Charles Schwab (SCHW +3%) has seen a significant boost under new CEO Rick Wurster, who took over on January 1. The company reported impressive Q4 results, with both top and bottom lines exceeding expectations. This comes after Schwab completed its largest brokerage conversion in 2024, integrating over 17 million Ameritrade accounts, marking a strong recovery from a transitional year.
In July, SCHW's stock hit four-month lows due to muted Q2 growth and comments about relying more on off-balance sheet arrangements for customer deposits. Former CEO Walter Bettinger mentioned plans to reduce the company's balance sheet investment portfolio duration over the next few years, which could lead to variability in earnings but also reduce capital volatility and reliance on supplemental borrowing if interest rates rise.
Since July, SCHW has rebounded over 30%, driven by strong performance.
- In Q4, adjusted EPS surged 48.5% year-over-year to $1.01, marking the best profitability quarter since 4Q22. Revenue grew 19.5% year-over-year to $5.33 billion, a significant increase from the previous quarter's 5.2% growth.
- Net new assets increased by 51% year-over-year, ending the year 20% higher. New brokerage account openings rose 23% to 1.1 million, closing the year with 36.5 million active accounts. Trading activity was robust, leading to record client engagement.
- SCHW's platform and products helped it stand out against competitors like Robinhood (HOOD, Financial) and Interactive Brokers (IBKR, Financial), with thinkorswim adoption growing 60% year-over-year.
- The company is optimistic about 2025, with CEO Rick Wurster highlighting M&A as important but confident in organic growth. Revenue and earnings are expected to remain strong as supplemental borrowing decreases significantly in 2025.
SCHW ended a volatile year on a positive note, with CEO Rick Wurster expressing confidence in the company's growth momentum heading into 2025. Schwab aims for a 5-7% organic growth rate, though potential market volatility from Federal Reserve policies and tariffs could pose challenges. However, recent quarterly performances suggest a promising year ahead.
