Schwab's stock gains as November client assets rise 12% from year-ago period

By Steve Gelsi

Company reports largest monthly build in transactional sweep cash since March 2022.

Charles Schwab Corp.'s stock (SCHW) rose Thursday after the financial firm said total client assets rose 12% in November from October to $8.18 trillion, also up 7% from the previous month.

Transactional sweep cash as of Nov. 30 increased $5 billion in November to $402.9 billion from the previous month, in what Schwab said was the largest monthly build in transactional sweep cash since March 2022.

Schwab's stock rallied 7% on Thursday as the overall market moved up.

Transactional sweep cash refers to money from accounts that automatically transfer funds into higher interest accounts at the close of each business day.

Schwab expects its full-year 2023 revenue to fall by about 9.5% to 10% from full-year 2022 due to lower transactional cash levels, softer client trading volumes and subdued securities lending activity.

Wall Street analysts estimate an 8% drop in annual revenue, to $19.02 billion, according to FactSet data.

For November, core net new assets brought to the company by new and existing clients were $21.7 billion.

Clients added more than $7 billion across Schwab's balance sheet cash solutions in November, excluding bank deposit account balance activity.

Schwab was one of four financial stocks that could outperform in 2024 along with Nasdaq Inc. (NDAQ), Intercontinental Exchange Inc. (ICE) and Federated Hermes Inc. (FHI), J.P.Morgan analyst Ken Worthington said in a research note published on Monday.

"We see 2024 as a better year for Schwab's earnings trajectory, allowing for a better view towards normalized earnings in 2025/2026," Worthington said.

Schwab may benefit from a slowdown in cash sorting, which is the movement of cash into higher-yielding products such as money markets and certificates of deposit, he said.

Other potential tailwinds include an increase in net interest income as short-term borrowings are repaid, with Schwab's balance sheet benefitting from the positive impact of lower, longer-term rates, he said.

The firm also remains well positioned to benefit from both hard and soft landings in the economy, he said.

Transactional sweep cash refers to money from accounts that automatically transfer funds into higher-interest accounts at the close of each business day.

-Steve Gelsi

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12-14-23 1236ET

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