Schwab (SCHW) Slides on Disappointing Q2 Earnings & NIM View

Core Viewpoint - Shares of Charles Schwab (SCHW) fell 4.6% following a disappointing management outlook for Q2 2024, with adjusted earnings not expected to grow sequentially and modest net interest margin expansion anticipated [1] Financial Performance - For Q1 2024, Schwab reported adjusted earnings of 74 cents per share, below the guidance of 80-90 cents, primarily due to higher funding costs and lower trading revenues [1] - The company projects full-year 2024 adjusted earnings growth at the upper end of the 20-30% range, with 2023 adjusted earnings per share at $3.13, driven by manageable expense growth of approximately 2% and a slowdown in client cash realignment activities [1] Integration and Client Transition - Schwab completed the final round of client account transitions from TD Ameritrade (TDA) on May 13, marking the end of a significant integration process [2] - The company aims to finish remaining integration-related tasks by the end of the year, including decommissioning systems and achieving nearly 20% of the $1.8-$2 billion expense synergy target [2] - Client attrition from TDA is trending below initial projections of 5-6%, with an estimated $500 billion asset capture opportunity by introducing TDA clients to Schwab's broader capabilities [2] Growth Projections - Schwab maintains a long-term growth trajectory of 5-7% in net new assets (NNA), with expectations of 3-5% growth from existing clients and 2-3% from new clients [3] - The company started 2024 positively, gathering approximately $100 billion in core NNA through Q1 [3] - Growth in lending is anticipated with the introduction of a mortgage product and pledged asset line, expecting solid growth as interest rates fall [3] Stock Performance - Over the past year, Schwab's shares have increased by 44.5%, outperforming the industry's growth of 42.5% [3]