Gathered $428 Billion in Annual Core Net New Assets; Added More Than 4 Million New Accounts

2022 Revenues Grew 12% to $20.8 Billion; Earnings per Share Increased to $3.50, $3.90 Adjusted (1)

    WESTLAKE, Texas, January 18, 2023 – The Charles Schwab Corporation announced today that its net income for the fourth quarter of 2022 was $2.0 billion, up 25% from $1.6 billion for the fourth quarter 2021. Net income for the twelve months ended December 31, 2022 was a record $7.2 billion, an increase of 23% versus the prior year.

Co-Chairman and CEO Walt Bettinger said, “Our consistent “Through Clients’ Eyes” strategy helped us continue to succeed with clients even as they faced a very difficult environment in 2022. Emerging concerns around inflation and global market stability became reality, with Russia’s invasion of Ukraine exacerbating the impact. Equity markets suffered their worst year since 2008, led by the S&P 500® and NASDAQ Composite® which contracted 19% and 33%, respectively. At the same time, the Federal Reserve tightened short-term rates at the fastest pace in 40 years – pushing the Fed Funds upper bound to 4.50% in December. Additionally, uncertainty around future economic growth increased during the back half of the year, weighing on longer-term rates and leading to an inverted yield curve. This shift reflected the persistent bearish sentiment amongst investors for most of the year – with certain indicators hitting levels below those observed during the 2008 Financial Crisis.”

Mr. Bettinger continued, “Against this challenging backdrop, investors looked to Schwab for help achieving their financial goals. Both of our primary businesses contributed to core net new assets of $428 billion, a full-year organic growth rate of 5%, which included record tax-related outflows in April. Total client assets ended the year at $7.05 trillion, as the company’s asset gathering was offset by $1.5 trillion in lower market values over the past 12 months. In addition, we also added over 4 million new brokerage accounts, pushing total accounts to nearly 34 million by December 31. Momentum within the retail channel was particularly strong in 2022, achieving record core inflows during 6 separate months. Similarly, Advisor Services attracted over 350 transitioning advisor teams, the second highest number ever, and recorded a transfer of account ratio of approximately 2-to-1 for the fifth consecutive year.”

“Through the relentless efforts of our dedicated employees, we made significant progress on our key strategic initiatives of scale and efficiency, win-win monetization, and segmentation,” Mr. Bettinger added. “This work included ongoing preparations for the largest broker-dealer integration in our industry’s history – with the first wave of client conversions scheduled to begin next month. Throughout 2022, we also took meaningful steps to further empower investors with more personalization options, increased access to high-quality products, and an evolved suite of tools and solutions. We launched our proprietary direct indexing offering, Schwab Personalized IndexingTM (SPI), for both registered investment advisors (RIAs) and retail clients – providing them with tax-efficient, customizable portfolio management capabilities at a much lower cost than existing alternatives in the market. Additionally, we introduced our initial thematic stock lists, which assist self-directed clients in selecting stocks aligned with their personal perspectives and values. The current range of themes spans over 40 different categories, including environmental innovation, artificial intelligence, and medical breakthroughs. We also further bolstered our leading value proposition to RIAs by expanding our institutional no transaction fee mutual fund platform to include over 900 additional equity and bond funds across 16 leading third-party asset managers. Finally, Schwab’s wealth management capabilities continued to evolve with the needs of our clients, including a growing interest in fixed income. Client allocations to this asset class increased 66% versus December 2021 as they took advantage of our self-directed tools and income-focused advisory solutions such as Wasmer SchroederTM Strategies. The Wasmer team’s ability to deliver an attractive value proposition across a range of tax-exempt and taxable offers, along with rising interest rates, helped these strategies collect $7.3 billion in net flows since becoming part of Schwab in July 2020 – including $3.5 billion in 2022.”

Mr. Bettinger concluded, “Our focus on meeting the needs of individual investors and the advisors who serve them remains steadfast across any environment. This commitment to consistency of mission, service, and experience sets us apart, helping to drive our strong performance and keeping us positioned as one of the most trusted names in financial services. While we are proud of the firm’s success thus far, we believe there is tremendous opportunity still ahead of us and we are excited to keep striving to deliver value for all of our key stakeholders – clients, employees, and owners.”

CFO Peter Crawford commented, “Schwab’s record financial performance in 2022 highlighted the resiliency of our diversified financial model. Sustained business momentum through an uneven macroeconomic environment helped drive 12% growth in total net revenues. Net interest revenue reached $10.7 billion, an increase of 33% versus the prior year, as higher interest rates more than offset the impact of balance sheet contraction due to client cash sorting. Lower market valuations throughout the year pushed asset management and administration fees down slightly to $4.2 billion, or 1% year-over-year. Trading revenue declined by 12% to $3.7 billion as daily average trades subsided from 2021’s unprecedented levels to just under 6 million for the full year. Transitioning to expenses, our total GAAP spending grew 5% to $11.4 billion, reflecting client engagement and growth, as well as the 12-month impact of the broad employee salary increase that went into effect at the end of 2021. Acquisition and integration-related costs and amortization of acquired intangibles were $392 million and $596 million, respectively. Exclusive of these items, adjusted total expenses (1) were up 7% year-over-year. Strong revenue growth and balanced expense management enabled us to deliver a 45.2% pre-tax profit margin for the full year – 50.0% on an adjusted basis (1) .”

“Over the course of the year, our approach to balance sheet management prioritized flexibility to help navigate through a dynamic environment,” Mr. Crawford added. “As rates rose from the ultra-low levels observed during the most recent period of the Federal Reserve’s Zero Interest-rate Policy, clients allocated a growing portion of their assets to higher yielding cash and fixed income alternatives. As a result of this expected sorting activity, the balance sheet shrank by $115 billion, a decline of 17% versus December 31, 2021. To facilitate these movements, we took steps to further bolster liquidity by limiting new portfolio investments to help build available cash and utilizing a limited amount of short-term funding sources such as Federal Home Loan Bank Advances and retail certificates of deposit. At the same time, the combination of Schwab’s enhanced earnings power and lower capital intensity enabled us to accelerate the pace of capital return to our owners.

Following the authorization of a $15 billion buyback program in July, we have repurchased an aggregate of 47 million shares for $3.4 billion in 2022. During the year, we also redeemed $1 billion of preferred equity and increased our common dividend by 22%. Inclusive of these actions, the company’s preliminary Tier 1 Leverage Ratio finished the year at 7.2%, above our stated operating objective of 6.50% – 6.75%.”

Mr. Crawford concluded, “Although 2022 unfolded much differently than we and many others anticipated at the start of the year, Schwab’s unwavering focus on serving clients, along with our all-weather business model, delivered another year of record financial performance. We believe the core tenets of the company’s financial formula remain firmly intact. The combination of strong business momentum, diversified revenue growth, expense discipline, and attentive capital management supports our long-term growth plus capital return story.”

(1) Further details on non-GAAP financial measures and a reconciliation of such measures to GAAP reported results are included on pages 11-12 of this release.

Peter Crawford, Managing Director and Chief Financial Officer, provides additional perspective on our fourth quarter and full-year 2022 financial results at: https://www.aboutschwab.com/cfo-commentary.

The company has scheduled a Winter Business Update for institutional investors on Friday, January 27, 2023. The Update is scheduled to run from approximately 8:00 a.m. - 1:00 p.m. CT, 9:00 a.m. - 2p.m. ET. Registration for this Update is accessible at https://www.aboutschwab.com/schwabevents.

This press release contains forward-looking statements relating to success with clients; strategic initiatives; TD Ameritrade integration; opportunity; stakeholder value; earnings power; capital needs and management; returning capital to stockholders; Tier 1 Leverage Ratio operating objective; all-weather business model; business momentum; revenue growth; and expense discipline. 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; monetize client assets; and manage expenses. 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.

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with 33.8 million active brokerage accounts, 2.4 million corporate retirement plan participants, 1.7 million banking accounts, and $7.05 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

(In millions, except per share amounts)

(Unaudited)

(1) No fee waivers were recognized for the three months ended December 31, 2022. Includes fee waivers of $57 million for the twelve months ended December 31, 2022, and $80 million and $326 million for the three and twelve months ended months ended December 31, 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.

        

(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 and November 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 September 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.

(Unaudited)

(1) Amounts have been calculated based on amortized cost.

(2) In January and November 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 September 30, 2022.

(Unaudited)

(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.

(Unaudited)

(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 December 31, 2022, off-platform equity and bond funds, CTFs, and ETFs were $23.6 billion, $4.9 billion, and $98.2 billion, respectively.

(3) Excludes all proprietary mutual funds and ETFs.

(4) As of December 31, 2022, third-party money funds were $3.2 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) Fourth quarter of 2022 includes the company-initiated closure of approximately 350 thousand low-balance accounts. Third quarter of 2022 includes the company-initiated closure of approximately 152 thousand low-balance accounts.

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.

(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) November 2022 includes the company-initiated closure of approximately 350 thousand low-balance accounts. September 2022 includes the company-initiated closure of 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. November 2022 includes the impact of transferring certain investment securities from the available for sale category to the held-to-maturity category.

(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.

In addition to disclosing financial results in accordance with generally accepted accounting principles in the U.S. (GAAP), Schwab’s fourth 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.

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 tables below present reconciliations of GAAP measures to non-GAAP measures:

(1) Acquisition and integration-related costs for the three and twelve months ended December 31, 2022 primarily consist of $54 million and $220 million of compensation and benefits, $38 million and $140 million of professional services, and $7 million and $21 million of occupancy and equipment. Acquisition and integration-related costs for the three and twelve months ended December 31, 2021 primarily consist of $56 million and $283 million of compensation and benefits, $33 million and $132 million of professional services, and $9 million and $39 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 December 31,									Twelve Months Ended December 31,
			2022			2021						2022			2021
Return on average common stockholders’ equity (GAAP)			27		%	12		%				18		%	11		%
Average common stockholders’ equity			$	26,823		$	46,898					$	36,605		$	47,318
Less: Average goodwill			(11,951)			(11,952)						(11,952)			(11,952)
Less: Average acquired intangible assets — net			(8,856)			(9,456)						(9,084)			(9,685)
Plus: Average deferred tax liabilities related to goodwill and acquired intangible assets — net			1,842			1,889						1,870			1,919
Average tangible common equity			$	7,858		$	27,379					$	17,439		$	27,600
Adjusted net income available to common stockholders (1)			$	2,004		$	1,644					$	7,386		$	6,175
Return on tangible common equity (non-GAAP)			102		%	24		%				42		%	22		%

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