Charles Schwab (SCHW) Q4 2023 earnings summary

Executive summary

• 2023 client engagement remained strong; core net new assets were $333B, with 6.4% organic core NNA growth.

• ~90% of Ameritrade client assets and accounts had transitioned by year-end; the final cohort was scheduled for May 2024.

Financial highlights

• FY 2023 net revenue was $18.8B: 50% net interest revenue, 25% asset management and administrative fees, 17% trading, and 8% other and bank deposit account revenue.

• FY 2023 GAAP expenses were $12.5B and adjusted expenses $11.0B; GAAP and adjusted pre-tax margins were 33.9% and 41.5%, respectively.

• FY 2023 GAAP net income was $5.067B; adjusted net income was $7.934B.

• GAAP expenses included $495M in one-time restructuring charges related to incremental expense savings.

Outlook and guidance

• 2024 is expected to be a financial transition year; expenses are expected to remain roughly flat while investments support long-term growth and efficiency.

• 4Q24 NIM could reach 2.25%-2.65% under illustrative assumptions; NIM is expected to approach 3.00% before end-2025 as cash realignment decelerates and supplemental funding is repaid.

• Adjusted quarterly earnings power is projected at $0.80-$0.90 exiting 2024, with meaningful sequential growth through 2025.

• Consolidated adjusted Tier 1 leverage is expected to exceed 6.5% before end-2024; long-term targets include 5%-7% annualized NNA growth and 50%+ pre-tax margin.

• Long-term capital return framework targets a 20%-30% dividend payout ratio plus opportunistic buybacks.