Charles Schwab (SCHW) Q2 2024 earnings summary

Strategic progress and integration

• Completed Ameritrade client transition, moving nearly $2 trillion in assets and 17 million accounts, with lower-than-expected attrition and improved client satisfaction; promoter scores rose by 50 points for retail and 35 points for advisors post-conversion.

• Organic growth rate is accelerating as Ameritrade-related attrition moderates, with strong client engagement and successful completion of the final Ameritrade client conversion.

• Integration has driven scale and efficiency, reducing cost per client account by 25% over the past decade, with remaining 10% of expense synergies from the Ameritrade acquisition expected by year-end.

• Over 2 million new brokerage accounts opened year-to-date, with nearly 1 million in Q2 and 56%-60% of new clients under age 40.

• Former Ameritrade clients are now contributing positively to net new assets, though still below target growth rates.

Financial performance and outlook

• Q2 2024 net income was $1.3 billion ($0.66 per diluted share), with adjusted net income at $1.5 billion ($0.73 per share); total net revenues rose 1% year-over-year to $4.7 billion, driven by record asset management fees.

• Adjusted pre-tax margin reached 41%, with GAAP margin at 37.2%; return on average common stockholders’ equity was 14%.

• Net new assets year-to-date exceeded $150 billion, with Q2 asset gathering up 17% from last year and total client assets reaching $9.41 trillion.

• Full-year revenue expected to be flat to up 2% versus 2023; adjusted expenses to rise about 2%, half due to one-time items; adjusted quarterly earnings for Q4 2024 expected to track toward the middle of the $0.80–$0.90 range.

• Net interest margin projected to reach mid-2.20s in Q4 2024 and approach 3% by end of 2025, assuming a Fed rate cut in September.

Banking and balance sheet strategy

• Committed to offering lending services, including mortgages, HELOCs, and pledged asset lines, to deepen client relationships.

• Plans to gradually shift some deposits to third-party banks to lower capital intensity and improve liquidity, with changes expected over years.

• Bank size will be somewhat smaller over time, but will maintain ability to meet client needs and protect economics.

• Supplemental borrowing increased to $73.7 billion to support higher margin lending, with some paydown expected using liquidity.

• Securities portfolio expected to generate $10-11 billion in cash flows per quarter, declining as portfolio shrinks.