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TheStreet Open House

Schwab Reports Monthly Activity Highlights

Stocks in this article: SCHW

The Charles Schwab Corporation released its Monthly Market Activity Report today. Company highlights for the month of August 2013 include:

  • Core net new assets (before significant one-time flows) brought to the company by new and existing clients in August 2013 totaled $22.3 billion. Net new assets of negative $2.4 billion contained the following items:
    • Core flows of $22.3 billion, including inflows of $9.5 billion and $3.1 billion from certain mutual fund clearing services clients.
    • A reduction of $24.7 billion, reflecting changes to Schwab’s retirement plan business as discussed below.
  • Also reflecting the retirement plan business changes, total client assets were $2.08 trillion as of month-end August, up 12% from August 2012 and down 2% compared to July 2013.
  • Client daily average trades were 467.3 thousand in August 2013, up 24% compared to August 2012 and down 6% compared to July 2013. August 2013 trading activity included a 2% sequential increase in daily average revenue trades.

Schwab has decided to consolidate its two retirement plan recordkeeping technology platforms. For the past six years, the company has supported both the platform operated by the former 401(k) Company, which was acquired in 2007, and the Schwab Retirement Information (“SRI”) recordkeeping platform utilized under its primary full-service bundled retirement plan offering.

Certain clients serviced on the acquired platform will be transitioned to the SRI platform. Schwab will resign from providing recordkeeping services to certain other clients. The retirement plans sponsored by these clients are either unprofitable, include uniquely resource-intensive servicing provisions, or are otherwise not an appropriate fit for Schwab’s retirement plan servicing strategy.

Accordingly, Schwab has reduced its reported totals for overall client assets and retirement plan participants (by $24.7 billion and 317,000, respectively) to reflect the estimated impact of these changes. Financial impacts are not expected to be material. Given the current interest rate environment and financial market conditions, management believes the company remains on track to deliver the 2013 financial performance discussed at its Business Update on July 26, including a pre-tax profit margin of at least 30% and earnings per share in the mid-$.70s for the year.

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