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Charles Schwab Bank Expands on Assets, Products in 2016

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Bank’s performance

In the first half of 2016, Charles Schwab (SCHW) added 13,000 new accounts, which represents a rise of 6% YoY (year-over-year). In 2Q16, the bank’s balance sheet expanded to $153.9 billion, which is a YoY rise of 26%. The bank’s net interest revenue led to an overall rise in net income. It reported net interest revenue of $798 million in 2Q16, as compared to $612 million in 2Q15.

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Compliments trading activity

Charles Schwab doesn’t use the banking structure for client acquisitions. The bank is used for supporting trading and wealth management activity. The bank’s outstanding mortgage and home equity loans stood at $11.1 billion on June 30, 2016. Charles Schwab Bank’s loan reserve ratio stood at 0.23% on June 30, reflecting the strong quality of its assets.

Here’s how a few of the company’s peers in the brokerage industry fared in terms of long-term debt-to-asset ratios in their last fiscal years:

  • Interactive Brokers Group’s (IBKR) ratio was 5.8x.
  • TD Ameritrade Holdings’ (AMTD) ratio was 4.6x.
  • E*TRADE Financial’s (ETFC) ratio was 5.9x.

Together, these companies make up 1.4% of the Vanguard Financials ETF (VFH).

Managing assets

Charles Schwab is expanding its asset base through third-party investment advisors as well as new initiatives. As of March 31, 2016, Windhaven Investment Management, an affiliate of Charles Schwab, managed client assets totaling $11.1 billion, a fall of 29% from 1Q15. ThomasPartners expanded its client base by 10% to $7.8 billion.

Client assets managed under Intelligent Portfolios, including Schwab Intelligent Portfolios and Institutional Intelligent Portfolios, rose to $8.2 billion, up $1.6 billion from the first quarter of 2016.

Charles Schwab has also expanded its ETF OneSource. It now offers five more ETFs, translating to 225 ETFs across 66 Morningstar categories. The company charges fees rather than commissions on these investments. The company’s Schwab Index Advantage offers 130 plans, and 90,000 clients have signed up for the ETF or index mutual fund versions.

Correction: This article originally misreported the value of client assets managed under Intelligent Portfolios. We have since corrected this error, and we regret this oversight.

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