Charles Schwab reported fourth quarter profits that well exceeded Wall Street estimates early Tuesday. Revenues also beat estimates. Shares jumped 5.35% in premarket trading.
The brokerage giant said adjusted earnings were $1.01 per share, beating analyst estimates of 91 cents, according to FactSet. That’s 49% higher than the fourth quarter of 2023. On an unadjusted basis, Schwab reported earnings of 94 cents per share. Schwab said revenue rose 20% year over year to $5.3 billion. That was above Wall Street revenue expectations of $5.2 billion.
Schwab also showed robust growth, hauling in $115 billion in core net new assets for the fourth quarter and $367 billion for 2024. In 2023, it brought in $306 billion and had an annualized growth rate of 6%.
In addition, the company showed progress on another front that has weighed on the stock: paying down short-term debt that it accumulated in 2023 and 2024 because of cash sorting, a process by which investors moved billions of dollars out of low paying sweep accounts to higher paying options. When deposit outflows exceeded Schwab’s cash on hand, the company had to rely on short-term borrowings, and that weighed on earnings.
On Tuesday, the company said it had reduced its supplemental borrowing by nearly $15 billion during the fourth quarter, bringing the total to just under $50 billion. That’s down 50% from peak levels, the company said. Client transactional sweep cash, a key metric, grew by $35 billion compared to the third quarter.
CEO Rick Wurster, who took over the helm at the brokerage firm earlier this month, credited the firm’s performance to strong client engagement, encouraging client cash trends, and record net inflows into Schwab’s managed investing offering.
And, in a sign that the company has benefited from robust investor engagement with markets during the quarter, Schwab reported new brokerage account openings increased 23% year over year to 1.1 million. The company has 36.5 million total active accounts.
Following the presidential election, investors piled into stocks in anticipation of a more business-friendly administration under President-elect Trump. Other bank and wealth managers, such as Morgan Stanley, have reported upticks in investor activity.
Schwab’s total client assets increase 19% year over year to just over $10 trillion due to inflows of new money and market appreciation.
This is breaking news. Read a preview of Schwab earnings below and check back for more analysis soon.
Last year was a transition period for Charles Schwab, executives have said. When the company reports earnings on Tuesday, investors hope its new CEO will give them a better sense of what 2025 portends for the $10 trillion wealth management company.
Schwab’s earnings call Tuesday will be its first since Rick Wurster took over as CEO from Walt Bettinger at the beginning of the year. Wurster has already indicated that the company can grow more by adding additional high-net-worth customers and expanding its business providing custody and other services to registered investment advisory firms. He has also put renewed emphasis on bricks and mortar, and plans to add more than a dozen branches to the company’s more than 400 offices.
Wall Street analysts expect Schwab to report fourth-quarter adjusted earnings of 91 cents and revenue of $5.2 billion, according to FactSet. That compares with earnings of 68 cents and revenue of $4.5 billion for the fourth quarter of 2023.
Top of mind for investors will be growth and the paying down of short-term debt, which weighed on the stock. Over the past 12 months, shares of Schwab have lagged the S&P 500. It has gained 20% compared to 27% for the index.
Analysts are mostly bullish on the stock, with 15 rating it a Buy or Overweight, six a Hold, and three Underweight or Sell, according to FactSet. KBW stock analyst Kyle Voigt chose Schwab as one of his two top retail brokerage picks for 2025, citing several potential catalysts for the company, such as an opportunity to pay down short-term debt.
TD integration. In addition, the company has said it is working to drum up more business with legacy TD Ameritrade clients, such as by providing them with wealth management and lending services. Doing so could help boost Schwab’s net new assets because more engaged customers are more likely to consolidate accounts with Schwab. The company bought its longtime rival in 2020 and completed its integration last year.
Analysts at Jefferies, who rate Schwab a Buy, expect Wurster and CFO Mike Verdeschi to place “emphasis on addressing the sustainability of [net new asset] growth” of 5% to 7% per year. Schwab has traditionally raked in substantial new assets from new and existing clients. The company is one of the nation’s largest brokerage and wealth management companies with 36 million active brokerage accounts. As of the end of the third quarter, Schwab’s year-to-date net new assets were $252 billion. In 2023, it brought in $306 billion and had an annualized growth rate of 6%
The company’s fourth report will likely show a surge in investor activity during the quarter. Following the presidential election, investors piled into stocks in anticipation of a more business-friendly administration under President-elect Trump. Other bank and wealth managers, such as Morgan Stanley, have reported upticks in investor activity. In December, Schwab raised its raised forecast for full-year 2024 net revenue, pointing to a combination of increased investor engagement, postelection equity market strength.