Schwab Reports Record Quarterly Net Income of $575 Million, up 27%

Business Wire 18-Jul-2017 8:53 AM

Revenues Grow 17% Year-Over-Year to a Record $2.1 Billion

Core Net New Assets Total $46.2 Billion and Total Client Assets Reach a Record $3.04 Trillion

SAN FRANCISCO--(BUSINESS WIRE)-- The Charles Schwab Corporation announced today that its net income for the second quarter of 2017 was a record $575 million, up 2% from $564 million for the prior quarter, and up 27% from $452 million for the second quarter of 2016. Net income for the six months ended June 30, 2017 was $1.1 billion, up 32% from the year-earlier period.

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Three Months EndedJune 30,

%

Six Months EndedJune 30,

%
Financial Highlights 2017 2016 Change 2017 2016 Change
Net revenues (in millions) $ 2,130 $ 1,828 17% $ 4,211 $ 3,592 17%
Net income (in millions) $ 575 $ 452 27% $ 1,139 $ 864 32%
Diluted earnings per common share $ .39 $ .30 30% $ .78 $ .60 30%
Pre-tax profit margin 42.7 % 39.4 % 41.6 % 38.3 %

Return on average common stockholders equity (annualized)

15 % 13 % 15 % 13 %
Note: All per-share results are rounded to the nearest cent, based on weighted-average diluted common shares outstanding. Effective January 1, 2017, a new accounting standard prospectively changes the treatment of a portion of the tax deductions relating to equity compensation. These deductions were previously reflected in additional paid-in capital, a component of stockholders equity, and are now included in taxes on income, a component of net income. The companys tax expense for the second quarter and first half of 2017 decreased by approximately $5 million and $36 million, respectively, as a result of this change. Future effects will depend on the companys share price, restricted stock vesting, and the volume of equity incentive options exercised.

CEO Walt Bettinger said, Strong client engagement and demand for our contemporary approach to wealth management have led to business momentum that ranks among the most powerful in Schwabs history. Equity markets touched all-time highs during the second quarter, volatility remained largely contained, short-term interest rates rose further, and clients benefited from the full extent of the strategic pricing moves we announced in February. Against this backdrop, clients opened more than 350,000 new brokerage accounts during the second quarter, bringing year-to-date new accounts to 719,000 up 34% from a year ago and our strongest first half total in seventeen years. In addition, households new to Schwab as part of our Retail business rose by 50% versus the first half of 2016. We gathered $46.2 billion of core net new assets during the second quarter, a record for the period and the second-highest quarter ever. Our year-to-date core net new assets of $85.1 billion represent the strongest first half in the companys history and a 6% organic growth rate. Retail gathered record levels of core net new assets in the first six months of 2017, posting a 69% increase over the year-earlier period. Concurrently, Advisor Services attracted near-record core inflows and achieved a 77% year-over-year increase. Our impressive results were helped by an 86% year-over-year lift in net transfers of client assets from our competitors for the first half of 2017, demonstrating our ability to win in the marketplace. Total client assets reached a record $3.04 trillion at month-end June, up 16% year-over-year. We ended June serving 10.5 million active brokerage accounts, 1.1 million banking accounts, and 1.5 million retirement plan participants.

Mr. Bettinger continued, We believe that following our Through Clients Eyes strategy means bringing investors the capabilities they expect to help build their financial futures, and weve continued to see more clients turn to us for help in setting and tracking long-term goals. Our financial consultants held planning conversations with approximately 73,000 clients in the first six months of 2017, up 9% year-over-year. Client balances receiving ongoing advisory services rose 17% year-over-year, faster than overall client asset growth. These advised balances totaled a record $1.54 trillion at quarter-end, with $1.30 trillion under the guidance of a registered investment advisor and $242 billion enrolled in one of our retail or other advisory solutions.

Mr. Bettinger added, We recently placed in the top 20 for Barrons 2017 rankings of The Most Respected American Companies. This is certainly important recognition, yet the ultimate measure of our success is whether clients and prospects entrust us with their business. Our second quarter performance gives us great optimism for the future, as we continue to execute against our goal of helping clients invest through a no trade-offs combination of value, service, transparency, and trust.

CFO Peter Crawford commented, Our financial model, with multiple revenue streams, operating leverage, and an all-weather balance sheet, produced outstanding second quarter results, with records for revenue and pre-tax profit margin. Net interest revenue rose to a record $1.1 billion, up 32% from last years second quarter, driven by higher short-term rates reflecting the Federal Reserves March and June 2017 hikes. We achieved these results even as the longer end of the yield curve softened and growth in interest-earning assets slowed due to clients engaging further with the markets and investing more of their cash. Asset management and administration fees grew 12% year-over-year to a record $845 million, reflecting further improvement in net money fund revenue from rising rates and growing balances in advised solutions, equity and bond funds, and ETFs. By quarter-end, the yields on all proprietary money market fund portfolios were at or above their respective operating expense ratios, fully eliminating money fund fee waivers for the first time since the financial crisis. Trading revenue declined 22% to $157 million as the full effect of our February commission reductions took hold, partially offset by stronger client activity. Overall, our growing success with clients, the Feds rate actions, and improving equity market valuations helped us end the second quarter a bit ahead of our 2017 baseline scenario, with total revenue up 17% year-over-year to $2.1 billion.

On the expense front, our 10% year-over-year increase for the second quarter was consistent with serving an expanding client base, higher incentive accruals relating to strong client metrics, and our planned pace of investment in growth initiatives, Mr. Crawford said. The resulting 630 basis point gap between revenue and expense growth yielded a 42.7% pre-tax profit margin and once again demonstrated our ability to successfully balance near-term profitability with reinvestment to drive long-term growth.

Mr. Crawford concluded, We remain focused on managing the companys balance sheet to support investment initiatives and further our strategy of optimizing the spread earned on client cash sweep balances. With sweep balances impacted by minimal year-to-date bulk transfers and reduced client cash levels, our consolidated assets totaled $221 billion as of June 30th. This contributed to a preliminary 7.4% Tier 1 Leverage ratio at quarter-end, somewhat above our long-term operating objective of 6.75-7%. We delivered a 15% return on equity for the second quarter, capping our strongest first half ROE in 8 years.

Business highlights for the second quarter (data as of quarter-end unless otherwise noted):

Investor Services

  • New retail brokerage accounts for the quarter totaled approximately 232,000, up 36%year-over-year; total accounts were 7.3million, up 4%year-over-year.
  • Opened three new company branches and one independent branch; completed two relocations. Schwab has over 340 branches across the country that offer clients access to a range of investing and personal finance services.
  • Launched a new account summary page on Schwab.com, making it easier for clients to track their portfolios and manage investments across all of their Schwab accounts.

Advisor Services

  • Held the annual EXPLORE conference for the companys top independent advisor clients. Schwab leadership and keynote speakers discussed the state of the industry and global economies.
  • Initiated the transition for advisor firms to Schwab Advisor StreetSmart Edge, providing streaming real-time quotes, advanced charting, and additional trading capabilities; full conversion will be completed throughout 2017.
  • The 2017 RIA Benchmarking Study was released to RIA clients; a record 1,321 firms participated, representing $848 billion in AUM. Topics included client acquisition, marketing, technology, and financial performance.

Products and Infrastructure

  • For Charles Schwab Bank:
    • Balance sheet assets = $175.7 billion, up 14% year-over-year.
    • Outstanding mortgage and home equity loans = $11.7billion, up 5% year-over-year.
    • Pledged Asset Line balances = $4.0billion, up 14%year-over-year.
    • Schwab Bank High Yield Investor Checking accounts = 950,000, with $13.5billion in balances.
  • For Charles Schwab Investment Management:
    • Net new assets into proprietary equity and bond funds and ETFs held off the Schwab platform rose 57% year-over-year.
    • Excluding money funds, net flows for proprietary mutual funds, ETFs, and collective trust funds reached a record $8.2 billion for the quarter; net flows for first half of 2017 were also a record at $15.7 billion.
  • Client assets managed by Windhaven totaled $8.0 billion, down 25% year-over-year.
  • Client assets managed by ThomasPartners totaled $12.6 billion, up 48% year-over-year.
  • Client assets managed by Intelligent Portfolios (Schwab Intelligent Portfolios and Institutional Intelligent Portfolios) totaled $19.4 billion, up 137% year-over-year.

Supporting schedules are either attached or located at: http://www.aboutschwab.com/investor-relations/financial-reports.

Commentary from the CFO

Periodically, our Chief Financial Officer provides insight and commentary regarding Schwabs financial picture at: http://www.aboutschwab.com/investor-relations/cfo-commentary. The most recent commentary was posted on February 28, 2017.

Forward-Looking Statements

This press release contains forward-looking statements relating to the companys business momentum; strategy; balancing near-term profitability with reinvestment for growth; balance sheet management; investment in growth initiatives; and optimization of the spread earned on client cash sweep balances. Achievement of these expectations and objectives is subject to risks and uncertainties that could cause actual results to differ materially from the expressed expectations.

Important factors that may cause such differences include, but are not limited to, client use of the companys investment advisory services and other products and services; the companys ability to attract and retain clients and registered investment advisors and grow those relationships and client assets; general market conditions, including the level of interest rates, equity valuations and trading activity; competitive pressures on pricing; the companys ability to develop and launch new products, services and capabilities in a timely and successful manner; the level of client assets, including cash balances; the companys ability to manage expenses; capital and liquidity needs and management; the companys ability to monetize client assets; the timing, amount and impact of bulk transfers; the quality of the companys balance sheet assets; client sensitivity to interest rates; regulatory guidance; the effect of adverse developments in litigation or regulatory matters and the extent of any charges associated with legal matters; any adverse impact of financial reform legislation and related regulations; and other factors set forth in the companys most recent reports on Form 10-K and Form 10-Q.

About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 340offices and 10.5 million active brokerage accounts, 1.5 million corporate retirement plan participants, 1.1millionbanking accounts, and $3.04 trillion in client assets as of June30, 2017. Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management, custody, and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through Schwab Advisor Services. Its banking subsidiary, Charles Schwab Bank (member FDIC and an Equal Housing Lender), provides banking and lending services and products. More information is available at www.schwab.com and www.aboutschwab.com.

THE CHARLES SCHWAB CORPORATION

Consolidated Statements of Income

(In millions, except per share amounts)

(Unaudited)

Three Months EndedJune 30, Six Months EndedJune 30,
2017 2016 2017 2016
Net Revenues
Asset management and administration fees (1) $ 845 $ 757 $ 1,668 $ 1,456
Interest revenue 1,127 840 2,182 1,650
Interest expense (74 ) (42 ) (129 ) (80 )
Net interest revenue 1,053 798 2,053 1,570
Trading revenue 157 201 349 433
Other 75 70 141 133
Provision for loan losses 2
Total net revenues 2,130 1,828 4,211 3,592
Expenses Excluding Interest
Compensation and benefits 663 602 1,364 1,228
Professional services 144 125 277 241
Occupancy and equipment 107 101 212 199
Advertising and market development 71 70 142 140
Communications 58 62 115 122
Depreciation and amortization 66 57 131 113
Other 112 91 218 174
Total expenses excluding interest 1,221 1,108 2,459 2,217
Income before taxes on income 909 720 1,752 1,375
Taxes on income (2) 334 268 613 511
Net Income 575 452 1,139 864
Preferred stock dividends and other (3) 45 46 84 66
Net Income Available to Common Stockholders $ 530 $ 406 $ 1,055 $ 798
Weighted-Average Common Shares Outstanding:
Basic 1,338 1,322 1,337 1,322
Diluted 1,351 1,333 1,351 1,331
Earnings Per Common Share:
Basic $ .40 $ .31 $ .79 $ .60
Diluted $ .39 $ .30 $ .78 $ .60
Dividends Declared Per Common Share $ .08 $ .07 $ .16 $ .13
(1) Includes fee waivers of $1 million and $55 million during the second quarters of 2017 and 2016, respectively, and $9 million and $152 million during the first halves of 2017 and 2016, respectively, relating to Schwab-sponsored money market funds.
(2) Taxes on income were reduced by approximately $5 million and $36 million for the three and six months ended June 30, 2017 to reflect the required adoption of Accounting Standards Update 2016-09, which changes the accounting treatment of a portion of the tax deductions relating to equity compensation.
(3) Includes preferred stock dividends and undistributed earnings and dividends allocated to non-vested restricted stock units.

THE CHARLES SCHWAB CORPORATION

Financial and Operating Highlights

(Unaudited)

Q2-17 % change

2017 2016
(In millions, except per share amounts and as noted)

vs.Q2-16

vs.Q1-17 SecondQuarter FirstQuarter FourthQuarter ThirdQuarter SecondQuarter
Net Revenues
Asset management and administration fees 12 % 3 % $ 845 $ 823 $ 801 $ 798 $ 757
Net interest revenue 32 % 5 % 1,053 1,000 907 845 798
Trading revenue (22 )% (18 )% 157 192 202 190 201
Other 7 % 14 % 75 66 62 76 70
Provision for loan losses (100 )% 5 2
Total net revenues 17 % 2 % 2,130 2,081 1,972 1,914 1,828
Expenses Excluding Interest
Compensation and benefits 10 % (5 )% 663 701 629 609 602
Professional services 15 % 8 % 144 133 134 131 125
Occupancy and equipment 6 % 2 % 107 105 99 100 101
Advertising and market development 1 % 71 71 61 64 70
Communications (6 )% 2 % 58 57 58 57 62
Depreciation and amortization 16 % 2 % 66 65 61 60 57
Other 23 % 6 % 112 106 106 99 91
Total expenses excluding interest 10 % (1 )% 1,221 1,238 1,148 1,120 1,108
Income before taxes on income 26 % 8 % 909 843 824 794 720
Taxes on income 25 % 20 % 334 279 302 291 268
Net Income 27 % 2 % $ 575 $ 564 $ 522 $ 503 $ 452
Preferred stock dividends and other (2 )% 15 % 45 39 44 33 46
Net Income Available to Common Stockholders 31 % 1 % $ 530 $ 525 $ 478 $ 470 $ 406
Earnings per common share:
Basic 29 % 3 % $ .40 $ .39 $ .36 $ .36 $ .31
Diluted 30 % $ .39 $ .39 $ .36 $ .35 $ .30
Dividends declared per common share 14 % $ .08 $ .08 $ .07 $ .07 $ .07
Weighted-average common shares outstanding:
Basic 1 % 1,338 1,336 1,329 1,324 1,322
Diluted 1 % 1,351 1,351 1,341 1,334 1,333
Performance Measures
Pre-tax profit margin 42.7 % 40.5 % 41.8 % 41.5 % 39.4 %
Return on average common stockholders equity (annualized) (1) 15 % 15 % 14 % 14 % 13 %
Financial Condition (at quarter end, in billions)
Cash and investments segregated (1 )% (13 )% $ 18.5 $ 21.2 $ 22.2 $ 20.1 $ 18.6
Receivables from brokerage clients - net 7 % 8 % 18.0 16.7 17.2 16.4 16.8
Bank loans - net 7

%

2 % 15.8 15.5 15.4 14.9 14.7
Total assets

11

%

(3 )% 220.6 227.1 223.4 209.3 198.1
Bank deposits 18 % (3 )% 162.3 166.9 163.5 149.6 137.3
Payables to brokerage clients 1 % (4 )% 33.0 34.3 35.9 33.0 32.7
Short-term borrowings (94 )% (50 )% .3 .6 3.0 5.0
Long-term debt 21 % 3.5 3.5 2.9 2.9 2.9
Stockholders equity 17 % 3 % 17.5 17.0 16.4 15.5 15.0
Other
Full-time equivalent employees (at quarter end, in thousands) 5 % 2 % 16.9 16.5 16.2 16.1 16.1

Capital expenditures - purchases of equipment, office facilities, and property, net (in millions)

(34 )% 28 % $ 86 $ 67 $ 86 $ 75 $ 131

Expenses excluding interest as a percentage of average client assets (annualized)

0.16 % 0.18 % 0.17 % 0.17 % 0.17 %
Clients Daily Average Trades (in thousands)
Revenue trades (2) 11 % (2 )% 311 317 293 268 279
Asset-based trades (3) 14 % 103 103 106 80 90
Other trades (4) 17 % 6 % 175 165 174 195 149
Total 14 % 1 % 589 585 573 543 518
Average Revenue Per Revenue Trade (2) (29 )% (19 )% $ 7.96 $ 9.84 $ 11.03 $ 11.17 $ 11.27
(1)

Return on average common stockholders equity is calculated using net income available to common stockholders divided by average common stockholders equity.

(2) Includes all client trades that generate trading revenue (i.e., commission revenue or principal transaction revenue); also known as DART.
(3) Includes eligible trades executed by clients who participate in one or more of the Companys asset-based pricing relationships.
(4) Includes all commission-free trades, including Schwab Mutual Fund OneSource funds and ETFs, and other proprietary products.

THE CHARLES SCHWAB CORPORATION

Net Interest Revenue Information

(In millions)

(Unaudited)

Three Months EndedJune 30, Six Months EndedJune 30,
2017 2016 2017 2016
AverageBalance InterestRevenue/Expense AverageYield/Rate AverageBalance InterestRevenue/Expense AverageYield/Rate AverageBalance InterestRevenue/Expense AverageYield/Rate AverageBalance InterestRevenue/Expense AverageYield/Rate
Interest-earning assets:
Cash and cash equivalents $ 8,562 $ 22 1.03 % $ 10,888 $ 14 0.52 % $ 8,803 $ 39 0.89 % $ 10,820 $ 27 0.50 %
Cash and investments segregated 19,703 41 0.83 % 19,155 22 0.46 % 20,755 76 0.74 % 19,710 41 0.42 %
Broker-related receivables (1) 435 1 0.68 % 685 0.20 % 412 1 0.62 % 535 0.15 %
Receivables from brokerage clients 15,827 138 3.50 % 15,027 124 3.32 % 15,537 264 3.43 % 14,959 249 3.35 %
Available for sale securities (2) 48,154 177 1.47 % 71,431 211 1.19 % 59,728 428 1.45 % 69,797 409 1.18 %
Held to maturity securities 107,378 600 2.24 % 53,404 335 2.52 % 95,439 1,085 2.29 % 51,830 657 2.55 %
Bank loans 15,701 115 2.94 % 14,569 98 2.71 % 15,615 225 2.91 % 14,487 197 2.73 %
Total interest-earning assets 215,760 1,094 2.03 % 185,159 804 1.75 % 216,289 2,118 1.97 % 182,138 1,580 1.74 %
Other interest revenue 33 36 64 70
Total interest-earning assets $ 215,760 $ 1,127 2.10 % $ 185,159 $ 840 1.82 % $ 216,289 $ 2,182 2.03 % $ 182,138 $ 1,650 1.82 %
Funding sources:
Bank deposits $ 163,711 $ 30 0.07 % $ 136,009 $ 8 0.02 % $ 163,696 $ 49 0.06 % $ 133,814 $ 16 0.02 %
Payables to brokerage clients 26,125 3 0.05 % 25,302 1 0.01 % 26,892 5 0.04 % 26,015 1 0.01 %
Short-term borrowings 1,393 3 0.86 % 2,038 2 0.39 % 1,363 5 0.74 % 1,029 2 0.39 %
Long-term debt 3,518 31 3.53 % 2,876 26 3.64 % 3,305 59 3.60 % 2,877 52 3.63 %
Total interest-bearing liabilities 194,747 67 0.14 % 166,225 37 0.09 % 195,256 118 0.12 % 163,735 71 0.09 %
Non-interest-bearing funding sources 21,013 18,934 21,033 18,403
Other interest expense 7 5 11 9
Total funding sources $ 215,760 $ 74 0.14 % $ 185,159 $ 42 0.09 % $ 216,289 $ 129 0.12 % $ 182,138 $ 80 0.09 %
Net interest revenue $ 1,053 1.96 % $ 798 1.73 % $ 2,053 1.91 % $ 1,570 1.73 %
(1) Interest revenue was less than $500,000 in the period or periods presented.
(2) Amounts have been calculated based on amortized cost.

THE CHARLES SCHWAB CORPORATION

Asset Management and Administration Fees Information

(In millions)

(Unaudited)

Three Months EndedJune 30, Six Months EndedJune 30,
2017 2016 2017 2016
AverageClientAssets Revenue AverageFee AverageClientAssets Revenue AverageFee AverageClientAssets Revenue AverageFee AverageClientAssets Revenue AverageFee
Schwab money market funds before fee waivers $ 158,974 $ 224 0.57 % $ 163,929 $ 239 0.59 % $ 160,881 $ 455 0.57 % $ 166,184 $ 485 0.59 %
Fee waivers (1 ) (55 ) (9 ) (152 )
Schwab money market funds 158,974 223 0.56 % 163,929 184 0.45 % 160,881 446 0.56 % 166,184 333 0.40 %
Schwab equity and bond funds and ETFs 151,825 52 0.14 % 112,814 52 0.19 % 145,363 107 0.15 % 108,103 103 0.19 %
Mutual Fund OneSource 220,680 179 0.33 % 201,034 169 0.34 % 211,548 349 0.33 % 197,839 333 0.34 %
Other third-party mutual funds and ETFs (1) 271,503 59 0.09 % 252,405 56 0.09 % 272,065 117 0.09 % 244,820 107 0.09 %
Total mutual funds and ETFs (2) $ 802,982 513 0.26 % $ 730,182 461 0.25 % $ 789,857 1,019 0.26 % $ 716,946 876 0.25 %
Advice solutions (2) :
Fee-based $ 199,823 256 0.51 % $ 175,973 226 0.52 % $ 195,791 500 0.51 % $ 171,146 441 0.52 %
Intelligent Portfolios 17,796 6,620 16,020 5,868
Legacy Non-Fee 18,340 17,015 17,890 16,712
Total advice solutions (3) $ 235,959 256 0.44 % $ 199,608 226 0.46 % $ 229,701 500 0.44 % $ 193,726 441 0.46 %
Other balance-based fees (4) 406,307 64 0.06 % 338,529 58 0.07 % 397,523 125 0.06 % 328,278 114 0.07 %
Other (5) 12 12 24 25
Total asset management and administration fees $ 845 $ 757 $ 1,668 $ 1,456
(1) Includes Schwab ETF OneSource.
(2) Advice solutions include managed portfolios, specialized strategies, and customized investment advice. Fee-based advice solutions include Schwab Private Client, Schwab Managed Portfolios, Managed Account Select, Schwab Advisor Network, Windhaven Strategies, ThomasPartners Dividend Growth Strategy, Schwab Index Advantage advised retirement plan balances, and Schwab Intelligent AdvisoryTM, launched in March 2017; average client assets are shown exclusive of enrolled balances that do not generate advice fees. Intelligent Portfolios include Schwab Intelligent Portfolios and Institutional Intelligent Portfolios. Legacy Non-Fee advice solutions include superseded programs such as Schwab Advisor Source and certain retirement plan balances. Average client assets for advice solutions may also include the asset balances contained in the mutual fund and/or ETF categories listed above.
(3) For total end of period client assets receiving ongoing advisory services, including those not generating advice fees, please see the Monthly Activity Report.
(4) Includes various asset-related fees, such as trust fees, 401(k) recordkeeping fees, and mutual fund clearing fees and other service fees. Beginning in the first quarter of 2017, a prospective methodology change was made to average client assets relating to 401(k) recordkeeping fees to provide improved insight into the associated fee driver, which resulted in an increase of approximately $25 billion. There was no impact to revenue or the average fee.
(5) Includes miscellaneous service and transaction fees relating to mutual funds and ETFs that are not balance-based.

THE CHARLES SCHWAB CORPORATION

Growth in Client Assets and Accounts

(Unaudited)

Q2-17 % Change

2017 2016
(In billions, at quarter end, except as noted) vs.Q2-16 vs.Q1-17 SecondQuarter FirstQuarter FourthQuarter ThirdQuarter SecondQuarter
Assets in client accounts
Schwab One , certain cash equivalents and bank deposits 15 % (3 )% $ 193.7 $ 199.6 $ 197.4 $ 181.1 $ 168.4
Proprietary mutual funds (Schwab Funds and Laudus Funds):
Money market funds (3 )% (4 )% 156.2 162.9 163.5 160.3 161.0
Equity and bond funds (1) 17 % 5 % 73.3 70.1 66.1 64.6 62.8
Total proprietary mutual funds 3 % (2 )% 229.5 233.0 229.6 224.9 223.8
Mutual Fund Marketplace (2)
Mutual Fund OneSource 10 % 10 % 224.7 204.9 198.9 206.1 203.4
Mutual fund clearing services 18 % 15 % 226.4 197.5 196.6 198.8 192.0
Other third-party mutual funds 15 % 2 % 609.0 596.2 558.2 556.1 529.7
Total Mutual Fund Marketplace 15 % 6 % 1,060.1 998.6 953.7 961.0 925.1
Total mutual fund assets 12 % 5 % 1,289.6 1,231.6 1,183.3 1,185.9 1,148.9
Exchange-traded funds (ETFs)
Proprietary ETFs (1) 63 % 13 % 78.0 69.3 59.8 53.9 47.9
ETF OneSource (2) 31 % 8 % 24.9 23.1 21.2 20.2 19.0
Other third-party ETFs 23 % 5 % 270.2 257.0 238.3 230.8 220.5
Total ETF assets 30 % 7 % 373.1 349.4 319.3 304.9 287.4
Equity and other securities 17 % 3 % 971.4 939.7 886.5 860.3 830.7
Fixed income securities 14 % 5 % 229.3 217.5 208.3 208.0 202.0
Margin loans outstanding 7 % 8 % (16.5 ) (15.3 ) (15.3 ) (14.9 ) (15.4 )
Total client assets 16 % 4 % $ 3,040.6 $ 2,922.5 $ 2,779.5 $ 2,725.3 $ 2,622.0
Client assets by business
Investor Services 15 % 4 % $ 1,634.1 $ 1,565.9 $ 1,495.4 $ 1,470.8 $ 1,415.5
Advisor Services 17 % 4 % 1,406.5 1,356.6 1,284.1 1,254.5 1,206.5
Total client assets 16 % 4 % $ 3,040.6 $ 2,922.5 $ 2,779.5 $ 2,725.3 $ 2,622.0
Net growth in assets in client accounts (for the quarter ended)
Net new assets by business
Investor Services (3) 170 % 185 % $ 39.9 $ 14.0 $ 13.7 $ 14.2 $ 14.8
Advisor Services 108 % (1 )% 24.6 24.9 23.2 15.8 11.8
Total net new assets 142 % 66 % $ 64.5 $ 38.9 $ 36.9 $ 30.0 $ 26.6
Net market gains 39 % (49 )% 53.6 104.1 17.3 73.3 38.7
Net growth 81 % (17 )% $ 118.1 $ 143.0 $ 54.2 $ 103.3 $ 65.3
New brokerage accounts (in thousands, for the quarter ended) 32 % (1 )% 357 362 293 264 271
Clients (in thousands)
Active Brokerage Accounts 5 % 2 % 10,487 10,320 10,155 10,046 9,977
Banking Accounts 7 % 2 % 1,143 1,120 1,106 1,088 1,065
Corporate Retirement Plan Participants (1 )% 1,540 1,545 1,543 1,561 1,553
(1) Includes proprietary equity and bond funds and ETFs held on and off the Schwab platform. As of June 30, 2017, off-platform equity and bond funds and ETFs were $8.7 billion and $17.2 billion, respectively.
(2) Excludes all proprietary mutual funds and ETFs.
(3) Second quarter of 2017 includes inflows of $18.3 billion from a mutual fund clearing services client. First quarter of 2017 includes an outflow of $9.0 billion from a mutual fund clearing services client. Second quarter of 2016 includes an inflow of $2.7 billion from a mutual fund clearing services client.

The Charles Schwab Corporation Monthly Activity Report For June 2017

2016 2017

Change

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Mo.

Yr.

Market Indices
(at month end)
Dow Jones Industrial Average 17,930 18,432 18,401 18,308 18,142 19,124 19,763 19,864 20,812 20,663 20,941 21,009 21,350 2% 19%
Nasdaq Composite 4,843 5,162 5,213 5,312 5,189 5,324 5,383 5,615 5,825 5,912 6,048 6,199 6,140 (1)% 27%
Standard & Poors 500 2,099 2,174 2,171 2,168 2,126 2,199 2,239 2,279 2,364 2,363 2,384 2,412 2,423 15%
Client Assets
(in billions of dollars)
Beginning Client Assets 2,607.2 2,622.0 2,698.2 2,710.4 2,725.3 2,686.7 2,734.6 2,779.5 2,831.3 2,895.2 2,922.5 2,948.8 2,995.8
Net New Assets (1) 9.3 9.0 10.4 10.6 6.1 11.9 18.9 11.1 6.6 21.2 2.8 24.0 37.7 57% N/M
Net Market Gains (Losses) 5.5 67.2 1.8 4.3 (44.7 ) 36.0 26.0 40.7 57.3 6.1 23.5 23.0 7.1
Total Client Assets (at month end) 2,622.0 2,698.2 2,710.4 2,725.3 2,686.7 2,734.6 2,779.5 2,831.3 2,895.2 2,922.5 2,948.8 2,995.8 3,040.6 1% 16%
Receiving Ongoing Advisory Services
(at month end)
Investor Services 205.0 210.2 211.7 213.4 211.3 213.2 217.1 220.8 227.9 230.9 234.4 239.1 242.2 1% 18%
Advisor Services (2) 1,110.5 1,142.3 1,149.4 1,155.4 1,140.5 1,161.8 1,184.3 1,208.4 1,239.0 1,250.9 1,262.7 1,283.4 1,297.6 1% 17%
Client Accounts
(at month end, in thousands)
Active Brokerage Accounts 9,977 9,989 10,021 10,046 10,068 10,102 10,155 10,198 10,254 10,320 10,386 10,439 10,487 5%
Banking Accounts 1,065 1,074 1,083 1,088 1,092 1,099 1,106 1,109 1,117 1,120 1,128 1,138 1,143 7%
Corporate Retirement Plan Participants 1,553 1,559 1,565 1,561 1,547 1,550 1,543 1,543 1,534 1,545 1,543 1,541 1,540 (1)%
Client Activity
New Brokerage Accounts (in thousands) 87 84 96 84 84 93 116 111 113 138 125 115 117 2% 34%
Inbound Calls (in thousands) 1,665 1,605 1,755 1,633 1,565 1,642 1,931 1,817 1,787 2,111 1,788 1,727 1,736 1% 4%
Web Logins (in thousands) 43,220 46,217 42,627 38,237 35,429 37,687 40,720 40,047 40,717 45,441 39,750 44,024 43,790 (1)% 1%
Client Cash as a Percentage of Client Assets (3) 12.6 % 12.5 % 12.5 % 12.5 % 12.8 % 12.8 % 13.0 % 12.7 % 12.4 % 12.4 % 12.1 % 11.8 % 11.5 % (30) bp (110) bp
Mutual Fund and Exchange-Traded Fund
Net Buys (Sells) (4, 5)
(in millions of dollars)
Large Capitalization Stock 185 (1,173 ) (755 ) (1,209 ) (652 ) 200 565 265 580 (125 ) 346 134 (63 )
Small / Mid Capitalization Stock (113 ) (320 ) (214 ) 460 (190 ) 877 1,103 1,364 673 (409 ) (797 ) (285 ) (322 )
International (1,208 ) (347 ) 386 (26 ) (1 ) 348 (683 ) 1,296 1,633 1,703 2,410 3,610 3,631
Specialized 470 357 189 (274 ) (159 ) (1,019 ) 20 411 1,007 273 570 529 647
Hybrid (403 ) (463 ) (219 ) 58 (432 ) (687 ) (456 ) (53 ) 258 563 92 65 (340 )
Taxable Bond 1,421 1,420 1,888 1,585 1,475 (1,110 ) 1,045 3,144 3,535 3,876 2,060 3,618 3,499
Tax-Free Bond 700 766 920 539 20 (1,090 ) (1,692 ) 864 472 300 155 290 507
Net Buy (Sell) Activity
(in millions of dollars)
Mutual Funds (4) (2,049 ) (1,683 ) (297 ) (656 ) (1,979 ) (5,864 ) (5,825 ) 2,522 4,005 2,368 1,116 3,837 2,980
Exchange-Traded Funds (5) 3,101 1,923 2,492 1,789 2,040 3,383 5,727 4,769 4,153 3,813 3,720 4,124 4,579
Money Market Funds (1,799 ) 701 (768 ) (658 ) 211 1,851 1,141 (1,761 ) (181 ) 1,218 (4,434 ) (1,167 ) (1,260 )
Average Interest-Earning Assets (6)
(in millions of dollars) 187,933 191,850 194,268 199,107 201,894 206,970 212,052 216,001 216,112 218,554 217,407 215,252 214,709 14%
(1) June 2017 includes an inflow of $15.6 billion from a mutual fund clearing services client. February 2017 includes an outflow of $9.0 billion from a mutual fund clearing services client.
(2) Excludes Retirement Business Services.
(3) Schwab One , certain cash equivalents, bank deposits, and money market fund balances as a percentage of total client assets.
(4) Represents the principal value of client mutual fund transactions handled by Schwab, including transactions in proprietary funds. Includes institutional funds available only to Investment Managers. Excludes money market fund transactions.
(5) Represents the principal value of client ETF transactions handled by Schwab, including transactions in proprietary ETFs.
(6) Represents average total interest-earning assets on the Companys balance sheet.
N/M Not meaningful.

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MEDIA: Charles SchwabJoe Carberry, 415-667-1677orINVESTORS/ANALYSTS:Charles SchwabRich Fowler, 415-667-1841

Source: The Charles Schwab Corporation