Overview

The Charles Schwab Corporation (Schwab) continued its strong performance in 2024, navigating an evolving macroeconomic landscape. Despite some challenges, Schwab remained focused on its “Through Clients’ Eyes” strategy, driving growth across multiple fronts and successfully completing the integration of Ameritrade.

Financial Highlights

• Total client assets reached a record $10.10 trillion as of year-end 2024, up 19% from 2023. Core net new assets totaled $366.9 billion in 2024, up 20% from the prior year.
• Net income totaled $5.9 billion in 2024, up 17% year-over-year, and diluted EPS was $2.99, an increase of 18%. Adjusted diluted EPS was $3.25, up 4% from 2023.
• Total net revenues rose 4% year-over-year to $19.6 billion in 2024. Net interest revenue decreased 3% to $9.1 billion, while asset management and administration fees increased 20% to $5.7 billion.
• Total expenses excluding interest were $11.9 billion in 2024, down 4% from 2023, reflecting lower restructuring and integration costs.
• Return on average common stockholders’ equity was 15% in 2024, down from 16% in 2023, while return on tangible common equity was 35%, down from 54%.

Segment Performance

• Investor Services total net revenues increased 6% in 2024, driven by growth in net interest revenue, trading revenue, and asset management fees.
• Advisor Services total net revenues decreased 3% in 2024, primarily due to lower net interest revenue and trading revenue, partially offset by higher asset management fees.

Integration of Ameritrade

Schwab successfully completed the integration of Ameritrade in May 2024, converting approximately $1.9 trillion in client assets across more than 17 million client accounts. The integration resulted in $2.0 billion in annualized run-rate cost synergies.

Risk Management

Schwab maintains a comprehensive risk management program to identify and manage operational, compliance, credit, market, and liquidity risks. Key aspects include:

• Operational risk management through policies, procedures, and controls to address issues such as cybersecurity, fraud, and third-party risk.
• Compliance risk management through policies and procedures to ensure adherence to legal and regulatory requirements.
• Credit risk management in the investment, lending, and counterparty portfolios through underwriting guidelines, collateral requirements, and monitoring.
• Market risk management, including interest rate risk, through asset-liability management, derivative hedging, and sensitivity analyses.
• Liquidity risk management through policies, stress testing, and diversified funding sources, including FHLB borrowings and repurchase agreements.

Outlook

Schwab expects total expenses excluding interest in 2025 to increase approximately 3.5% to 4.5% from 2024, and adjusted total expenses to increase approximately 4.5% to 5.5%. The Company remains focused on executing its “Through Clients’ Eyes” strategy, driving growth, and maintaining a strong risk management culture.

Analysis

Schwab’s 2024 financial performance demonstrates the strength and resilience of its business model. Despite a challenging macroeconomic environment, the company continued to attract new client assets, grow its revenue streams, and effectively manage expenses.

The increase in total client assets, driven by both market gains and strong net new asset inflows, highlights Schwab’s ability to capitalize on client demand and maintain its position as a leading provider of financial services. The growth in asset management and administration fees, particularly in money market funds and managed investing solutions, reflects Schwab’s success in meeting client needs for yield and professional investment management.

While net interest revenue declined due to higher funding costs and lower interest-earning assets, Schwab’s proactive management of its balance sheet and use of interest rate hedging strategies helped mitigate the impact. The company’s focus on expense discipline, including through the successful integration of Ameritrade, enabled it to offset some of the pressure on net interest revenue.

Schwab’s segment performance reflects the diversification of its business model. The Investor Services segment, which serves individual investors, continued to drive growth, while the Advisor Services segment, which serves independent investment advisors, faced some headwinds due to the interest rate environment.

The completion of the Ameritrade integration is a significant milestone, allowing Schwab to fully realize the benefits of the acquisition and enhance its competitive position. The realization of $2.0 billion in annualized cost synergies demonstrates Schwab’s ability to effectively integrate and optimize its operations.

Schwab’s comprehensive risk management framework is a key strength, enabling the company to identify, assess, and mitigate a wide range of risks. The focus on operational, compliance, credit, market, and liquidity risk management helps ensure the company’s long-term sustainability and resilience.

Looking ahead, Schwab’s guidance for moderate expense growth in 2025 suggests the company is well-positioned to continue investing in its business while maintaining disciplined cost management. The company’s commitment to its “Through Clients’ Eyes” strategy and its strong risk management culture provide a solid foundation for future growth and success.

Overall, Schwab’s 2024 financial performance and strategic execution demonstrate the company’s ability to navigate a dynamic market environment, meet the evolving needs of its diverse client base, and deliver value to shareholders.