Schwab faces market risk from fluctuating interest rates and equity prices, impacting net interest revenue and economic value of equity. Liquidity risk exists due to client cash reallocation, potentially requiring higher-cost funding. Regulatory changes, including FDIC assessments and SEC rule amendments, pose potential operational and financial burdens. Credit risk from client defaults and counterparty failures in securities lending and repurchase agreements is also a concern. The document also notes the possibility of adverse judgments or settlements in pending legal proceedings.
Financial Upside
Strong equity markets and organic asset gathering are driving client assets to $9.92 trillion. Improved client engagement, including higher daily average trades and new brokerage accounts, are positive indicators. Cost synergies from the Ameritrade integration are expected to reach $1.8-$2.0 billion annually. Lower restructuring costs and expense management are contributing to improved profitability. The company is actively managing its balance sheet and interest rate exposure.
