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Charles Schwab Bank Expanded, Supported Brokerage Services in 3Q15

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Charles Schwab Bank’s expansion

In 3Q15, Charles Schwab (SCHW) Bank’s balance sheet expanded to $128.7 billion, up 22% on a year-over-year basis. The bank’s net interest revenue led to an overall increase in net income. It reported net interest revenue of $635 million in 3Q15 as compared to $573 million in 3Q14.

Charles Schwab doesn’t use the bank and its products for client acquisition—the structure is used for supporting trading and wealth management products. The bank’s outstanding mortgage and home equity loans stood at $11.1 billion as of September 30, 2015.

Charles Schwab managed $1.1 billion in first mortgage originations during the quarter, and its bank’s loan reserve ratios stood at 0.22% as of September 30, 2015, reflecting a strong quality of its assets.

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Managing assets

Charles Schwab is expanding its asset base through third-party investment advisers as well as new initiatives. As of September 30, 2015, Windhaven managed client assets totaling $12.9 billion, a decrease of 27% from the prior year’s quarter. ThomasPartners helped in an expansion of the client base by 11% to $6.8 billion.

Client assets managed under the Intelligent Portfolios, including Schwab Intelligent Portfolios and Institutional Intelligent Portfolios, increased to $4.1 billion as compared to $3 billion in the previous quarter.

Charles Schwab has also expanded its offering called ETF OneSource. It now offers nine more ETFs and one new provider, translating to 209 ETFs across 66 categories of Morningstar. The company charges fees rather than commissions on these investments. The company’s Schwab Index Advantage offers 130 plans, for which 90,000 clients have signed up for the ETF or index mutual fund versions.

Peer performance

Here is how a few of the firm’s peers in the brokerage industry fared in terms of long-term debt to assets:

  • Interactive Brokers’s (IBKR) ratio was 5.77x.
  • TD Ameritrade’s (AMTD) ratio was 4.62x.
  • E*TRADE’s (ETFC) ratio was 5.85x.

Together, these companies form 10.8% of the iShares US Broker-Dealers ETF (IAI).

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