Q4 2024 Charles Schwab Corp Earnings Call

This is Jeff Edwards head of Investor Relations and we're coming to you live from the frozen tundra of Westlake, Texas I'm joined in the room today with a slightly different but I hope they sell very familiar group.

Speaker Change: Didn't and now CEO, Rick Webster as well as our CFO, Mike potentially hope.

Speaker Change: Hopefully everyone has had an opportunity to review our strong results for the fourth quarter and full year 2024 that were posted earlier this morning.

Speaker Change: During our time together today the team will take a look back at 2024 and discuss key drivers that helped us build momentum through the year as well as highlight the opportunities they see to continue driving growth across the firm in 2025 and beyond.

Speaker Change: When we dive into the good stuff, let's quickly run through a few housekeeping items. The slides for today's business update will be posted to their usual spot on the IR website at the end of the prepared remarks. During Q&A. Please respect. The one question no follow up rule. There was always we encourage you to jump back into the queue to ask another question if time permits.

Speaker Change: And of course, the IR team is available to assist with any questions. Following today's update.

Speaker Change: Lastly, before we start let's spend a minute on the ever important forward looking statements page, which exists to remind us all that outcomes can differ from expectations. So please keep in touch with our disclosures and with that it looks like we're all set to begin so let me turn it over to Rick.

Thank you, Jeff and Hello, everyone and welcome to the call.

Rick: My first opportunity to speak with all of you in my new role I'm very grateful to Walt to Chuck can aboard for Entrusting me with this responsibility and I know I have big shoes to fill.

Rick: I Love our company and the work, we do for clients and as you'll hear from me today I couldn't be more excited about the opportunities we have in front of us.

Rick: For the last 50 years, our purpose at Schwab has been to champion our clients' goals with passion and integrity, helping people invest and grow their wealth, whether investing directly or through an adviser we've had a relentless focus on serving our clients in meeting their evolving needs across our retail and.

Rick: Pfizer services and workplace businesses.

Can assure you that our focus remains unchanged as we move into 2025 and beyond.

Rick: I believe you should come away from this mornings discussion hearing three key messages.

Rick: First we delivered strong results across multiple measures in a transition year, where we completed the largest integration in the history of the industry.

Rick: The one word summary of our year end quarter is growth.

Rick: Net new asset growth.

Rick: Up 20% and 51% this quarter.

Rick: Total new brokerage accounts and 24 were up.

Rick: Okay.

Rick: Revenue was up 4% for the year.

Rick: Per cent for the fourth quarter of 2023.

Rick: Fourth quarter earnings per share increased nearly 50% on an adjusted basis versus Q4.

Rick: Clients were active with strong levels of trading activity record engagement with our trading coaching and education and record flows into our managed investing and lending solutions.

Rick: Client promoter scores reached all time highs for the firm.

Rick: I'd also note that client cash grew in the fourth quarter and supplemental borrowing is down to 50 billion.

Rick: Finally, we grew our capital ratios to our target levels.

The second message I Hope you take away is that with these strong results momentum is continuing to build we are in a position of strength and poised for lift off in 2025.

With integration behind US, we are focused on helping our clients, while growing and deepening relationships.

Rick: I'd highlight two points on client growth first we believe our M&A and account growth will accelerate in 2025, just as it did in 2024.

Rick: As we move past the integration, we remain confident in our ability to progress back into our long term, 5% to 7% growth range.

Rick: Second we believe there is an opportunity to grow revenue by doing more for our existing 43 million client accounts in the areas of wealth banking and trading.

Rick: We also refer to this as win win monetization we.

Rick: We have consistently demonstrated that when we have compelling schwab capabilities products and solutions for clients our clients love to engage.

Rick: Good examples are wassmer, Schwab wealth advisory and our lending solutions.

Rick: And when you look at our traders sink or swim adoption is up over 60% year over year on desktop and mobile.

Rick: As our clients engage they achieve better outcomes and are more satisfied we attract more of their assets and earn more revenue from the assets we do hold.

Rick: M&A remains an important metric and we are confident in our organic growth and at the same time. We are also focused on new account growth revenue on client assets revenue growth and earnings growth.

Rick: We expect strong growth for both revenue and earnings as we project, our supplemental borrowing to diminish significantly in 2025, and our investments and deepening client relationships to continue to pay off.

Rick: And we're poised for greater capital return during 2025.

Rick: And the third message I Hope you walk away with today is our future is bright with a relentless focus on our clients, we're continuing to innovate with solutions capabilities and experiences to meet clients evolving needs fueling our long term profitable.

Rick: Growth.

Rick: 'twenty 'twenty four was a strong year for markets in part helped by the easing of rates by the Federal Reserve.

Rick: Within Schwab it was a year of client transitions as we successfully completed the largest brokerage conversion in the history of our industry.

Rick: In total through the integration, we welcomed over 17 million Ameritrade client accounts and brought nearly two trillion in assets to Schwab, we did so near flawlessly and with less client attrition than forecasted.

Rick: It was also a year of leadership transitions, where we executed on our long standing and thoughtful succession planning.

Rick: Through it all with through client sizes, our guide we delivered exceptional results across multiple measures.

Rick: When we measure our growth, we look holistically at client growth adoption.

Rick: Adoption and usage of our solutions and capabilities as well as our financial growth.

Rick: And 'twenty 'twenty four was a year of robust growth across all major fronts.

Rick: From a client perspective, we drove meaningful growth in M&A and new brokerage accounts in 'twenty 'twenty four with good momentum into 2025.

Rick: As you can see on the page core M&A reached 367 billion for the year up 20% over 2023.

Rick: We attracted nearly $115 billion in M&A in the fourth quarter up 51% from the prior year.

We're more than a year out from the advisor services conversion and we've seen M&A in that segment returned to normalized growth levels.

Rick: Within our retail segment, we're making progress in returning to normalized growth in M&A as you would expect only six months removed from the most complex part of the transition.

Rick: Retail core M&A grew by over 50% versus the prior year quarter and nearly 20% for the year.

Rick: We are making solid progress in growing our relationships with legacy Ameritrade, specifically legacy Ameritrade M&A continues to increase and these clients are engaging in advice and banking beyond our estimates, which is a positive sign for the future.

Rick: And notably Schwab clients are adopting the best of Ameritrade offer 25% of Thinkorswim users are now legacy Schwab clients.

Rick: This is exactly where we expected to be at this point past the integration where legacy Ameritrade clients are now used to our platform and we're building and deepening relationships is.

Rick: As this continues we fully expect to return to our organic growth rate of 5% to 7% and we're confident we'll see meaningful asset growth in 2025 that will bring us closer to these levels. The more time, we spend with legacy ameritrade clients. The more M&A they are bringing in more.

Rick: They're engaging in our solutions at.

Rick: At the same time, we're continuing to deepen relationships with Schwab clients. It is an exciting time for our growth at Schwab.

Rick: And it is important to emphasize while M&A and account growth are important. We're also focused on other measures of growth for the firm.

Rick: Clients continue to do more and more with US. This is a reflection of the trust they place in us the success, we're having in serving them and an indicator of our ability to drive future profitable growth in.

We're engaging in our solutions.

Rick: In 2024 clients engage strongly and our trading wealth and lending solutions.

and the more they are engaging in our solutions.

At the same time, we're continuing to deepen relationships with Schwab clients. It is an exciting time for our growth at Schwab.

Rick: Daily average trades grew nearly 10% year over year.

Rick: Investing net flows reached a record 55 billion in 2024 up nearly 70% over last year and 80% for the quarter.

And it is important to emphasize, while N&A and account growth are important, we are also focused on other measures of growth for the firm.

Rick: Our pledged asset line balances increased to 17 billion up more than 25% year over year.

Clients continue to do more and more with us. This is a reflection of the trust they place in us, the success we are having in serving them, and an indicator of our ability to drive future profitable growth.

Rick: These growth measure show, we are broadening and deepening our relationships with our clients doing more to meet their evolving needs and helping them conduct more of their financial lives in one place with us.

In 2024, clients engage strongly in our trading, wealth, and lending solutions.

Rick: This is an important source of revenue growth for us in the future and more importantly, it helps our clients achieve better financial outcomes for their for their families and for themselves.

We have a trade of nearly 10% year-over-year.

National investing net flows recently recorded $55 billion in 2024, up nearly 70% over last year and 80% this quarter.

With meaningful client solutions growth you can see on the page. We've also delivered growth in revenue and earnings.

Our budget asset line analysis increases $17 billion, up more than 25% year-over-year.

Rick: Fourth quarter total revenue was up 20% over the prior year and up 10% sequentially over the third quarter of 2024.

These are all messages showing our pride and deep-seated relationships with our clients. Today we want to take a second moment to thank you for helping us conduct more of this digitalize-in-one-place with us.

Rick: Adjusted earnings per share were a dollar in <unk> for the fourth quarter up 49% over the prior year and up 31% sequentially over Q3.

This is an important source of revenue growth for us in the future. And more importantly, it helps our clients achieve better performance outcomes for their families and for themselves.

Rick: Adjusted pre tax margin pre tax margins came in at 46, 6% for the fourth quarter and 42, 5% for the full year fueled by our revenue growth and disciplined expense management.

Thank you for watching Solutions for Health. Please subscribe to our YouTube channel and follow us on Twitter, Facebook, and Instagram. Thank you for watching.

Rick: As you can see with this holistic picture of our profitable growth. We are turning the page on our 2024 transition year in a position of strength.

Thanks everyone.

Rick: And we believe we are well positioned for lift off in 2025 across the multiple measures I just discussed.

$1.04 for the 4th quarter, up 49% over the prior year, and up 31% sequentially over Q3.

Rick: There are several reasons for our confidence.

Rick: First we are a leader in the two fastest growing segments in our industry and we have a value proposition that we believe sets the standard for the industry.

Speaker Change: I'd also like to point out that that's not even 46.6% for the fourth quarter. It's 42.5% for the fall year. See you tomorrow, everyone. Discipline, expense, management.

Rick: Second our business fundamentals are healthy clients are trading more borrowing more and seeking more advice solutions.

Speaker Change: As you can see with this holistic picture of our profitable growth, we are trying to meet the 1.24 transitionary position of strength.

Rick: Third our client base is diverse and growing across age groups and wealth segments. We are winning with our as of all sizes. We are attracting younger investors with 33% of our new to firm retail households, under the age of 30 and more than 50% under.

Thank you.

Speaker Change: First, we are a leader with two steps across the entire industry. We provide propositions and we will accept the standard for the industry.

Rick: The age of 40.

Rick: The percentage of new to firm retail households, classified as trader is growing and higher network clients, who comprise 70% of our retail assets continue to turn to schwab for their more complex financial and wealth management needs.

Speaker Change: Second, our business partners are healthy, concentrating more, borrowing more, and seeking more advanced solutions.

Thank you.

Speaker Change: Third, our client base is diverse and growing across age groups and wealth segments.

Rick: Fourth with that backdrop and positive momentum, we're playing offense and leaning further into investments that will fuel our profitable growth across all measures.

Speaker Change: We are winning with RAs of all sizes. We are attracting younger investors with 33% of our new to firm retail households under the age of 30 and more than 50% under the age of 40.

Rick: In combination investments within our four strategic focus areas will help us serve our clients evolving needs make it easier for them to do business with us and help us operate even more efficiently.

Speaker Change: the percentage of new-to-firm retail households classified as trader is growing. And higher net worth clients who comprise 70% of our retail assets continue to turn to Schwab for their more complex financial and wealth management needs.

Growing and deepening client relationships is our first focus area.

Rick: Over the past couple of years, we've made investments in our trading wealth and lending offers and those efforts are paying off with the type of growth I've shared.

Speaker Change: Fourth with that backdrop and positive momentum we're playing offense and leaning further into investments that will fuel our profitable growth across all measures.

Rick: In 2025 will make even more investments to deepen and expand relationships, we will hire hundreds of new financial consultants and expand our physical branch network in a meaningful and thoughtful way in the year ahead.

Speaker Change: In combination, investments within our four strategic focus areas will help us serve our clients' evolving needs, make it easier for them to do business with us, and help us operate even more efficiently.

Rick: We're making incremental investments in marketing and advertising to raise awareness of schwab among retail investors and advisors alike.

Growing and deepening client relationships is our first focus area.

Rick: We'll continue to enhance our capabilities and solutions for client segments with specific needs with investments in our trader offer our wealth offer and our ultra high net worth capabilities for RIAA and retail clients.

Speaker Change: Over the past couple of years, we've made investments in our trading, wealth, and lending offers. And those efforts are paying off with the type of growth I've shared.

Rick: This includes enhancing our alternative investment solutions, and expanding our lending capabilities as well as our tax trust and estate tools.

Speaker Change: In 2025, we'll make even more investments to deepen and expand relationships. We will hire hundreds of new financial consultants and expand our physical branch network in a meaningful and thoughtful way in the year ahead.

Rick: Our award winning bank was purpose built for investors and helps us stand apart by offering among the lowest lending rates in the industry.

Speaker Change: We're making incremental investments in marketing and advertising to raise awareness of Schwab among retail investors and advisors alike.

Rick: F T I C insured cash access to pledged asset lines in a day and strong transactional capabilities in combination with our fixed income and money fund capabilities. There is no better place for liquid assets than here at Schwab.

Speaker Change: We'll continue to enhance our capabilities and solutions for client segments with specific needs with investments in our trader offer, our wealth offer, and our ultra-high net worth capabilities for RIA and retail clients.

Rick: We'll continue to invest in our industry, leading trader offer including expanding 24 by five trading launching spot crypto trading when and if regulations make it permissible and continuing to invest in our trading education and coaching which is a key differentiator.

Speaker Change: This includes enhancing our alternative investment solutions and expanding our lending capabilities, as well as our tax, trust, and estate tools.

Speaker Change: Our award-winning bank was purpose-built for investors and helps us stand apart by offering among the lowest lending rates in the industry, FDIC-insured cash, access to pledged asset lines in a day, and strong transactional capabilities.

Rick: In advisor services, we are adding support and capabilities for our as of all sizes, while also helping new advisors transition to independence.

Rick: And we will continue our multi year effort to introduce even more workplace clients to our investing and wealth management capabilities.

Speaker Change: In combination with our fixed income and money fund capabilities, there is no better place for liquid assets than here at Schwab.

Rick: Our second strategic focus area is creating value through scale and efficiency in.

Speaker Change: We'll continue to invest in our industry leading trader offer, including expanding 24 by 5 trading, launching spot crypto trading, when and if regulations make it permissible, and continuing to invest in our trading education and coaching, which is a key differentiator.

Rick: In 'twenty 'twenty four we captured 100% of the Ameritrade run rate expense synergies, we invested in new technologies and capabilities that help our employees do their jobs more efficiently. We increased usage of schwab knowledge assistant by 90% in 2024, which is our AI technology.

Speaker Change: In Advisor Services, we are adding support and capabilities for RIAs of all sizes while also helping new advisors transition to independence.

Rick: Supporting the efficiency of our service professionals.

Speaker Change: and we'll continue our multi-year effort to introduce even more workplace clients to our investing and wealth management capabilities.

Rick: Through these efforts and others were able to drive down our cost per client account, which has decreased more than 25% in the last decade on an inflation adjusted basis cost per account has decreased nearly 50%.

Speaker Change: Our second strategic focus area is creating value through scale and efficiency. In 2024, we captured 100% of the Ameritrade run rate expense synergies. We invested in new technologies and capabilities that help our employees do their jobs more efficiently.

Rick: This focus helps us keep costs low for our clients, while also enabling us to invest in our highest priority growth opportunities in.

Speaker Change: We increased usage of Schwab Knowledge Assistant by 90 percent in 2024, which is our AI technology supporting the efficiency of our service professionals.

Rick: In 2025. These critical efforts will continue well invest in continued process transfer transformation and systems modernization.

Rick: We'll continue to invest in AI and other technology to help employees across the firm do their jobs more efficiently.

Speaker Change: Through these efforts and others, we're able to drive down our cost per client account, which has decreased more than 25 percent in the last decade. On an inflation-adjusted basis, cost per account has decreased nearly 50 percent.

Rick: These efforts benefit our clients by making it easier to work with us burner.

Rick: Benefit of our employees by making their jobs easier and also free up expense capacity to fund our growth.

Speaker Change: This focus helps us keep costs low for our clients, while also enabling us to invest in our highest priority growth opportunities. In 2025, these critical efforts will continue. We'll invest in continued process transformation and systems modernization.

Our third strategic focus area is delivering on the brilliant basics for our clients, which is one of the most effective ways, we can build trust and nurture client loyalty.

Rick: Simply put we strive to make it easy for clients to work with us in every interaction in every channel and.

Speaker Change: We'll continue to invest in AI and other technologies to help employees across the firm get their jobs more efficiently.

Rick: And we delivered for clients in 'twenty, 'twenty, four which you can see with our record client satisfaction scores.

Speaker Change: These efforts benefit our clients by making it easier to work with us, benefit our employees by making their jobs easier, and also free up expense and capacity to fund our growth.

In 2025, delivering on the brilliant basics remains a top priority everything we do is oriented towards setting our client service and experience apart.

Rick: Finally, we can't serve our clients without our highly engaged dedicated employee base that provides our exceptional client service and experience.

Speaker Change: Our third strategic focus strategy is delivering on the priority basis for our clients, which is one of the most effective ways we can build trust and nurture client loyalty.

Rick: In 2025 and beyond we'll continue to invest in our people to deliver the differentiated service that our clients value and that sets us apart.

Speaker Change: Simply put, we strive to make it easy for clients to work with us in every direction, in every channel.

Speaker Change: And we delivered for clients in 2024, which you can see with our record client satisfaction scores.

Rick: With a clear purpose and relentless focus on clients. It is an exciting time for schwab.

Speaker Change: In 2025, delivering on a brilliant basic training may be a top priority. Everything we do is oriented towards setting our clients' service to the extreme of self-empowerment.

Rick: In 2024, we delivered strong growth across multiple measures during our transition year.

Rick: With strong competitive positioning healthy business fundamentals and a growing and diverse client base momentum is continuing to build 2025 is a lift off year.

Speaker Change: Finally, we can't serve our clients that are highly engaged, dedicated employees that provide our exceptional client service and experience.

Speaker Change: In 2025 and beyond, we'll continue to invest in our people, to deliver a good quality food service that our clients value, and that's just the best part.

Rick: As we look to the long term, we're confident our continued investments in innovation will drive client growth solutions growth and financial growth through the cycle.

Rick: And with that I will turn it over to Mike to share more detail on our financial picture.

with a clear purpose.

It is an exciting time for Schwab.

Mike: Thank you, Rick and I could not agree more about how exciting at the time of days for Schwab right now.

Speaker Change: In 2024, we deliver strong growth across multiple measures during our transition year. With strong competitive position, healthy business fundamentals, and a growing and diverse client base, momentum is continuing to build. 2025 is a lift-off year.

Mike: In terms of what the firm has accomplished during 2024 and the tremendous opportunity still ahead of us.

Mike: As Rick mentioned, although 'twenty 'twenty four was a year of transition we were able to deliver meaningful growth across the firm.

Mike: Investors opened over 4 million new accounts during the year and brought an increasing amount of assets to schwab.

Speaker Change: As we look to the long term, we're confident our continued investment in innovation will drive the right path, solutions for all, and the future works. Thank you for listening.

Mike: It's further deepen their relationships with us as they took advantage of the breadth of modern wealth solutions available on our platform.

Speaker Change: And with that, I will turn it over to Mike to share more detail about our traditional mixture.

Mike: And we delivered strong revenue and earnings expansion over the course of the year.

Mike: Thank you, Rick, and I cannot agree more about how exciting the confidence is right now. But in terms of what the President has accomplished in 2024, an extraordinary opportunity still lies ahead of us.

Mike: 2024 brought encouraging trends around transactional cash levels.

Mike: Realignment activity continued to decelerate as we move towards more business as usual client activity.

Mike: As I mentioned, over the course of 24 months since your transition, we were able to deliver millions of dollars across the country. And that's because of the number of foreign-related jobs that you have. And that's an increase in the number of benefits that you have.

Mike: At the same time, we've made meaningful progress on reducing the level of bank supplemental funding to approximately 50 billion down about 50% from peak levels and our capital ratios increased to within our targeted operating range.

Mike: relationships with us, and they took advantage of the fact that we had a lot of solutions available on our platform. And we delivered strong revenue and revenue distribution over the course of the year.

Mike: In summary, our success during 2024 enables us to enter this year with a lot of momentum and we have a clear plan to drive meaningful business and financial growth in 2025 and beyond.

Mike: 2024 Project has a strength of around 3,000 test levels. We hope that this will continue to accelerate as we move towards more business-as-usual-acquired activity.

Mike: Before we share some thoughts about the future, let's review our strong 2024 results.

Mike: Revenue for <unk> totaled $5 3 billion a year over year increase of 20% as we benefited from growth across all line items.

Mike: At the same time, we need to focus on increasing the level of things government provides to protect the rights of individuals and to protect the rights of individuals. The non-profit ratio increases the non-profit operating range.

Mike: The leveling off of cash realignment activity. The continued reduction in higher cost bank supplemental funding and healthy margin balance growth helped for Q net interest revenue increased 19% versus the prior year.

Mike: In summary, our success story in 2024 is no less than this year with a lot of momentum. We have a clear plan to strive to meet our business and potential goals in 2025 and beyond.

Mike: While a second consecutive year of 20 plus percent equity market appreciation, coupled with clients increase utilization of our modern wealth solutions pushed asset management and administration fees to a new record.

Mike: It probably shouldn't have popped up on the page there, which would have been a large chunk of 20.4 megawatts.

Mike: Thank you for watching Title 5.3.3. We are only at an increase of 20% as we navigate control across our island.

Mike: For Q trading revenue grew by 14% versus the fourth quarter of 2023, which benefited from the step up in client trading volumes as investor sentiment improved further.

Mike: The record-topping tax rate in Washington, D.C., the continuing reduction in private cost and supplementary funding, and housing margins down the road, helped support shareholder relationships revenue increase 19% versus the prior year.

Mike: While bank deposit account fees moved higher due to improved net yield as a growing percentage of the balances have converted to the floating rate bucket.

Mike: Our exciting 2017 year of 20-plus percent equity-minded participation helped with climate-increased utilization of our modern water solutions, which has imagined an administration leap to a new record.

Mike: Now looking at expenses fourth quarter adjusted expenses came in flat on both a sequential and year over year basis.

Mike: Helping full year 2024, adjusted expense growth to finish in line with our expectations of approximately 2%.

Mike: For duty, training record you provide for him with him per point in 2023, which stands in a stocked incorporation budget and investitute, so that's right.

Mike: During a transitional year, we continued to invest to drive growth and to enhance our client offering while at the same time drive incremental scale and efficiency.

Speaker Change: Well, I think the product has to be higher to improve my yield. I think 90% of these companies have to put it to the first place market.

Mike: In all the fourth quarter represented a strong finish to the year with significant topline growth plus expense discipline, producing a quarterly adjusted pre tax profit margin approaching 47% and adjusted earnings per share of a dollar one.

Speaker Change: Now we're looking at expenses. What kind of expenses came into play on a sequential and year-over-year basis?

Speaker Change: Thank you for joining us for this webinar. I just want to express my appreciation for your participation. I hope to talk to you next time.

Mike: Well for Q E. P. S included three cents from certain items exiting the year with a run rate of around the dollar demonstrates the progress we made toward our financial objectives and sets the stage for strong growth in 2025 and beyond.

Speaker Change: During the transitional year, we continue to invest to drive growth. This is such a fine offering, while at the same time, tracking critical scale and efficiency.

Mike: Finally, the firm's full year financial results reflect the progress made across all aspects of the business. During this past year 'twenty.

Thank you.

Speaker Change: Now, the fourth quarter represented a strong finish to the year, with significant top-line growth, plus expenses including reducing the quarterly adjusted premium tax cut to margins approaching 47%, and adjusted earnings per share of $1.01.

Mike: 'twenty 'twenty four revenue reached $19 6 billion up 4% year over year, while adjusted expense growth finished in line with expectations at approximately 2%, resulting in adjusted pre tax margin expanding to 42.5% and earnings per share increasing to $3.

Speaker Change: While the selection of UPS includes the exemptions to finance, continuing to have a system that makes up around $1,000, demonstrate that partners may need to try out financial objectives to help them succeed to a strong growth in 2025 and beyond.

Mike: And 25 cents.

Mike: Moving to our balance sheet, we continue to support our clients with both margin and bank loans to clients up significantly during the year include.

Speaker Change: I wish you the best of luck for the rest of your 20th anniversary. For the time that we have left, I'd like to thank you for joining this talk here.

Mike: Including 34% growth in margin balances at the broker dealer and low double digit bank loan growth with an over 1 billion increase in power balances in the fourth quarter alone.

Speaker Change: While adjusted, expenses are finished in line with expectations at approximately 2%, resulting in adjusted contract margins extending to 42.5%, and earnings per share increasing to $39.25.

Mike: We saw a continuation of the build in transactional sweep cash during the fourth quarter, including 25 billion of net inflows in December.

Mike: The strong seasonal inflow during the last month of the year is consistent with the historical trends.

Speaker Change: Moving to our top sheet, we continue to support our clients. We want to mark it and tell them the clients are significantly dreaming yet.

Mike: And if history remains a guide we would anticipate much of the seasonal build the flow back out into the market. During the first couple of months of 2025.

Mike: The combination of the principal and interest coming off of the securities portfolio plus the cash inflow on the full court has enabled us to reduce high cost supplemental funding at the banks.

Thank you very much.

Speaker Change: We thank you for your patience on the challenge we've had to reach out to in the form of contracts, including the $25 million net inflows in December. This trust is working well during the last month of the year. It's been set in the best light of times.

Mike: Double clicking into our progress on reducing bank supplemental funding following the 15 billion pay down during the fourth quarter. We have now cut the level of higher cost supplemental funding and half from its peak level in May 2023.

Speaker Change: In the history of women in the dark, women participate in much of this issue as well, as far back as the 19th century and the first several months of 2025.

Mike: Due to a range of factors, including typical seasonality, we would not necessarily expect to reduce spending levels by the same magnitude every quarter. However, as we move forward, we do expect to make additional progress each quarter until the supplemental funding at the banks is reduced to a level consistent with our diversified.

Speaker Change: The combination of the principal and interest, coming out of the security portfolio, plus its cash-in-flow program, enable us to reduce high costs of financial funding for the banks.

Mike: Long term funding profile.

Speaker Change: So, thank you for your progress on the recent banks supplement of funding. Following the $15 billion transfer plan, we have now cut the level of 5% supplement of funding tax from its peak level in May 2020.

Mike: Finally, our capital levels move to within the adjusted tier one leverage objective of $6, 75% to 7%. It is important to note. The continued build of capital driven by our strong earnings as well as accretion of unrealized marks even while long term rates moved higher journey.

Speaker Change: We are not necessarily expected to reduce the number of COVID-19 cases, however, as we move forward, we do expect to make additional coverage for each COVID-19 case until the federal government is revising the banks. This is just a rebuttal. June 16th, 2025. Long-term funding profile.

Mike: In the quarter.

Mike: And for Q, the pull to par of those unrealized marks alone offset the capital impact of the sharp rise in interest rates across the curve.

Mike: Shifting the focus of 2025, we expect our momentum from 2024 to carry over into this year.

Bye.

Speaker Change: Finally, our capital levels moved to within the adjusted two-month limit of getting of 6.75% to 7%. It is important to note the continued growth of capital, to advise our strong earnings as well as the creation of a liberalized market, even while large companies will try to join the growth.

Mike: With strong client growth and deeper relationships as we continue to meet the evolving needs of individual investors and the advisors, who serve them. We expect this will translate into meaningful and diversified financial growth as well.

Mike: As is the case in any year, our financial outcomes will be influenced by a range of factors, including the path of interest rates equity market performance as well as client engagement and activity levels.

Speaker Change: It's what you do. So for the time being, I'm going to let my thoughts alone. I'll accept the challenge as it is. I'm going to talk about it in just a couple of seconds.

Mike: Therefore, our 2025 financial scenario is grounded in several key macroeconomic assumptions. We include 125 basis point cut to the feds target rate, bringing the upper bound to four point to 5% by the end of 2025.

Speaker Change: Shifting the focus to 2025, we expect that momentum from 2024 to try the other end of this year. We're traveling quite a bit to deepen our relationships as we continue to meet the evolving needs of individual investors and the advisors who serve them.

Mike: Equity market returns consistent with the long term average of six and a half per cent and client trading activity and mix remaining generally in line with four Q 'twenty four levels.

Speaker Change: We expect this will translate into new people and the rest of Fox's future growth as well.

Speaker Change: As is the case in any year, our financial outcomes will be influenced by a range of factors including the capital gains rates, equity market performance, as well as party engagement and action in the world.

Mike: Against this type of macro backdrop, we would expect total revenue growth of 13% to 15% in 2025. This scenario also results in continued reduction of bank supplemental funding.

Speaker Change: Therefore, our 2025 interest scenario is grounded in several key macroeconomic assumptions.

Mike: All year net interest margin of 2.55 to six 5% with average for Q2 2025, NIM expanding through that 2.8% level also full year 2025 interest earning assets are expected.

Speaker Change: We include one 25 basis point cut to assess target rates, bringing the average balance to 4.25% by the end of 2025.

Speaker Change: I'd like to make sure it's consistent with the long-term average of 6.5% and quantitative intensity index, which is generally in line with the 4Q24 models.

They are expected to decline slightly year over year as we prioritize the continued pay down of higher cost supplemental funding at the banks.

Speaker Change: Against this type of macro backdrop, we would expect total revenue growth of 13 to 15 percent in 2025. This scenario also results in continued reduction of tax government funding.

Mike: From a 2025 expense perspective, we still anticipate mid single digit growth relative to 'twenty, 'twenty, four or somewhere within the 4.5% to 5.5% range.

We have an interest margin of 2.55, 2.65%.

Mike: In terms of expense planning for the year as Rick outlined earlier, we are playing offense and taking steps to further accelerate client solution and financial growth.

with average 14,20,25 million expense included at 2.8% level also.

Speaker Change: For the year 2025, interest earning assets are expected to decline slightly nearer the year as we prioritize the continuing trade-off of high-price double-double-bonding investments.

Mike: Therefore, we have aligned our spending plan to our key strategic initiatives with a significant portion earmarked for growth, including hiring F. C's and other client facing personnel expanding the breadth of solutions, we offer investors as well as leaning into targeted marketing and advertising initiatives.

Speaker Change: We're still anticipating it's going to be 2024 to 5.5% range.

Mike: Yeah on growth. We are also continuing to invest in our firm's scale and efficiency, which offers both near and long term benefits and we will keep investing in other key fundamentals such as continuing to advance our technology stack and of course, our people who are foundational in driving our best.

Speaker Change: and connect to open up rights, and the power of choice. We are close partners, in setting the starts of smarter and just a lot more clients. So mission, effort, they chose.

Speaker Change: We have a lot of outstanding questions, so I'd like to switch it to the next step. There's a significant proportion of questions.

Mike: In class service experience.

Mike: One reminder, on expenses, we'd expect outlays during the year to remain generally consistent with the historical cadence with slightly higher levels in the first quarter due to typical seasonal factors.

Speaker Change: including hiring ex-thieves and other crime-information personnel, expanding the breadth of solutions we offer to investors, as well as leading and key traffic in marketing and advertising initiatives.

Mike: So bringing this all together the combination of strong topline growth and balanced expense management implies healthy margin expansion into the upper forty's with fourth quarter adjusted pre tax margins approaching 50%. If you follow the math all the way down to the bottom line. This full.

Speaker Change: In our group, we have also continued to invest in our funds to our organization team, which offers both near and long-term benefits.

Speaker Change: And we don't keep investing in R&D for a long time, such as in generating 20,000 R&D projects. And of course, our people, who are foundational in driving our best-in-class civic execution.

Mike: Ear scenario implies potential adjusted earnings in the $4 10 to $4 20 area, which would represent year over year earnings growth of around 25% to 30%.

Speaker Change: When providing our expenses, we expect our wages to be attributed in general in consistence with the historical cadence, with a slightly higher level in the first quarter due to technical feasible factors.

Well rates client activity and other variables may differ from our financial scenario, we are confident in our ability to drive strong financial outcomes across a range of environments.

Thank you.

Speaker Change: So, what can you say about the combination of strong carbon growth and balanced expense management implies housing margin expansion into the upper 40s, with fourth quarter adjusted pre-tax margins approaching 50%.

Mike: Before we move away from the scenario, we thought it might be helpful to provide a set of static revenue sensitivities based on year end 2024 levels in an effort to help you adjust estimates and shape your own view around 2025, please don't hesitate to reach out to the IR team with any questions about the sensitivities or.

Speaker Change: We found that, although it has good bottom lines, this four-year scenario implies potential adjusted earnings in the $4.10 to $4.20 area, which would represent a nearly-near-earnings growth of 125 to 80%.

Mike: Certain underlying assumptions for the 2025 financial scenario.

Speaker Change: While rates, private activity, and other variables may differ from office-to-office scenario, we have confidence in our ability to drive strong financial outcomes across a range of environments.

Mike: As mentioned now that we have moved to within our adjusted tier one operating range, we expect to pivot and begin to look across our capital framework to many of you. This will be a familiar framework as always our top capital priority is to support long term business growth.

Thank you.

Speaker Change: It's probably a little late for this scenario, but I thought it might be helpful to provide you with some statistical evidence of sensitivity based on your end-2024 levels. In an effort to help you adjust estimates and shape your own view around 2025, please don't hesitate to reach out to the IRT for any questions about any sensitivities or certain underlying assumptions for the 2025 NHS scenario.

Mike: The extent, we have excess capital beyond our needs. We have sought throughout our history to return to stockholders through a variety of means including our common dividend, which historically has risen alongside GAAP earnings for.

Mike: Preferred security redemptions, considering cost and an optimized equity funding mix as well as opportunistic stock buybacks as I noted back in October.

Speaker Change: As mentioned, now that we have moved to extend our life-sustenance to one hour and 19 minutes, we expect that the pandemic can be viewed as a little bit of trouble for the travel framework. To many of you, this will be a familiar travel framework. As always, our top travel priority is to support long-term business plans.

Mike: In the very near term, there's another consideration our continued progress on further reducing bank supplemental funding to the extent, we continue to make the expected progress on our key financial objectives. It is reasonable to believe we will commence various forms of capital return over the course of 2025.

Speaker Change: To the extent that we have access to capital beyond our means, we have sought throughout our history to ensure that the stockpilers that are thriving in New York City are coming to them, which historically has been a problem that we have faced.

Mike: As excited as we are about 2025, we do not view this coming year as a final destination with a long term diversified model intact. We are equally enthusiastic about the tremendous long term opportunity in front of us given our attractive value proposition and leadership position with.

Speaker Change: For further security intentions, considering cost and an optimized equity funding mix, there's more of an opportunity to develop products. As I noted back in October,

Speaker Change: It's a very good job, this is a very good situation. I can see you proud of yourself for what you do. Thanks so much for coming.

Mike: And the two fastest growing segments of the U S wealth market, we expect to generate healthy organic account and asset growth as we serve an increasing number of investors with their suite of modern wealth management solutions across a base lending trading and asset management.

Speaker Change: To the extent we continue to make these extensive progress, I have two initial objectives. In the 20s and 30s, we will continue to transform the talent of the child over the course of 2025.

Mike: This enables us to deepen client relationships, while further diversifying our revenues and of course, we continue to invest to support our long term growth trajectory, while at the same time driving enhanced scale and efficiency, which helps to further enhance our leading cost to serve.

Speaker Change: At this time, it is now about 3.25. We do not need a train yet to get to our final destination.

Speaker Change: with all the right tools to be able to solve problems in the past. We can't be great enthusiasts about which tools we need, or which tools we have, or which tools we need to find the best.

Speaker Change: in our traffic value propositions and leadership positions, which make two fast-growing segments of the U.S. wealth market. We expect to generate a healthy organic account and passive growth as we serve an increasing number of investors with their suite of modern wealth management solutions across device, lending, trading, and asset management.

Mike: This combination of diversified revenue growth and disciplined expense management positions us to drive incremental margin expansion through the cycle.

Mike: Guided by our balance sheet principles will maintain the resources needed to support client growth, while returning excess capital to shareholders inclusive of opportunistic buybacks.

Speaker Change: This enables us to deepen client relationships while further diversifying our revenues.

Mike: Scrap up during a transitional year, we achieved we achieved significant progress in all fronts in 2024 client base product and solution set and financial results.

Speaker Change: And of course, we continue to invest and support our long-term growth trajectory, while at the same time, driving against non-efficiency, which helps to further enhance our leading cost success.

Mike: Momentum has carried over into 2025 and helps position us for further substantial growth in the year ahead, and importantly, our confidence regarding 2025 stems from the durability of our model, meaning we can drive shrunk strong year over year financial growth across a wide range of environments.

Speaker Change: This combination of diversified family groups and disciplined expense management positions us to guide incremental market expansion through the cycle.

Speaker Change: Guided by a balance of principles, we'll maintain the resources needed to support crime groups or the training and support of first-time holders in crisis or opportunistic problems.

Mike: And with the key components of our diversified financial model intact healthy organic growth.

Speaker Change: Stop. During this transitional year, we achieved significant progress across 2020-21. Client-based, confidence-in-solution-filled, and financial results.

Mike: And client relationships and therefore revenue from multiple sources expense disciplined and efficient deployment of the firm's capital and liquidity.

Speaker Change: We have a tremendous opportunity to continue to meet the evolving needs of our clients and deliver profitable growth through the cycle with that Jeff I'll hand, it back to you.

Speaker Change: This momentum has turned over to 2025 and comes to finish off the service that stands above and in your hands.

Speaker Change: And finally, our conference is on 2025, and for the majority of our model meetings, we can drive short-term and long-term financial growth across a wide-range environment and within each component of our diversification model impact.

Jeff Hand: Thank you Rick and Mike our operator can you. Please open up the line to remind everyone. How they can ask a question.

Jeff Hand: Thank you we will now begin our question and answer session. If you'd like to ask a question. Please press star One. Please press star two if you would like to withdraw your question again that is star one to ask a question. Our first question comes from Steve <unk> with Wolfe Research. Your line is open.

Speaker Change: Help the other young adults. Keep them in tight relationships and therefore let them have multiple choices. Expense the discipline. And make sure the timing of the funds happens around the country.

Speaker Change: Hi, Good morning, good morning, Mike.

Speaker Change: We want to make sure we have the opportunity to change the community of all the needs of our classrooms and deliver possible growth through the cycle. With that, Jeff, I'll hand it back to you.

Speaker Change: So one way to start wanted to start with a question on the M&A target. So Ricky you noted.

Speaker Change: <unk> is delivering organic growth in line with the target range, we're seeing some recovery or normalization of retail flows and just looking at the results. This year are a hit 5% retail was closer to three and a half just given it was only at the lower end of that target range the gap in retail.

Jeff: Thank you, Mr. Mike. Operator, can you please open the line for everyone to have a chance to question?

Speaker Change: Thank you. If you would like to ask a question, please press star 1. Please press star 2 if you would like to withdraw your question. Again, that is star 1 to ask a question. If you would like to ask a question, please press star 2.

Speaker Change: Still fairly wide.

Speaker Change: Why is that 5% to 7% still the appropriate and then they target and it might be helpful. If you could just unpack some of the building blocks supporting the closure of that gap.

Speaker Change: So, before I start, I want to start with a question on the M&A process. So, as you noted, I am a member of the Department of Age, which is the Department of Health and Welfare.

Stephen: Stephen Thanks for the question.

Stephen: I would highlight a couple of points about our growth. The first thing is this is where we expect it to be following.

Stephen: Storage really large integration.

Stephen: You know we moved it.

Speaker Change: And this would be the results this year. RIA is about 5%, which sounds close to 3 1⁄2. If you get RIA, you're looking at around that target range.

Order of our assets nearly 50% of our brokerage accounts, we move them from one experience to a completely different experience and I think what you're noting in those numbers is a reflection of the fact that we have gone from negative flows with our ameritrade clients as we expected some outflows had at the beginning of the integration.

Speaker Change: And that's a great task that's fairly wide. I'm glad you guys got to 70% so that you have a bit of a benefit from it. And I hope you have a beautiful time. And I look forward to seeing you next year. Bye-bye.

Stephen: We're just slightly positive to more and more positive and importantly, we're also seeing as we engage with these ameritrade clients that they are doing more and more business with us in fact, roughly a third of the flows into our solutions were driven by Ameritrade clients. So we're exactly where we thought we would be in there.

Thanks for the question.

Speaker Change: I have a couple of points about growth in the first three years.

Speaker Change: This is where we expected to be, probably, you know, a strikingly large integration problem.

Yeah. Bye. Bye.

Speaker Change: We're going to have access to nearly 60% of our corporate accounts. We have advanced from one experience to a completely different experience. And that's what we have been learning. It's just not as easy for us to question the fact that we can have governance problems making it as close to what our network requires us to be expected to have as opposed to at the beginning of the integration. We're excited and positive that we're going to be more cognitive. And importantly, we're also seeing as we're being introduced to more

Stephen: This transition, which is taking a set of clients from a you know represent half of our brokerage accounts from one experience to a different experience getting them used to that getting them comfortable with that and importantly building a relationship with those clients. So that they have the same trust and confidence that they have in the firm they worked with for years that they have.

Stephen: With Schwab and that is paying off and we're seeing growth with that group accelerating and the reason that's so important Stephen is because when we look broadly at our schwab clients. Our growth is consistent with the historical range. We've we've talked about so it's really going to be important that we nail. It for these ameritrade clients, we are investing in more and more relationships.

Speaker Change: In fact, roughly a third of the flyers into our solicitions were driven by a marriage-trained client. So, exactly where we thought we would be in this transition to taking it instead of trying to move, you know, represent a task for a representation of a task from one experience to a different experience. And again, we'd like to be comfortable with that. And importantly, building a relationship with those clients so they have the same trust and confidence

Stephen: And more and our physical footprint, because we think that will help accelerate the building of trust between us and some of those are legacy clients.

Lastly, I would encourage.

Stephen: Investors to think about our growth picture broadly at it we're not stepping away from our M&A a historical range in any way. We continue to know how important that is critical to the success and growth of our firm.

Speaker Change: for years, but they have a lot of problems. And that's the kind of thing we're seeing for our local tax group. So I think that's really important to see because when we look at property tax for our clients, our growth is consistent with the historical range we've talked about. So it's really important that we know what's great in our trade clients. We're not investing in more and more relationships and more in our physical footprint because then we can figure out how we can celebrate the building of trust between us and some of those legacy clients.

Stephen: At the same time I really think it's important to broaden how we think about schwab's growth. We have an enormous growth platform in front of US serving the 43 million client accounts that we have actually 44 million client accounts that we have today, serving those more deeply you know to me, it's a little bit.

Stephen: Kin to what Apple has done.

Lastly, I would encourage.

Speaker Change: I'm just curious to know how important that is and critical to the success and growth of our firm.

Outside of the iPhone growth they've found many many ways to grow with their existing client base and to me. We're in the exact same spot with a with a multitude of ways. We can help clients, whether it's it's helping them in a bull market for advice that exists whether it's helping them meet their lending solutions, where we lend to only a fraction of our clients at our.

Speaker Change: At the same time, I really think it's important to broaden how we think about jobs growth.

Stephen: Firm and we could be doing more in <unk>.

Speaker Change: We have an enormous growth platform in front of us, serving the 43 million client accounts that we have, actually 44 million client accounts that we have today, serving those more deeply.

Stephen: Milton progressed towards being able to do more to opportunities for us in trading theres opportunities for us to support our A's and tax trust in a state like services. So there is just a plethora of ways. We can do more for our existing 44 million client accounts. So I think it's really important when you think about our growth to think about both of those.

Speaker Change: You know, to me, it's a little bit akin to what Apple has done.

Speaker Change: outside of the iPhone growth. They've found many, many ways to grow with their existing client base. And they were in the exact same spot with a multitude of ways we can help clients, whether it's helping them in the bull market for advice that exists, whether it's helping them meet their lending solutions where we lend only a fraction of the clients at our firm and we could be doing more and we've built and progressed towards being able to do more. There's opportunities for us in trading.

Stephen: To the five to seven which we expect to and and and in growing more broadly with our with our 44 million clients accounts.

Ken Worthington: Thank you. Our next question comes from Ken Worthington with Jpmorgan. Your line is open hi.

Ken Worthington: Hi, good morning, Thanks for taking the question I wanted to maybe dig into the alternative buildup for retail and the program that you're trying to build them together I think part of the plan was to begin launching all or part of the retail customer base last quarter. So what's the Schwab currently offer for retail clients alternatives.

Speaker Change: to support RIAs and tax trusts and state-like services. So there is just a plethora of ways we can do more for our existing 44 million client accounts. So I think it's really important when you think about our growth to think about both of those.

Ken Worthington: Today, how do you see the timetable for that build out and I know that they are as have access to all to already but you do have more curated programs like I N T F that could be impactful what are your aspirations for all on the adviser side.

Speaker Change: getting to the five to seven, which we expect to. And.

and growing.

Ken Worthington: Yeah.

Ken Worthington: Thanks for the question, Ken Let me start by putting the retail alternatives launch into into context. It is a really important part of our offering for high net worth and ultra high net worth clients an area, where we are doing really well with clients and continue to broaden out how we serve them and what we can offer to them.

Thank you.

Ken Worthington: To make sure that our offer for those clients continues to be the strongest in the industry.

in the program that you're trying to build.

Ken Worthington: October we launched alternatives to a very limited group of clients. We will launch in the first half of this year much more broadly to our to our retail client base in terms of what that offering tails, we have five or six different categories of alternatives that we're making available that includes private equity.

So, that's the RIAs have asked.

Speaker Change: We want to make sure that our offer for those clients continues to be the strongest in the industry. In October, we launched alternatives to a very limited.

Ken Worthington: <unk> IV.

Ken Worthington: Hedge funds are long.

Ken Worthington: Long short.

Ken Worthington: And and exchange funds, which allow you to exchange a concentrated position for a diversified portfolio.

Ken Worthington: That's roughly the range of of Alts that we'll have with each of those categories will start with somewhere between one and three offerings within each of those categories that will grow over time, and the and the menu will broaden <unk>.

Ken Worthington: Standing behind each of those categories. We've hired a team of alternatives specialists that are available to spend time with our clients to help them answer their questions and to and to make sure. They find their way to the to the investment that's most suitable for them and their goals and objectives working with our finance.

Speaker Change: a group of clients. We will launch in the first half of this year much more broadly to our to our retail client base. In terms of what that offer entails,

of alternatives that we're making available.

Ken Worthington: Consultants.

Ken Worthington: In terms of the timetable I think I highlighted it first half of this year, we should be fully launched in in retail that's our expectation.

Ken Worthington: As it relates to advisor services, there's lots of opportunities are there as well as you mentioned our advisory clients do custody, a fair amount of alternative assets with us and we also have different alternatives programs that we make available here at Schwab.

Ken Worthington: Thank the opportunity going forward is for us to be offer a more curated set of alternatives to our advisors and to be bringing them.

Ken Worthington: To those advisor clients as opposed to primarily being in a position of just custody and the assets. The reason that's important is that we can help our advisors find suitable alternatives and at the same time, it's beneficial to our economics to be a two to two two offer that to our advisor clients. So I think all.

Ken Worthington: <unk> is a growing area for the for the industry an area, where we now see ourselves being quite competitive.

Ken Worthington: An area, where we are entering our ability to be the leading place for high net worth and ultra high net worth investors and our country.

Ken Worthington: Yeah.

Speaker Change: Thank you. Our next question comes from Brennan Hawken with UBS. Your line is open.

Brennan Hawken: Good morning, Thanks for taking my question Mike.

Brennan Hawken: Mike you spoke to capital returns increasing here in 2025.

Speaker Change: Given the adjusted leverage ratio inside your targeted range could you speak specifically to appetite Ah. If we end up seeing TD <unk> TD has sort of made some public comments about their stake and if they come to market your appetite and ability to participate in any kind of secondary from them.

Brennan Hawken: Large thank.

Brennan Hawken: Thank you.

Brennan Hawken: Hi, Bryan. Thank you for the question and then.

Brennan Hawken: Not much I would say on this topic for for obvious reasons and hard to comment in any definitive way on that but if you look back at history. It at similar types of situations. When we're given the appropriate time and opportunity to evaluate this tends to.

A situation, we like to be part of.

Brennan Hawken: But again I won't go beyond that at this point, we feel very good about the progress we've made broadly and as you know we are building capital and we are now in that our targeted operating range. Thank you for the question.

Speaker Change: Thank you. Our next question comes from Dan Fannon with Jefferies. Your line is open.

Dan Fannon: Thanks, Good morning, a microscope and he could talk about client cash trends. We obviously saw the normal seasonality in December and as I think you said in prepared remarks expect you know some of that to go back in.

Dan Fannon: Start the year here, but as you look beyond the first couple of months, how are you thinking about client cash levels.

Dan Fannon: Cash sorting.

Dan Fannon: Are you seeing here as we think about 2025 more broadly.

Speaker Change: Thank you for the question really.

Speaker Change: It really based on everything we've seen over the past couple of quarters would be suggestive that we're entering that more normalize environment for client cash. If you just go back to the previous year.

Speaker Change: The first half of the year was really that continued normalization of realignment and of course, the second half of the year, we did see two consecutive quarters of cash growth.

Speaker Change: And while that December number reflects seasonality again more indicative of that normalized environment. I think he should go forward I think of that deposit level of course in part being influenced by our new account growth of course there'll be other macro economic variables.

Speaker Change: The role of central banks, as well impacting levels of liquidity in the system, but I do think we are in that more normalized environment. At this time of course as we've always seen month to month quarter to quarter, you will see impacts of seasonality, but again I would suggest we are in that a more normalized environment.

Speaker Change: We're encouraged by the the last couple of quarters.

Speaker Change: Thank you. Our next question comes from Brian Bedell with Daily Keybanc. Your line is open.

Brian Bedell: Great. Thanks, Good morning folks, maybe just to back maybe tie two questions together just on the deposit formation. Just two questions. You just answered Mike maybe just what would you envision as the organic contributor to that deposit formation given the.

Brian Bedell: You know the efforts and the and the focus on you know generating a.

Brian Bedell: Greater than a day.

Brian Bedell: This year and then you know did you think you can get back to that 5% level.

Brian Bedell: You know at some point this year I know that I know that five to seven is sort of a long term target, but just in looking at.

Brian Bedell: And then with that in the new.

Brian Bedell: You know products, you're offering including the ultra platform do you think you can get back to that 5% range yesterday in sometime and it is really a second half.

Hi, Thanks for the question, it's Mike I'll take the first part of that and then Rick can pick up the second part of that question again, where we're encouraged by the trends we're seeing in deposits at two consecutive quarters of growth and as I highlighted I think the account growth that we've seen historically really is.

Rick: Associated with that new account openings and the portion of assets that come to us that are in the form of cash and of course, there could be a percentage that's off balance sheet versus on balance sheet, but but again, where we're seeing indicators that are the realignment activity is certainly.

Has that decelerated last year and we're looking at that new account formation now being the driver of that of that cash and keep in mind. It's been a long time since the fed has hiked rates previously of course, the fed began lowering rates at the back end of the year and so.

Rick: We think that again, that's a represents a lower propensity to realign so again encouraging trends.

Rick: And Brian I'll take the part on M&A and.

Rick: And highlight two things first we we we expect to make.

For us this year, so we put a share at four 3% for the year in terms of percentages.

Rick: We expect that to be higher in 2025.

Rick: We are also confident that over the long run 5% to 7% remains the right number and and and our goal. This year is to make progress towards that for all the reasons that I mentioned earlier.

Rick: Yeah.

Speaker Change: Thank you. Our next question comes from David Smith with tourists Securities. Your line is open.

David Smith: Good morning.

David Smith: On the topic of the buyback can you give us a sense of how low supplemental funding has to get before you can resume that and on a related note is there an upper bound that you've seen to the adjusted OCI.

David Smith: Above where it's just you wouldn't feel compelled to repurchase shares.

Speaker Change: David in terms of the supplemental borrowings yet again, we saw very good progress.

Speaker Change: Production in the quarter again that is a combination of the cash that came in over the course of the quarter.

Speaker Change: As well as of course, the principal and interest proceeds coming off of the investment portfolio.

So as I look out over the course of the year, we expect to make that that steady progress in reducing that a supplemental funding consistently and I think that what I would ask you to keep in mind is that we don't intend to bring supplemental funding down to zero, we wanted to see.

Speaker Change: Good progress, but for the purpose of good liquidity management practices, we do want to keep funding diversification in place, we'll bring that bank supplemental funding down to minimum levels, but we wanted to keep that operational we want to keep that flexibility that's consistent with good sound liquidity management. So.

Speaker Change: I don't look at that as a gating factor over the course of the year necessarily we want to see that we want to see that progress, but again the endpoint is certainly not zero.

Speaker Change: Thank you. Our next question comes from Bangladesh with Barclays. Your line is open.

Speaker Change: Hi, good morning, and thank you for taking the question.

Speaker Change: I wanted to just ask about the Opex growth for next year I think there's a couple of one time items in 'twenty 'twenty four I was under the impression there'd be a little bit of expense synergies that will still be incremental going into next year and in the mid single digit sort of number feels a little bit more in line I know there are some other factors too like some of the the exchange fees around trading.

Speaker Change: But just curious if there's anything else going on any other sort of like one time items to think about and how you would compare next year's guide in the context of your sort of longer term financial formula.

Speaker Change: Thank you.

Speaker Change: So for that expense.

Speaker Change: We talked about mid single digits at four and a half to five 5% we feel very good about that range again, we're in a position where we want to invest in growth. We wanted to invest in our solutions and the capabilities that we're providing to clients and importantly, we're also investing in that efficiency and again that has gotten any.

Speaker Change: Loss to recycle that efficiency and to continue to grow while at the same time, ensuring that we're maintaining that low cost to serve while at the same time, achieving our financial outcomes I don't think there's anything to.

Speaker Change: The actual are in that range that are really when I when I look at that range and thinking about that combination of investing in our growth while at the same time, maintaining that discipline. Certainly you you did see some of the I'll pick up given the volumes. So of course that is incorporated in that expense number.

Speaker Change: And of course with the back end of the year with a continued good engagement and certainly what we're expecting this year that continued engagement Ah.

Speaker Change: That we'll see that as a component of the spend for 2025 as well.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question comes from Bill Katz with TD Cowen. Your line is open okay. Thank you very much and congrats again guys. Your new positions again, just sticking with the balance sheet for a moment you mentioned, it's going to be about flattish year on year can.

Speaker Change: Can you talk us through a little bit in terms of the ins and outs of how you sort of see it I think on the prior management there was sort of a conversation about potentially shrinking the balance sheet longer term just wondering how we should be thinking about that once you get on the other side of the shop level reduction and is this just a replacement opportunity of migrating down from securities into bank loan.

Speaker Change: And how should we think about maybe the long term opportunity for NIM. Thank you.

Speaker Change: Thank you first Paul when I think about the balance sheet over the course of 2025 again that balance sheet is going to be a reflection of how our clients engage us and of course, we've been very focused on meeting their evolving needs. We've seen good momentum in margin lending good momentum in our in our bank offerings as well so we do.

Speaker Change: Believe over the course of the year, we're going to see a reflection of that activity of course, and we're also expecting to see that improved liability mix again very focused on bringing down the supplemental borrowings were seeing that realignment you know where we're away from that stabilization to back to a more normalized environment. So I think.

Speaker Change: You know at the core of how I see the balance sheet evolving you know when I think about you know the comments about you know the balance sheet size, just taking a step back again, we are a growth firm. We are focused on growth and meeting the evolving needs of our clients that bank platform as Rick mentioned earlier.

Speaker Change: It's an important platform for achieving our strategic objectives. So we're going to grow client loans, we're going to meet those needs of course is a part of that balance sheet. The supplemental borrowings that we are bringing down with intense but might you find yourself in a situation of one day again going back a few years, where lots of liquidity is coming into the system.

Speaker Change: Might you want to have the tactical flexibility to move some liquidity off balance sheet. If it makes sense for clients. It if it made sense for the economics that might be a capability that would give us some flexibility, but again our strategy is growth I think with that capability does that moving more of that.

Speaker Change: <unk> off balance sheet. It just gives you flexibility to operate across a range of environments.

Devin Ryan: Thank you. Our next question comes from Devin Ryan with citizens JMP. Your line is open.

Devin Ryan: Great Good morning, Rick and Mike. Thanks for the update so question on spot Crypto, obviously, SaaS growing part of the market high percentage of trading revenue for some other brokerages and.

Devin Ryan: No swap clients currently have access to Etfs and some other proxies, but how are you guys thinking about the incremental opportunity for Schwab do you have any sense of the demand you can frame for us and then from a timing perspective, what what are you currently expecting and are you ready to move forward. Once there is a green lighter or some sort of you can do this thank you.

Speaker Change: Kevin Thanks for the question on on Crypto.

Speaker Change: We're doing really well in crypto, we have a lot of ways to meet our clients' needs etf's. The crypto Etfs have really grown on our platform.

Speaker Change: By futures you can invest in a variety of of closed end funds and in different products that will meet client.

Speaker Change: Needs, we have a crypto site that we that we attract clients to and in fact in the fourth quarter with a 400% increase in the number of visitors to our crypto site, 70% of those visitors or where prospects. So it just shows you that when when investors in the marketplace are thinking about crypto.

Speaker Change: I want to be able to work with Schwab and I think those numbers reflect that and we had a 200% increase in and new account applications tied into our clients that came to our crypto site.

So we're doing a lot for clients in the space today, we do want to have the ability to offer spot crypto and our expectation is that at some point that regulations around.

Speaker Change: Crypto are going to allow us to do that and when we do we expect to launch not long after so from a timing standpoint, some of that it will depend run on on when that regulation is changed and to you know what when we're ready to go but up but our.

Speaker Change: <unk> would be it would be sometime in 2025, and we're excited to be in the marketplace. Because we think clients will want to hold crypto a trial because it's a place they can trust to places where they do a lot of business.

Speaker Change: And we think that will drive clients to crypto just as it did in the fourth quarter, where they may.

400% increase in the number of clients are hitting on our crypto site. So we're we think we're well.

<unk> positioned in this space.

Speaker Change: Thank you. Our next question comes from Alex Blaustein with Goldman Sachs. Your line is open.

Alex Blaustein: Hey, good morning. Thank you for the question did you guys spend a minute on your securities portfolio strategy as you roll through 2025, I guess, maybe just a reminder of how much principal and interest you say you expect the securities portfolio to generate and ultimately how do you expect that to flow down either to paying down supplemental borrowings and I guess at what point do you feel like you are.

Alex Blaustein: Could start to reinvest back in the securities portfolio.

Speaker Change: Thank you.

Speaker Change: I would say on the quarter, we've been around that $10 billion range for the principal and interests coming off of the portfolio and and as we highlighted being used to pay down the supplemental borrowings and so over the course of the year that is going to be a priority.

For the continued use of those proceeds to pay down those borrowings made continued progress there again in this environment now where rates are seemingly at least the latest forward, you're indicating that perhaps the fed target rate won't come down as much as perhaps a wisconsin played at some point last year.

Speaker Change: At some point in the future.

Speaker Change: We would be in.

Speaker Change: In a position where we're reinvesting in that portfolio are.

Speaker Change: Again, the near term, though we're going to be very focused on paying down the supplemental borrowings longer term I would say that allocation similar to what we've done in the past we're going to stay in in highly liquid a high credit quality treasuries agencies, and and I've talked about how we think about the range of that duration of that.

Speaker Change: Portfolio also operating in a range that really contemplates the composition of liability. So I think we're in a in a real good position to continue to use those proceeds to pay down supplemental and then over time investing reinvesting in that securities portfolio, which are at this at these levels in market rates would be.

Speaker Change: We are much more accretive than what the yields are today in that portfolio.

Speaker Change: Operator, I think that's coming from one final question.

Speaker Change: Thank you. Our last question comes from Tayo late with K B W. Your line is open.

Tayo: Hi, Good morning, Mike maybe I can just ask another follow up on the securities portfolio.

I'm wondering if you could provide some updated thoughts on the potential for our securities repositioning does the recent positive trajectory on sweep cash balances lower supplemental funding and the current reinvestment rate levels with yields moving higher make us a more attractive option now than even compared to a quarter ago and given the progress you've made with the balance sheet already.

Tayo: Just outline any remaining concerns with potentially excuse me that's in 2025.

Tayo: Thank you for the question as we've talked about in the past with the securities portfolio, which is very mindful of giving something that trades.

Tayo: Craig's headlines and and disrupt the the trust that we have with our that our clients have enough. So we've been reluctant to do that at this time that being said, we're keeping a close eye on that portfolio and its performance a restructuring is not something we're taking off the table we do evaluate.

Tayo: Get that but I think you raised an important point, which is a if you think about the the proceeds of a portfolio sale how might you use that you know what are the priorities is to continue to make progress on the reduction of supplemental borrowings and we are making that progress just after the principal and interest payments and <unk>.

Tayo: Certainly alongside cash stabilization. So that is an important consideration and of course out where we're mindful of the level of rates in the marketplace as well and what the trajectory of that rate market.

Tayo: It looked like over the course of the year. So I think at this point you know we feel good about the strategy that that is unfolding.

Tayo: Thanks, Mike and thanks, all for your questions. Thank you for your engagement I'd like to wrap up where I started it.

Tayo: It's an exciting time for Schwab, we delivered strong growth across multiple measures in 2024.

Tayo: Position of strength and poised for lift off.

Tayo: In the 2025 and it is full steam ahead, as we focus on serving our clients and accelerating our profitable and holistic growth for the long term and through the cycle.

Tayo: Thank you all for joining us I hope you all have a good day take care.