Schwab Annual Meeting 2016

[LongTermView]

Today will be my first time attending.  Is anyone else from around here going to be there?

[JBird]

I'd like to be but no.

 

Are you going to ask any questions?

[LongTermView]

Are you going to ask any questions?

 

I don't plan on it.  However, I might go through the annual report again before the meeting and change my mind.

[merkhet]

If you can share any noteworthy insights from the meeting, it would be much appreciated. Thanks!

[LongTermView]

If you can share any noteworthy insights from the meeting, it would be much appreciated. Thanks!

 

Sounds good, I'll give it my best.

[JBird]

One nugget I picked up watching Joe Martinetto's last presentation was that a move to 2% short-term interest rates means a roughly $1.8 billion increase in pre-tax income. That nearly doubles current after-tax income. This is of course due to the company's "float", client cash that Schwab holds but doesn't own. They're currently waiving $100's of millions of money market fund fees per year. So a rate increase gives a double dip effect-- they stop waiving the fees plus they start earning a satisfactory spread on the float.

 

[LongTermView]

During the q&a two longtime shareholders thanked Chuck for making them rich.

[vinod1]

One nugget I picked up watching Joe Martinetto's last presentation was that a move to 2% short-term interest rates means a roughly $1.8 billion increase in pre-tax income. That nearly doubles current after-tax income. This is of course due to the company's "float", client cash that Schwab holds but doesn't own. They're currently waiving $100's of millions of money market fund fees per year. So a rate increase gives a double dip effect-- they stop waiving the fees plus they start earning a satisfactory spread on the float.

 

JBird,

 

Could you please let me know if it is really a 2% move for $1.8 billion in pre-tax income?

 

From earlier presentations that $1.8 billion number came from just a 1% move.

 

They put a slide in Feb update, a 0.25% move would result in $0.65 billion increase in revenues, of which 75% would flow down to pre-tax income. They also mentioned that this relationship would hold for up to a 2% increase when other effects start creeping in.

 

This would roughly increase pre-tax by $1.8 billion for a 1% rise.

 

I tried to look for a replay but it is not working on their site. Could you please let me know any additional details around the comments he made regarding this?

 

Thanks

 

Vinod

[JBird]

I found the presentation you just referred to and those are indeed the numbers he used.

 

I'm still trying to find the presentation I was thinking of earlier but I suppose it's prudent to go by those numbers.

[vinod1]

I found the presentation you just referred to and those are indeed the numbers he used.

 

I'm still trying to find the presentation I was thinking of earlier but I suppose it's prudent to go by those numbers.

 

Thanks!