Charles Schwab(SCHW)2025-01-21 16:54Industry/Company * Company: The Charles Schwab Corporation (NYSE: SCHW) * Industry: Investment Banking, Financial Services Core Points and Arguments * 2024 Q3 Results: Schwab reported strong financial results for the third quarter of 2024, with revenue up 5% year-over-year to 0.77. * Client Growth: Schwab experienced strong client growth, with net new assets more than doubling from the third quarter of 2023. Former Ameritrade clients continued to contribute positively to net new assets. * Strategic Focus Areas: Schwab outlined four strategic focus areas: Scale & Efficiency, Win-Win Monetization, Client Segmentation, and the Brilliant Basics. Progress was made in each area during the third quarter. * Cost Efficiency: Schwab captured 95% of its Ameritrade run rate expense synergies and expects to capture the rest by the end of the year. Adjusted expense on client assets (EOCA) fell to 12 basis points in 2024, down from 16 in 2019. * Wealth Management: Schwab saw strong growth in managed investing net flows, with year-to-date managed investing net flows up 65% compared to last year. Clients added 15.7 billion, an increase of 16% over last year. Former Ameritrade clients represented 44% of PAL balance growth. * RIA Services: Schwab continues to invest in its custody business for RIAs, providing them with an open architecture platform and unmatched resources, services, and education. * Client Experience: Schwab focused on improving the client experience, with average speed to answer the phone less than 40 seconds in the third quarter and client easy scores for service teams at 92%. * Capital Levels: Schwab's adjusted Tier 1 Leverage ratio expanded by over 70 basis points to 6.7% in the third quarter, approaching its 6.75% to 7% operating objective. Other Important Points * Transition: Walt Bettinger, Co-Chairman and CEO, will transition into his new role as Executive Co-Chairman, and Rick Wurster will assume the role of CEO in January 2025. * CFO Transition: Mike Verdeschi joined Schwab as CFO in May 2024 and provided an update on the company's financial performance and outlook. * Securities Portfolio: Schwab does not plan to pursue a holistic restructuring of its securities portfolio at this time, as it focuses on paying down supplemental funding at the banks. * Capital Allocation: Schwab's capital allocation strategy will focus on supporting business growth, paying down supplemental borrowings, and returning capital to shareholders through various means, including dividends, preferred security redemptions, and stock buybacks. * 2025 Outlook: Schwab expects to continue building momentum in 2025, with revenue growth in the mid-single digits and adjusted EPS in the upper 80s range. The company remains confident in its ability to deliver profitable growth and return capital to shareholders.