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Charles Schwab Corp SCHW

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Morningstar’s Analysis

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Client Asset Growth Leads to a Strong, Year-End Finish for Charles Schwab

Michael Wong, CFA, CPA Sector Director

Analyst Note

| Michael Wong, CFA, CPA |

Wide-moat Charles Schwab reported a fairly strong finish to a tumultuous 2020, as it closed its merger with TD Ameritrade and equity markets continued to rally. Including the results of Charles Schwab’s merger with TD Ameritrade that closed in October 2020, net revenue for the fourth quarter increased 60% to $4.2 billion and net income to common shareholders increased 31% to $1.05 billion from a year ago. Taking into account the shares issued with the TD Ameritrade merger, GAAP earnings per share in the fourth quarter decreased 8% to $0.57, while adjusted earnings per share that excludes acquisition-related costs and acquired intangible amortization increased 17% to $0.74. Client assets ended the year at $6.7 trillion, up about 12% sequentially on a proforma basis. We anticipate that we may increase our current $47 fair value estimate for Charles Schwab upwards of 10% to account for the rally in equity markets over the past couple of months.

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Company Profile

Business Description

Charles Schwab operates in the brokerage, banking, and asset-management businesses. The company runs a large network of brick-and-mortar brokerage branch offices and a well-established online investing website. It also operates a bank and a proprietary mutual fund business and offers services to independent investment advisors. The company is among the largest firms in the investment business, with over $5.5 trillion of client assets at the end of October 2020. Nearly all of its revenue is from the United States.

211 Main Street
San Francisco, CA, 94105
T +1 415 667-7000
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type Cyclical
Employees 22,100