Total expenses in 3Q17
In 3Q17, Charles Schwab (SCHW) incurred total expenses (excluding interest) of $1.2 billion compared to $1.1 billion in 3Q16, reflecting a 9.0% rise. The rise was forecast by the company’s management.
Charles Schwab’s major components of expenses are compensation, occupancy and equipment, depreciation and amortization, communications, advertising and market development, professional services, and other. The rise in total expenses (excluding interest) in 3Q17 was due to more expenses for professional services and compensation.
Charles Schwab currently has diluted EPS (earnings per share) of $1.49 on a trailing 12-month (or TTM) basis. Its peers (XLF) Morgan Stanley (MS), Goldman Sachs (GS), and Bank of America (BAC) have diluted EPS of $3.49, $19.07, and $1.68, respectively, on a TTM basis.
Compensation and professional services
Charles Schwab’s compensation expenses rose from $609.0 million in 3Q16 to $662.0 million in 3Q17, reflecting a 9.0% rise.
The company was able to increase its assets in 3Q17 due to favorable macros, which led to higher compensation expenses. However, more employees in 3Q17 contributed to the rise in compensation expenses.
The company’s professional services expenses also rose from $131.0 million in 3Q16 to $152.0 million in 3Q17, reflecting a 16.0% rise. The company saw a marginal decline in advertising and market development expenses, from $64.0 million in 3Q16 to $63.0 million in 3Q17, reflecting 2.0% fall.