Charles Schwab Corp posts record net income for Q3 2021
The Charles Schwab Corporation (NYSE:SCHW) today posted its financial results for the third quarter of 2021.
Net income for the third quarter of 2021 was a record $1.5 billion compared with $1.3 billion for the second quarter of 2021, and $698 million for the third quarter of 2020. Net income for the nine months ended September 30, 2021 was $4.3 billion, compared with $2.2 billion for the year-earlier period.
The company’s financial results include TD Ameritrade from October 6, 2020 forward, as well as certain acquisition and integration-related costs and the amortization of acquired intangibles. For the third quarter and first nine months of 2021, these transaction-related expenses totaled $257 million and $828 million, respectively, on a pre-tax basis.
In addition, the company’s results for the first nine months of 2021 included a non-deductible charge of approximately $200 million regarding a previously disclosed regulatory matter.
CEO Walt Bettinger noted that investors consistently turned to Schwab as a trusted financial partner, opening over a million new brokerage accounts for the fourth consecutive quarter – bringing year-to-date new brokerage accounts to 6.0 million.
Schwab generated core net new assets of $139.0 billion in the quarter, pushing asset gathering for the first nine months of the year to $396.0 billion, representing an 8% annualized organic growth rate. Total client assets ended September at $7.61 trillion, up from $6.69 trillion at year-end 2020.
In addition, while the third quarter is often viewed as a slower period for client activity, engagement levels showed persistent strength through the summer months – daily average trade volumes softened only modestly versus the prior quarter to 5.5 million.
Mr. Bettinger continued,
“Additionally, investor interest in low-cost investing solutions elevated our Schwab-managed ETFs to a record $251.6 billion in assets, up 49% year-over-year. Retail clients also sought out our help and guidance; over $437 billion of assets were enrolled in one of our advisory offerings at month-end September, representing an increase of 24% from a year ago”.
“I am incredibly proud of all the great work our team of talented employees have poured into serving our clients and each other this year and throughout the pandemic,” Mr. Bettinger concluded.
“Their unwavering focus has kept the TD Ameritrade integration on track, helped advance our other key strategic initiatives, and yielded outstanding operating and financial performance for our company. As such, we rewarded them by implementing a special 5% pay increase, effective at the end of September”.
CFO Peter Crawford said that net interest revenue grew 4% versus the second quarter of 2021, driven by further expansion of Schwab’s interest-earning asset base, including strength in lending activity and rising investment portfolio balances. This expansion more than offset a decline in securities lending revenue as well as a lower average yield on outstanding margin loans.
Asset management and administration fees increased 5% sequentially, driven by rising balances in both proprietary and third-party mutual fund and ETF offerings and advisory solutions. Trading revenue edged up 1% as a higher proportion of derivatives bolstered revenue per trade in the third quarter, offsetting the impact of an 8% slowdown in activity overall.
Mr. Crawford concluded, “As we navigated the third quarter’s mixed macroeconomic environment, we worked to further enhance our liquidity position and streamline our capital structure. In August, we issued $850 million in long-term senior notes, marking our third debt issuance in 2021.
We also completed a tender offer to exchange nearly $2 billion of TD Ameritrade Holding Corporation debt for an equal amount of equivalent Charles Schwab Corporation debt. Both organic client activity and the previously announced bank deposit account migrations helped our consolidated balance sheet reach $607.5 billion as of September 30, and the company’s preliminary Tier 1 Leverage Ratio was 6.3%.”