Charles Schwab delivered a robust fourth-quarter performance, significantly surpassing Wall Street expectations. Adjusted earnings reached $1.01 per share, outpacing the FactSet consensus estimate of 91 cents and reflecting a 49% increase from the same quarter in 2023. Revenue rose 20% year over year to $5.3 billion, exceeding projections of $5.2 billion. Shares surged 6.86% following the announcement.
The brokerage giant also demonstrated strong growth in core net new assets, attracting $115 billion in the fourth quarter and $367 billion for the full year 2024. This represents a notable improvement from the $306 billion collected in 2023, which had an annualized growth rate of 6%.
Schwab made substantial progress in reducing short-term debt, a lingering issue from cash sorting challenges in 2023 and 2024. The practice had forced the company to rely on supplemental borrowing as clients shifted funds from low-yield sweep accounts to higher-yield options. During the fourth quarter, Schwab reduced its short-term borrowings by nearly $15 billion, bringing the total down to just under $50 billion—a 50% decrease from peak levels. Client transactional sweep cash rose by $35 billion compared to the prior quarter, signaling encouraging trends in client engagement.
CEO Rick Wurster, who took the reins earlier this month, attributed the firm’s success to strong client engagement, improved cash trends, and record net inflows into Schwab’s managed investing services. Under his leadership, Schwab plans to further target high-net-worth clients and expand services for registered investment advisory (RIA) firms.
Investor engagement also fueled account growth, with new brokerage account openings climbing 23% year over year to 1.1 million, bringing the total number of active accounts to 36.5 million. Total client assets increased 19% from the prior year, surpassing $10 trillion due to strong inflows and market gains.
The company’s results align with broader industry trends, as investors responded positively to market conditions. Other wealth management firms, including Morgan Stanley, also reported increased investor activity, driven in part by expectations for a business-friendly administration following the presidential election.
Schwab’s earnings call marked Rick Wurster’s first as CEO. Analysts are optimistic about the company’s direction under his leadership, particularly his emphasis on expanding the firm’s brick-and-mortar footprint with plans to add more than a dozen branches to its existing network of over 400 offices.
Schwab is also focusing on deepening relationships with legacy TD Ameritrade clients, a strategic move expected to enhance net new asset growth and boost client consolidation. The integration of TD Ameritrade, completed last year, offers Schwab significant opportunities to leverage cross-selling potential in wealth management and lending services.
Looking ahead, Schwab has revised its forecast for 2024 net revenue upward, buoyed by increased investor activity and strong equity market performance post-election. Analysts at Jefferies and KBW have expressed confidence in Schwab’s ability to sustain 5% to 7% annual growth in net new assets, highlighting its consistent ability to attract substantial new client investments.
Despite trailing the S&P 500’s 27% annual gain with a 20% rise in its stock, Schwab’s outlook remains promising. With 36 million active brokerage accounts and steady inflows, the firm continues to rank as one of the largest brokerage and wealth management companies in the U.S.
Analysts largely maintain bullish ratings on Schwab, with 15 assigning a Buy or Overweight rating. Jefferies analysts anticipate that Wurster and CFO Mike Verdeschi will emphasize sustainable asset growth and further debt reduction as top priorities in the coming quarters. Schwab’s strategy to capitalize on its expansive client base, market momentum, and enhanced operational efficiencies positions the company for continued success in 2025 and beyond.
