42.4
%
 
 
Return on average common
 
 
 
 
 
 
 
 
 
 
 
 
    stockholders’ equity (annualized)
 
20
%
 
14
%
 
 
 
19
%
 
15
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding.
 
CEO Walt Bettinger said, “Our ability to build stronger client relationships and set financial records through a volatile environment reaffirmed the power of Schwab’s ‘Virtuous Cycle’ in 2018. While the year began with strong market momentum, February saw a surge of volatility, including the largest-ever one-day increase in the Cboe Volatility Index®. After a relatively stable summer, the S&P 500® reached an all-time high in September, before dropping 580 points to ultimately end the year 6% lower than month-end December 2017. Throughout these ups and downs, disciplined execution of our ‘Through Clients’ Eyes’ strategy helped us succeed with clients – households new to Retail rose 20% compared to 2017, with 53% of those new clients under the age of 40. Another measure of our success is the willingness of new and existing clients to trust us with their hard-earned assets. Both of our primary businesses posted record inflows in 2018, with Retail and Advisor Services net new assets rising 37% and 7%, respectively. Altogether, investors rewarded Schwab with a record $227.8 billion in core net new assets, up 15% from the previous record in 2017 and more than twice the 2008 total – clear evidence of our asset gathering capabilities. These impressive flows were driven, in part, by our ability to win in a competitive marketplace as we continued attracting more than two dollars of inflow for every dollar out in 2018. Our strong net new assets largely offset lower market valuations and we ended the year at $3.25 trillion in total client assets.”

Mr. Bettinger continued, “We remain well-positioned to continue driving robust business growth; with less than 10% market share, we still have ample opportunity ahead of us even as our client base reaches new highs. Last year, clients opened a record 1.6 million new brokerage accounts, up 9% from the previous year. Record client activity and help from the broader environment contributed to our sixth straight year of record revenues, which totaled

- 1 -


$10.1 billion, up 18% from 2017. Our ratio of expenses to client assets, a key measure of our efficiency and one of our core competitive advantages, remained at our all-time low of 16 basis points – the best we’ve seen among public investment services firms. By balancing near-term profitability with long-term investments for growth and efficiency, along with support from a more favorable tax rate, we achieved the fifth consecutive year of record net income, up 49% to $3.5 billion. These results were made possible by our employees’ commitment to championing our clients’ goals every day, and in the fourth quarter we rewarded our non-officer employees with a one-time stock award totaling $36 million.”

Mr. Bettinger added, “We seek to offer a ‘no trade-offs’ approach to investors and are dedicated to sharing the benefits of our scale with them. We expanded access to investing in the fourth quarter by removing minimums for individual U.S. brokerage and retirement accounts. We also lowered the operating expense ratios on five market cap index mutual funds, removed investment minimums, and consolidated share classes across a variety of our mutual funds. During 2018, we enhanced our product line-up, adding 23 ETFs to Schwab ETF OneSource™ to total 265 ETFs covering 70 Morningstar categories. Additionally, consistent with our focus on improving transparency in investing, we introduced order-by-order price improvement reporting, enabling our clients to see how much they save on their equity trades. As we continue to seek ways to enhance our value proposition, product offering, and transparency, we are also striving to serve our clients where and how they choose. Throughout the year we hired over 500 client-facing employees, relocated or renovated 21 company-owned branches, and expanded the number of independent branches from 40 to 53. And we were honored to receive the ‘Highest in Investor Satisfaction with Full Service Brokerage Firms’ by J.D. Power* for the third consecutive year. We see this recognition as an affirmation of the importance of building trust and loyalty with our clients. We know when we do right by them they will reward us by bringing their assets to Schwab, fueling our growth well into the future.”

CFO Peter Crawford commented, “Schwab’s 2018 record financial performance once again demonstrates the effectiveness of the company’s financial formula. By focusing on our clients’ needs, we attract assets, and then we translate that business growth into solid revenue growth while at the same time exercising expense discipline – all of which leads to enhanced bottom-line performance. With an organic asset growth rate of 7% and a supportive environment for much of the year, we crossed the $10 billion revenue mark for the first time, producing 18% growth over 2017. Net interest revenue set a record at $5.8 billion, up 36% year-over-year, due to the Fed’s rate normalization and higher interest-earning assets, which reflect growth from both client cash allocations and the transfer of sweep money market funds to bank and broker-dealer sweep. As we progressed with these transfers, the corresponding money fund revenue naturally declined, yet positive flows in our advice solutions kept asset management and administration fees at $3.2 billion, down just 5% from last year. Record trading activity from our clients resulted in trading revenue reaching $763 million, up 17% from 2017. Our 12% increase in expenses encompasses our expected investments to support and fuel our business growth, including additional client-facing employees and our 2018 priorities – Application Modernization, Business Process Transformation, and Digital Accelerator. Our spending also reflects our late-year decisions to increase marketing and reward our employees, somewhat offset by the elimination of the FDIC surcharge. Overall, we delivered a 550 basis point gap between revenue and expense growth and produced a record 45.0% pre-tax profit margin, a 260 basis point expansion over last year.”

Mr. Crawford concluded, “Throughout 2018 we effectively managed our balance sheet to drive a 19% return on equity – the company’s highest annual level in ten years. We grew our consolidated balance sheet 22% to end the year at $297 billion, reflecting client cash allocations through the year – including a December surge in the midst of heightened market volatility – and $72 billion of sweep transfers. We ended the year with $30 billion remaining in sweep money market fund balances. Even with these transfers, we continued to generate more than enough capital to support our ongoing business growth and began accelerating returns to our stockholders. During 2018, our Board of Directors raised the quarterly cash dividend 63% and authorized a $1 billion Share Repurchase Program in October, which we completed by year-end; our preliminary Tier 1 Leverage Ratio was 7.1% at December 31st, just above our operating objective of 6.75%-7%. We will continue to utilize capital, as necessary, to fund and support balance sheet growth. At the same time, we are working with our Board to implement an approach for returning excess capital to stockholders, as Schwab’s story evolves to include both strong business growth and more meaningful capital returns.”


- 2 -


Supporting schedules and selected balances are either attached or located at: http://www.aboutschwab.com/investor-relations/financial-reports.

*Disclaimer: Charles Schwab received the highest numerical score in the J.D. Power 2016-2018 Full Service Investor Satisfaction Study. 2018 study based on 4,419 total responses from 18 firms measuring opinions of investors who used full service investment institutions, surveyed November-December 2017. Your experiences may vary. Visit jdpower.com/awards.

Commentary from the CFO
Periodically, our Chief Financial Officer provides insight and commentary regarding Schwab’s financial picture at: http://www.aboutschwab.com/investor-relations/cfo-commentary. The most recent commentary, which provides perspective on crossing the $250 billion consolidated asset threshold for heightened regulatory requirements, was posted on August 14, 2018.

Business Update
The company has scheduled a Business Update for institutional investors on Tuesday, February 5, 2019. The Update is scheduled to run from approximately 8:30 a.m. - 12:15 p.m. PT, 11:30 a.m. - 3:15 p.m. ET. Participants will include members of the company’s executive management. A simultaneous webcast of this Update will be accessible to the public at http://schwabevents.com/corporation.

Forward-Looking Statements
This press release contains forward-looking statements relating to growth in the client base, accounts and assets; growth in revenues, earnings and profits; expenses; capital returns to stockholders; Tier 1 Leverage Ratio operating objective; and balance sheet growth. 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 registered investment advisors and grow those relationships and client assets; general market conditions, including the level of interest rates, equity valuations, and trading activity; competitive pressures on pricing, including deposit rates; the company’s ability to develop and launch new products, services, infrastructure and capabilities in a timely and successful manner; client use of the company’s advisory solutions and other products and services; level of client assets, including cash balances; capital and liquidity needs and management; client sensitivity to interest rates; the company’s ability to manage expenses; the timing and amount of transfers to bank sweep; 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 more than 355 offices and 11.6 million active brokerage accounts, 1.7 million corporate retirement plan participants, 1.3 million banking accounts, and $3.25 trillion in client assets as of December 31, 2018. 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 subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and 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 banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.
###

- 3 -



THE CHARLES SCHWAB CORPORATION
Consolidated Statements of Income
(In millions, except per share amounts)
(Unaudited)





 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Net Revenues
 
 
 
 
 
 
 
 
Interest revenue
 
$
1,914

 
$
1,266

 
$
6,680

 
$
4,624

Interest expense
 
(288
)
 
(119
)
 
(857
)
 
(342
)
Net interest revenue
 
1,626

 
1,147

 
5,823

 
4,282

Asset management and administration fees
 
755

 
863

 
3,229

 
3,392

Trading revenue
 
206

 
154

 
763

 
654

Other
 
82

 
78

 
317

 
290

Total net revenues
 
2,669

 
2,242

 
10,132

 
8,618

Expenses Excluding Interest
 
 
 
 
 
 
 
 
Compensation and benefits
 
805

 
711

 
3,057

 
2,737

Professional services
 
178

 
151

 
654

 
580

Occupancy and equipment
 
128

 
113

 
496

 
436

Advertising and market development
 
93

 
63

 
313

 
268

Communications
 
63

 
60

 
242

 
231

Depreciation and amortization
 
80

 
69

 
306

 
269

Regulatory fees and assessments
 
31

 
46

 
189

 
179

Other
 
81

 
76

 
313

 
268

Total expenses excluding interest
 
1,459

 
1,289

 
5,570

 
4,968

Income before taxes on income
 
1,210

 
953

 
4,562

 
3,650

Taxes on income (1)
 
275

 
356

 
1,055

 
1,296

Net Income
 
935

 
597

 
3,507

 
2,354

Preferred stock dividends and other
 
50

 
47

 
178

 
174

Net Income Available to Common Stockholders
 
$
885

 
$
550

 
$
3,329

 
$
2,180

Weighted-Average Common Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
1,343

 
1,343

 
1,348

 
1,339

Diluted
 
1,354

 
1,358

 
1,361

 
1,353

Earnings Per Common Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
$
.66

 
$
.41

 
$
2.47

 
$
1.63

Diluted
 
$
.65

 
$
.41

 
$
2.45

 
$
1.61


(1) Taxes on income were increased by approximately $46 million in December 2017 due to the enactment of the Tax Cuts and Jobs Act.

         



- 4 -


THE CHARLES SCHWAB CORPORATION
Financial and Operating Highlights
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q4-18 % change
 
 
2018
 
2017
 
vs.
 
vs.
 
 
Fourth
 
Third
 
Second
 
First
 
Fourth
(In millions, except per share amounts and as noted)
Q4-17
 
Q3-18
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Net Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest revenue
42
%
 
6
%
 
 
$
1,626

 
$
1,527

 
$
1,407

 
$
1,263

 
$
1,147

Asset management and administration fees
(13
)%
 
(7
)%
 
 
755

 
809

 
814

 
851

 
863

Trading revenue
34
%
 
17
%
 
 
206

 
176

 
180

 
201

 
154

Other
5
%
 
22
%
 
 
82

 
67

 
85

 
83

 
78

Total net revenues
19
%
 
3
%
 
 
2,669

 
2,579

 
2,486

 
2,398

 
2,242

Expenses Excluding Interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
13
%
 
9
%
 
 
805

 
737

 
745

 
770

 
711

Professional services
18
%
 
9
%
 
 
178

 
164

 
156

 
156

 
151

Occupancy and equipment
13
%
 
3
%
 
 
128

 
124

 
122

 
122

 
113

Advertising and market development
48
%
 
33
%
 
 
93

 
70

 
77

 
73

 
63

Communications
5
%
 
7
%
 
 
63

 
59

 
58

 
62

 
60

Depreciation and amortization
16
%
 
3
%
 
 
80

 
78

 
75

 
73

 
69

Regulatory fees and assessments
(33
)%
 
(46
)%
 
 
31

 
57

 
50

 
51

 
46

Other
7
%
 
14
%
 
 
81

 
71

 
72

 
89

 
76

Total expenses excluding interest
13
%
 
7
%
 
 
1,459

 
1,360

 
1,355

 
1,396

 
1,289

Income before taxes on income
27
%
 
(1
)%
 
 
1,210

 
1,219

 
1,131

 
1,002

 
953

Taxes on income
(23
)%
 
(7
)%
 
 
275

 
296

 
265

 
219

 
356

Net Income
57
%
 
1
%
 
 
$
935

 
$
923

 
$
866

 
$
783

 
$
597

Preferred stock dividends and other
6
%
 
32
%
 
 
50

 
38

 
53

 
37

 
47

Net Income Available to Common Stockholders
61
%
 

 
 
$
885

 
$
885

 
$
813

 
$
746

 
$
550

Earnings per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
61
%
 

 
 
$
.66

 
$
.66

 
$
.60

 
$
.55

 
$
.41

Diluted
59
%
 

 
 
$
.65

 
$
.65

 
$
.60

 
$
.55

 
$
.41

Dividends declared per common share
63
%
 

 
 
$
.13

 
$
.13

 
$
.10

 
$
.10

 
$
.08

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic

 
(1
)%
 
 
1,343

 
1,351

 
1,350

 
1,347

 
1,343

Diluted

 
(1
)%
 
 
1,354

 
1,364

 
1,364

 
1,362

 
1,358

Performance Measures
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax profit margin
 
 
 
 
 
45.3
%
 
47.3
%
 
45.5
%
 
41.8
%
 
42.5
%
Return on average common stockholders’ equity (annualized) (1)
 
 
 
 
 
20
%
 
20
%
 
19
%
 
18
%
 
14
%
Financial Condition (at quarter end, in billions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and investments segregated
(10
)%
 
60
%
 
 
$
13.6

 
$
8.5

 
$
11.0

 
$
12.8

 
$
15.1

Receivables from brokerage clients — net
5
%
 
(3
)%
 
 
21.7

 
22.4

 
22.4

 
21.2

 
20.6

Bank loans — net
1
%
 

 
 
16.6

 
16.6

 
16.6

 
16.4

 
16.5

Total assets
22
%
 
9
%
 
 
296.5

 
272.1

 
261.9

 
248.3

 
243.3

Bank deposits
36
%
 
8
%
 
 
231.4

 
213.4

 
199.9

 
190.2

 
169.7

Payables to brokerage clients
5
 %
 
17
%
 
 
32.7

 
27.9

 
30.3

 
31.1

 
31.2

Short-term borrowings
(100
)%
 

 
 

 

 

 

 
15.0

Long-term debt
44
%
 
19
%
 
 
6.9

 
5.8

 
5.8

 
4.1

 
4.8

Stockholders’ equity
12
%
 

 
 
20.7

 
20.8

 
20.1

 
19.3

 
18.5

Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Full-time equivalent employees (at quarter end, in thousands)
11
%
 
2
%
 
 
19.5

 
19.1

 
18.7

 
18.2

 
17.6

Capital expenditures — purchases of equipment, office facilities, and
property, net (in millions)
13
%
 
2
%
 
 
$
159

 
$
156

 
$
126

 
$
135

 
$
141

Expenses excluding interest as a percentage of average client assets
(annualized)
 
 
 
 
 
0.17
%
 
0.15
%
 
0.16
%
 
0.17
%
 
0.16
%
Clients’ Daily Average Trades (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue trades (2)
35
%
 
22
%
 
 
466

 
382

 
376

 
462

 
345

Asset-based trades (3)
57
%
 
46
%
 
 
188

 
129

 
149

 
139

 
120

Other trades (4)
31
%
 
24
%
 
 
213

 
172

 
179

 
211

 
163

Total
38
%
 
27
%
 
 
867

 
683

 
704

 
812

 
628

Average Revenue Per Revenue Trade (2)
(3
)%
 
(2
)%
 
 
$
7.13

 
$
7.27

 
$
7.30

 
$
7.24

 
$
7.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Return on average common stockholders’ equity is calculated using net income available to common stockholders divided by average common stockholders’ equity.
(2) Includes all client trades that generate trading revenue (i.e., commission revenue or principal transaction revenue); also known as DART.
(3) Includes eligible trades executed by clients who participate in one or more of the company’s asset-based pricing relationships.
(4) Includes all commission-free trades, including Schwab Mutual Fund OneSource® funds and ETFs, and other proprietary products.


- 5 -


THE CHARLES SCHWAB CORPORATION
Net Interest Revenue Information
(In millions)
(Unaudited)

 
Three Months Ended
December 31,
 
 
Twelve Months Ended
December 31,
 
2018
 
 
2017
 
 
2018
 
 
2017
 
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
$
22,590

 
$
131

 
2.27
%
 
 
$
11,582

 
$
37

 
1.27
%
 
 
$
17,783

 
$
348

 
1.93
%
 
 
$
9,931

 
$
109

 
1.10
%
Cash and investments segregated
9,854

 
57

 
2.28
%
 
 
15,307

 
46

 
1.19
%
 
 
11,461

 
206

 
1.78
%
 
 
18,525

 
166

 
0.90
%
Broker-related receivables
241

 
2

 
3.99
%
 
 
438

 
1

 
0.91
%
 
 
303

 
6

 
2.09
%
 
 
430

 
3

 
0.70
%
Receivables from brokerage clients
20,584

 
230

 
4.38
%
 
 
17,478

 
160

 
3.63
%
 
 
19,870

 
830

 
4.12
%
 
 
16,269

 
575

 
3.53
%
Available for sale securities (1)
59,720

 
382

 
2.52
%
 
 
47,016

 
200

 
1.69
%
 
 
54,542

 
1,241

 
2.26
%
 
 
53,040

 
815

 
1.54
%
Held to maturity securities
138,629

 
928

 
2.66
%
 
 
115,694

 
663

 
2.27
%
 
 
131,794

 
3,348

 
2.53
%
 
 
103,599

 
2,354

 
2.27
%
Bank loans
16,649

 
149

 
3.55
%
 
 
16,378

 
125

 
3.03
%
 
 
16,554

 
559

 
3.37
%
 
 
15,919

 
472

 
2.97
%
Total interest-earning assets
268,267

 
1,879

 
2.77
%
 
 
223,893

 
1,232

 
2.18
%
 
 
252,307

 
6,538

 
2.57
%
 
 
217,713

 
4,494

 
2.06
%
Other interest revenue
 
 
35

 
 
 
 
 
 
34

 
 
 
 
 
 
142

 
 
 
 
 
 
130

 
 
Total interest-earning assets
$
268,267

 
$
1,914

 
2.82
%
 
 
$
223,893

 
$
1,266

 
2.24
%
 
 
$
252,307

 
$
6,680

 
2.63
%
 
 
$
217,713

 
$
4,624

 
2.12
%
Funding sources
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank deposits
$
217,325

 
$
206

 
0.38
%
 
 
$
165,552

 
$
50

 
0.12
%
 
 
$
199,139

 
$
545

 
0.27
%
 
 
$
163,998

 
$
148

 
0.09
%
Payables to brokerage clients
19,953

 
19

 
0.38
%
 
 
23,038

 
5

 
0.09
%
 
 
21,178

 
56

 
0.27
%
 
 
25,403

 
16

 
0.06
%
Short-term borrowings (2)
5

 

 
1.69
%
 
 
9,520

 
30

 
1.25
%
 
 
3,359

 
54

 
1.59
%
 
 
3,503

 
41

 
1.17
%
Long-term debt
6,524

 
59

 
3.59
%
 
 
3,671

 
30

 
3.24
%
 
 
5,423

 
190

 
3.50
%
 
 
3,431

 
119

 
3.47
%
Total interest-bearing liabilities
243,807

 
284

 
0.46
%
 
 
201,781

 
115

 
0.23
%
 
 
229,099

 
845

 
0.37
%
 
 
196,335

 
324

 
0.17
%
Non-interest-bearing funding sources
24,460

 
 
 
 
 
 
22,112

 
 
 
 
 
 
23,208

 
 
 
 
 
 
21,378

 
 
 
 
Other interest expense
 
 
4

 
 
 
 
 
 
4

 
 
 
 
 
 
12

 
 
 
 
 
 
18

 
 
Total funding sources
$
268,267

 
$
288

 
0.43
%
 
 
$
223,893

 
$
119

 
0.21
%
 
 
$
252,307

 
$
857

 
0.34
%
 
 
$
217,713

 
$
342

 
0.15
%
Net interest revenue
 
 
$
1,626

 
2.39
%
 
 
 
 
$
1,147

 
2.03
%
 
 
 
 
$
5,823

 
2.29
%
 
 
 
 
$
4,282

 
1.97
%
(1) Amounts have been calculated based on amortized cost.
(2) Interest expense was less than $500,000 in the period presented.


- 6 -


THE CHARLES SCHWAB CORPORATION
Asset Management and Administration Fees Information
(In millions)
(Unaudited)


 
 
Three Months Ended
December 31,
 
 
Twelve Months Ended
December 31,
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
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
 
$
137,541

 
$
117

 
0.34
%
 
 
$
162,249

 
$
200

 
0.49
%
 
 
$
141,018

 
$
568

 
0.40
%
 
 
$
160,735

 
$
875

 
0.54
%
Fee waivers
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 

 
 
 
 
 
 
(10
)
 
 
Schwab money market funds
 
137,541

 
117

 
0.34
%
 
 
162,249

 
200

 
0.49
%
 
 
141,018

 
568

 
0.40
%
 
 
160,735

 
865

 
0.54
%
Schwab equity and bond funds and ETFs
 
211,367

 
63

 
0.12
%
 
 
179,764

 
60

 
0.13
%
 
 
207,385

 
258

 
0.12
%
 
 
158,625

 
223

 
0.14
%
Mutual Fund OneSource® and other non-
transaction fee funds
 
191,620

 
156

 
0.32
%
 
 
219,157

 
178

 
0.32
%
 
 
210,429

 
680

 
0.32
%
 
 
215,333

 
706

 
0.33
%
Other third-party mutual funds and ETFs (1)
 
325,497

 
71

 
0.09
%
 
 
309,007

 
69

 
0.09
%
 
 
328,150

 
287

 
0.09
%
 
 
286,111

 
251

 
0.09
%
Total mutual funds and ETFs (2)
 
$
866,025

 
407

 
0.19
%
 
 
$
870,177

 
507

 
0.23
%
 
 
$
886,982

 
1,793

 
0.20
%
 
 
$
820,804

 
2,045

 
0.25
%
Advice solutions (2) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-based
 
$
226,184

 
280

 
0.49
%
 
 
$
216,546

 
278

 
0.51
%
 
 
$
227,790

 
1,139

 
0.50
%
 
 
$
203,794

 
1,043

 
0.51
%
Non-fee-based
 
64,085

 

 

 
 
55,368

 

 

 
 
62,813

 

 

 
 
48,936

 

 

Total advice solutions
 
$
290,269

 
280

 
0.38
%
 
 
$
271,914

 
278

 
0.41
%
 
 
$
290,603

 
1,139

 
0.39
%
 
 
$
252,730

 
1,043

 
0.41
%
Other balance-based fees (3)
 
380,193

 
59

 
0.06
%
 
 
451,310

 
66

 
0.06
%
 
 
398,495

 
250

 
0.06
%
 
 
417,659

 
258

 
0.06
%
Other (4)
 
 
 
9

 
 
 
 
 
 
12

 
 
 
 
 
 
47

 
 
 
 
 
 
46

 
 
Total asset management and administration fees
 
 
 
$
755

 
 
 
 
 
 
$
863

 
 
 
 
 
 
$
3,229

 
 
 
 
 
 
$
3,392

 
 
(1) Includes Schwab ETF OneSource.
(2) Advice solutions include managed portfolios, specialized strategies, and customized investment advice such as Schwab Private Client, Schwab Managed Portfolios, Managed Account Select®, Schwab Advisor Network®, Windhaven® Strategies, ThomasPartners® Strategies, Schwab Index Advantage® advised retirement plan balances, Schwab Intelligent Portfolios®, Institutional Intelligent Portfolios®, and Schwab Intelligent Advisory®, launched in March 2017; as well as legacy non-fee advice solutions including Schwab Advisor Source and certain retirement plan balances. Beginning the fourth quarter of 2017, a prospective change was made to add non-fee based average assets from managed portfolios. 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.
 

- 7 -


THE CHARLES SCHWAB CORPORATION
Growth in Client Assets and Accounts
(Unaudited)


 
Q4-18 % Change
 
 
2018
 
2017
 
vs.
 
vs.
 
 
Fourth
 
Third
 
Second
 
First
 
Fourth
(In billions, at quarter end, except as noted)
Q4-17
 
Q3-18
 
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
Assets in client accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Schwab One®, certain cash equivalents and bank deposits
32
%
 
9
%
 
 
$
261.2

 
$
239.5

 
$
228.2

 
$
219.4

 
$
198.6

Proprietary mutual funds (Schwab Funds® and Laudus Funds®)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (1)
(6
)%
 
19
%
 
 
153.5

 
128.5

 
134.2

 
145.0

 
163.6

Equity and bond funds (2)
(3
)%
 
(13
)%
 
 
79.9

 
91.7

 
86.6

 
83.4

 
82.5

Total proprietary mutual funds
(5
)%
 
6
%
 
 
233.4

 
220.2

 
220.8

 
228.4

 
246.1

Mutual Fund Marketplace® (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual Fund OneSource® and other non-transaction fee funds
(20
)%
 
(15
)%
 
 
180.5

 
212.6

 
212.5

 
221.6

 
225.2

Mutual fund clearing services
(38
)%
 
(10
)%
 
 
164.4

 
182.2

 
175.3

 
178.3

 
265.4

Other third-party mutual funds
(5
)%
 
(12
)%
 
 
650.4

 
740.1

 
716.1

 
693.4

 
682.6

Total Mutual Fund Marketplace
(15
)%
 
(12
)%
 
 
995.3

 
1,134.9

 
1,103.9

 
1,093.3

 
1,173.2

Total mutual fund assets
(13
)%
 
(9
)%
 
 
1,228.7

 
1,355.1

 
1,324.7

 
1,321.7

 
1,419.3

Exchange-traded funds (ETFs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proprietary ETFs (2)
16
%
 
(8
)%
 
 
115.2

 
125.2

 
114.8

 
104.5

 
99.1

Schwab ETF OneSource™ (3)
7
%
 
(8
)%
 
 
30.6

 
33.3

 
30.8

 
29.8

 
28.7

Other third-party ETFs

 
(8
)%
 
 
309.9

 
338.6

 
322.1

 
314.7

 
308.8

Total ETF assets
4
%
 
(8
)%
 
 
455.7

 
497.1

 
467.7

 
449.0

 
436.6

Equity and other securities
(6
)%
 
(15
)%
 
 
1,019.8

 
1,202.4

 
1,121.7

 
1,075.9

 
1,080.0

Fixed income securities
25
%
 
5
%
 
 
306.1

 
290.4

 
275.1

 
258.8

 
245.6

Margin loans outstanding
5
%
 
(7
)%
 
 
(19.3
)
 
(20.8
)
 
(20.4
)
 
(19.4
)
 
(18.3
)
Total client assets
(3
)%
 
(9
)%
 
 
$
3,252.2

 
$
3,563.7

 
$
3,397.0

 
$
3,305.4

 
$
3,361.8

Client assets by business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investor Services
(6
)%
 
(9
)%
 
 
$
1,701.7

 
$
1,876.9

 
$
1,784.8

 
$
1,740.8

 
$
1,810.9

Advisor Services

 
(8
)%
 
 
1,550.5

 
1,686.8

 
1,612.2

 
1,564.6

 
1,550.9

Total client assets
(3
)%
 
(9
)%
 
 
$
3,252.2

 
$
3,563.7

 
$
3,397.0

 
$
3,305.4

 
$
3,361.8

Net growth in assets in client accounts (for the quarter ended)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net new assets by business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investor Services (4)
(38
)%
 
3
%
 
 
$
28.7

 
$
27.8

 
$
13.7

 
$
(50.8
)
 
$
46.4

Advisor Services
(16
)%
 
4
%
 
 
26.6

 
25.7

 
30.2

 
32.0

 
31.7

Total net new assets
(29
)%
 
3
%
 
 
$
55.3

 
$
53.5

 
$
43.9

 
$
(18.8
)
 
$
78.1

Net market (losses) gains
N/M

 
N/M

 
 
(366.8
)
 
113.2

 
47.7

 
(37.6
)
 
102.5

Net (decline) growth
N/M

 
N/M

 
 
$
(311.5
)
 
$
166.7

 
$
91.6

 
$
(56.4
)
 
$
180.6

New brokerage accounts (in thousands, for the quarter ended)
(2
)%
 
3
%
 
 
380

 
369

 
384

 
443

 
386

Client Accounts (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Active Brokerage Accounts (5)
8
%
 
1
%
 
 
11,593

 
11,423

 
11,202

 
11,005

 
10,755

Banking Accounts
9
%
 
1
%
 
 
1,302

 
1,283

 
1,250

 
1,221

 
1,197

Corporate Retirement Plan Participants
6
%
 
2
%
 
 
1,655

 
1,627

 
1,599

 
1,594

 
1,568

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1) Total client assets in purchased money market funds are located at: http://www.aboutschwab.com/investor-relations.
(2) Includes proprietary equity and bond funds and ETFs held on and off the Schwab platform. As of December 31, 2018, off-platform equity and bond funds and ETFs were $10.4 billion and $30.1 billion, respectively.
(3) Excludes all proprietary mutual funds and ETFs.
(4) Second quarter of 2018 includes outflows of $9.5 billion from certain mutual fund clearing services clients. First quarter of 2018 includes outflows of $84.4 billion from certain mutual fund clearing services clients. Fourth quarter of 2017 includes an inflow of $16.2 billion from a mutual fund clearing services client.
(5) In September 2018, the definition of active brokerage accounts was standardized across all account types as accounts with activity within the preceding 270 days. This change increased active accounts by approximately 63,000.
N/M Not meaningful.



- 8 -


The Charles Schwab Corporation Monthly Activity Report For December 2018
 
2017
2018
 
 
 
 
 
 
 
 
 
 
 
Change
 
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Mo.
Yr.
Market Indices (at month end)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dow Jones Industrial Average
24,719

26,149

25,029

24,103

24,163

24,416

24,271

25,415

25,965

26,458

25,116

25,538

23,327

(9
)%
(6
)%
Nasdaq Composite
6,903

7,411

7,273

7,063

7,066

7,442

7,510

7,672

8,110

8,046

7,306

7,331

6,635

(9
)%
(4
)%
Standard & Poor’s 500
2,674

2,824

2,714

2,641

2,648

2,705

2,718

2,816

2,902

2,914

2,712

2,760

2,507

(9
)%
(6
)%
Client Assets (in billions of dollars) (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Client Assets
3,318.8

3,361.8

3,480.5

3,328.8

3,305.4

3,312.1

3,378.1

3,397.0

3,447.9

3,555.9

3,563.7

3,388.1

3,431.9

 
 
Net New Assets (1)
27.0

11.5

(50.5
)
20.2

0.4

19.4

24.1

16.3

20.8

16.4

14.9

15.6

24.8

59
%
(8
)%
Net Market Gains (Losses)
16.0

107.2

(101.2
)
(43.6
)
6.3

46.6

(5.2
)
64.6

57.2

(8.6
)
(190.5
)
28.2

(204.5
)
 
 
Total Client Assets (at month end)
3,361.8

3,480.5

3,328.8

3,305.4

3,312.1

3,378.1

3,397.0

3,477.9

3,555.9

3,563.7

3,388.1

3,431.9

3,252.2

(5
)%
(3
)%
Core Net New Assets (2)
27.0

18.7

21.3

25.6

9.9

19.4

24.1

16.3

20.8

16.4

14.9

15.6

24.8

59
%
(8
)%
Receiving Ongoing Advisory Services (at month end)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investor Services
268.7

278.6

273.0

273.2

274.7

279.1

280.0

287.0

292.0

292.7

280.3

284.7

272.4

(4
)%
1
%
Advisor Services (3)
1,431.1

1,483.7

1,449.5

1,444.4

1,451.6

1,478.0

1,488.7

1,525.5

1,555.3

1,559.2

1,485.8

1,510.1

1,436.1

(5
)%

Client Accounts (at month end, in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Active Brokerage Accounts (4)
10,755

10,858

10,936

11,005

11,081

11,145

11,202

11,243

11,310

11,423

11,479

11,529

11,593

1
%
8
%
Banking Accounts
1,197

1,210

1,218

1,221

1,230

1,240

1,250

1,262

1,274

1,283

1,289

1,297

1,302


9
%
Corporate Retirement Plan Participants
1,568

1,580

1,580

1,594

1,599

1,599

1,599

1,611

1,621

1,627

1,634

1,639

1,655

1
%
6
%
Client Activity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Brokerage Accounts (in thousands)
147

165

138

140

141

122

121

118

132

119

133

115

132

15
%
(10
)%
Inbound Calls (in thousands)
2,046

2,303

2,005

2,145

2,034

1,852

1,814

1,849

1,964

1,715

1,976

1,681

1,839

9
%
(10
)%
Web Logins (in thousands)
54,486

64,488

60,830

58,906

55,980

56,234

56,491

57,137

62,797

53,923

59,261

54,654

53,920

(1
)%
(1
)%
Client Cash as a Percentage of Client Assets (5)
10.8
%
10.4
%
10.9
%
11.0
%
10.9
%
10.6
%
10.7
%
10.5
%
10.4
%
10.3
%
11.1
%
11.2
%
12.8
%
160 bp
200 bp
Mutual Fund and Exchange-Traded Fund
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Buys (Sells) (6, 7) (in millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Large Capitalization Stock
1,023

496

715

(158
)
410

953

981

486

918

311

308

331

717

 
 
Small / Mid Capitalization Stock
274

(125
)
(167
)
130

359

753

1,195

768

(186
)
151

(1,344
)
(456
)
(1,414
)
 
 
International
1,852

4,306

2,685

1,546

809

372

(498
)
(529
)
186

(88
)
(109
)
(418
)
(2,163
)
 
 
Specialized
424

1,569

187

326

122

(19
)
383

520

(245
)
73

(914
)
(397
)
(2,105
)
 
 
Hybrid
307

978

(88
)
529

(541
)
(241
)
(288
)
(548
)
(678
)
(324
)
(1,313
)
(1,248
)
(2,985
)
 
 
Taxable Bond
2,561

3,284

155

2,117

1,661

1,002

928

879

965

1,371

(351
)
(836
)
(4,342
)
 
 
Tax-Free Bond
341

1,247

211

247

(113
)
449

588

306

559

262

(591
)
(407
)
(409
)
 
 
Net Buy (Sell) Activity (in millions of dollars)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mutual Funds (6)
775

4,843

(417
)
1,976

(36
)
(88
)
555

(522
)
(1,936
)
(1,538
)
(5,734
)
(7,955
)
(21,372
)
 
 
Exchange-Traded Funds (7)
6,007

6,912

4,115

2,761

2,743

3,357

2,734

2,404

3,455

3,294

1,420

4,524

8,671

 
 
Money Market Funds
2,968

(5,730
)
(4,292
)
(9,100
)
(4,156
)
(2,245
)
(4,919
)
(4,801
)
704

(1,933
)
2,546

8,515

13,548

 
 
Average Interest-Earning Assets (8)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in millions of dollars)
228,540
234,619
239,922
241,049
239,833
242,584
249,432
254,211
259,137
261,741
264,156
265,648
274,913

3
%
20
%
 
(1) April, March, February, and January 2018 include outflows of $9.5 billion, $5.4 billion, $71.8 billion, and $7.2 billion, respectively, from certain mutual fund clearing services clients.
(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) In September 2018, the definition of active brokerage accounts was standardized across all account types as accounts with activity within the preceding 270 days. This change increased active accounts by approximately 63,000.
(5) Schwab One®, certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets.
(6) 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.
(7) Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
(8) Represents average total interest-earning assets on the company’s balance sheet.

- 9 -