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Charles Schwab (SCHW +3%), now under new leadership in CEO Rick Wurster since January 1, gaps higher today as investors applaud another healthy top and bottom-line beat in Q4. The financial services giant, which derives over 75% of sales from investor services, has reported back-to-back quarters of impressive growth, showcasing a long-awaited emergence from a transition year as SCHW completed its largest brokerage conversion in 2024, integrating over 17 mln Ameritrade accounts.

Following muted growth in Q2 and comments surrounding relying more on off-balance sheet arrangements to house customer deposits, SCHW fell to four-month lows in July. Former CEO Walter Bettinger noted that reducing the company's overall balance sheet investment portfolio duration would unfold over the next few years, potentially generating elevated variability in earnings performance in the near term. Mr. Bettinger added that the move would reduce the company's capital levels volatility and the dependency on supplemental borrowing in the event of rising interest rates.

Since then, SCHW has performed well, powering its excellent rally, with shares rebounding by over +30% since July lows.

• In Q4, adjusted EPS ballooned by 48.5% yr/yr to $1.01, SCHW's best quarter of profitability since 4Q22, before the regional banking crisis in early 2023. Revenue growth accelerated to 19.5% yr/yr to $5.33 bln from a mild +5.2% last quarter and virtually flat growth in Q2.
• Net new assets swelled by 51% yr/yr in the quarter, ending the year 20% higher, consistent with the 21% increase in FY23. New brokerage account openings rose by 23% to 1.1 mln, ending the year with 36.5 mln active accounts. Meanwhile, trading activity was robust during the quarter, giving rise to an active client base with record engagement.
• It was not just a healthy market that underpinned SCHW's excellent numbers, although that certainly played a role. The company's platform and products helped differentiate itself against stiff competition, defending against numerous alternatives from Robinhood (HOOD), Interactive Brokers (IBKR), and many privately-held brokerages and financial services organizations. For instance, on the trading side, thinkorswim adoption (one of SCHW's trading platforms) enjoyed a 60% surge in adoption yr/yr.
• SCHW is optimistic about 2025 being another year of solid growth. CEO Rick Wurster commented that M&A remains an important metric but is also confident in organic growth. Furthermore, revenue and earnings are projected to remain strong as the company's supplemental borrowing diminishes significantly in 2025.

SCHW exited a relatively volatile year on a high note. The main message CEO Rick Wurster conveyed during the conference call today was that SCHW was entering 2025 with tremendous growth momentum, anticipating a strong year ahead. The company projected meaningful asset growth supporting a possible return to its organic growth rate goal of +5-7%. While a higher-for-longer view from the Federal Reserve, alongside potential tariffs from the Trump administration, could produce market volatility, hindering SCHW's ability to reach its targets, recent quarterly performances set an encouraging tone for 2025.