Executive Summary / Key Takeaways

• Accelerated Growth Trajectory: Charles Schwab is demonstrating robust growth across client metrics, solutions, and financials, with core net new assets (NNA) reaching $137.5 billion in Q3 2025 and 3.4 million new brokerage accounts year-to-date, signaling a strong return towards its long-term 5-7% organic growth target.
• Strategic Financial Strength: The company achieved record revenue of $6.1 billion in Q3 2025 and adjusted EPS of $1.31, driven by a 37% year-over-year increase in net interest revenue due to reduced high-cost supplemental funding and growth in client lending.
• Technological Edge & Innovation: Schwab leverages AI-powered tools like Schwab Knowledge Assistant for operational efficiency and is strategically expanding its digital asset offerings, including a planned spot crypto launch in H1 2026, to attract diverse client segments and enhance its competitive moat.
• Optimized Balance Sheet & Capital Return: Significant progress in reducing bank supplemental funding, down 70% year-to-date to $14.8 billion, positions Schwab for increased capital returns, with $8.5 billion already returned year-to-date through buybacks and dividends.
• Unmatched Competitive Positioning: Schwab maintains market leadership in client assets, RIA custodial assets, and retail trading, differentiating itself through a "no trade-offs" approach combining extensive capabilities, award-winning service, and a broad product suite, effectively competing against both traditional and fintech rivals.

The Through Clients' Eyes Advantage: A Foundation for Growth

The Charles Schwab Corporation, a savings and loan holding company, stands as a dominant force in wealth management, securities brokerage, banking, asset management, custody, and financial advisory services. Founded in 1971, Schwab's enduring "Through Clients' Eyes" strategy has been its guiding principle, aiming to champion every client's financial goals with passion and integrity. This client-centric approach has fostered a diversified business model, serving both individual investors through its Investor Services segment and independent Registered Investment Advisors (RIAs) via its Advisor Services segment.

A pivotal moment in Schwab's history was the acquisition and integration of TD Ameritrade (AMTD), completed in 2020. This monumental undertaking, described as the "largest brokerage conversion in the history of the industry," brought over 17 million client accounts and nearly $2 trillion in assets under Schwab's umbrella. The successful integration, achieved with less client attrition than forecasted, significantly expanded Schwab's scale and client reach. Post-integration, Schwab has focused on deepening relationships with these legacy Ameritrade clients, who are now increasingly engaging with Schwab's broader offerings and contributing positively to net new asset (NNA) growth.

Schwab's competitive positioning is formidable. It is the number one firm in total client assets among publicly reporting peers, boasting $11.59 trillion in client assets. The company also leads in RIA custodial assets and retail trading, as measured by daily average trades, with no close second. This market leadership is underpinned by a "no trade-offs" approach, offering an unmatched breadth of capabilities, education, research, and service. This combination of industry-leading digital experiences and deep client relationships helps clients achieve their desired outcomes, setting Schwab apart from both traditional financial institutions and agile fintech disruptors.

Technological Edge and Innovation Driving Efficiency and Client Engagement

Technology is a core differentiator for Schwab, enabling both operational efficiency and enhanced client experiences. The company is actively investing in artificial intelligence (AI) to "supercharge" its professionals and streamline internal processes. For instance, the Schwab Knowledge Assistant, an AI technology, supports the efficiency of service professionals, with its usage increasing by 90% in 2024. The rollout of a service AI assistant helps client-facing professionals create post-call summaries and notes, among other capabilities. These AI initiatives are designed to help representatives serve clients more efficiently, contributing to Schwab's ability to maintain a low cost to serve.

Beyond internal efficiencies, Schwab is strategically expanding its digital offerings to meet evolving investor needs. The company is on track to launch spot crypto trading in the first half of 2026, initially for Bitcoin and Ethereum. This initiative is a response to significant client interest, as evidenced by a 92% year-over-year increase in visits to Schwab's digital assets content on schwab.com. Schwab already holds approximately a 20% share of the spot crypto ETP market, indicating a client base eager for direct crypto exposure within a trusted framework. Management believes this offering will be a strong differentiator, allowing clients to access crypto directly alongside their existing investments and banking capabilities. This approach contrasts with some digitally native firms that primarily introduce clients to third-party custody solutions. Schwab is building its own books and records and capabilities to custody crypto assets, taking a long-term view to participate in potential future developments like blockchain and tokenization.

While management acknowledges the "enormous" spreads earned by digitally native crypto firms, they believe there is ample room to offer aggressive pricing, deliver great value, and generate profit. The strategic intent behind these technological advancements is clear: to enhance Schwab's competitive moat, improve financial performance through lower costs and new revenue streams, strengthen market positioning, and fuel long-term growth by attracting and retaining a diverse client base, including younger, tech-savvy investors.

Financial Performance: A Story of Resurgence and Diversification

The first nine months of 2025 have marked a period of significant financial resurgence for Charles Schwab, reflecting strong execution of its "Through Clients' Eyes" strategy amidst a dynamic macroeconomic backdrop. Investor sentiment improved, and equity markets reached record levels, with the S&P 500 rising 8% in Q3 and 14% year-to-date, and the NASDAQ Composite increasing 11% in Q3 and 17% year-to-date. This favorable environment, coupled with Schwab's operational prowess, translated into record financial results.

For the third quarter of 2025, Schwab reported total net revenues of $6.135 billion, a substantial 27% increase year-over-year. Net income for the quarter was $2.358 billion, growing an impressive 67% from the same prior-year period. Diluted earnings per common share (EPS) stood at $1.26, a 77% rise, while adjusted diluted EPS reached $1.31, up 70% year-over-year. Year-to-date, total net revenues were $17.585 billion, up 23%, and net income was $6.393 billion, a 56% increase.

A primary driver of this financial strength was net interest revenue, which increased 37% year-over-year in Q3 to $3.050 billion, and 30% year-to-date to $8.578 billion. This growth was largely attributable to lower interest expense from significant reductions in high-cost bank supplemental funding and lower rates on funding sources. Additionally, growth in margin and bank lending, along with increased cash and investments segregated, contributed to the expansion. Net interest margin notably increased to 2.86% in Q3 and 2.68% year-to-date, up from 2.08% and 2.04% in the comparable 2024 periods, respectively.

Asset management and administration fees also saw healthy growth, rising 13% in both Q3 and year-to-date periods to $1.673 billion and $4.773 billion, respectively. This was primarily due to continued growth in Schwab money market funds amid elevated interest rates, as well as higher client asset balances driven by asset gathering, equity market appreciation, and growth in managed investing solutions. Trading revenue increased 25% in Q3 to $995 million and 19% year-to-date to $2.855 billion, reflecting higher trading volumes. Daily average trades (DATs) were 7.40 million in Q3 and 7.50 million year-to-date, up 30% and 31% from 2024, respectively. Bank deposit account fee revenue rose 63% in Q3 to $247 million and 51% year-to-date to $739 million, primarily due to higher net yields.

Expense management remained disciplined, with total expenses excluding interest increasing 4% in Q3 to $3.114 billion and 5% year-to-date to $9.306 billion. Adjusted total expenses rose 5% and 6% for the respective periods, reflecting ongoing investments in business growth and client-serving capabilities while driving incremental efficiencies. Profitability metrics demonstrated significant improvement, with return on average common stockholders' equity at 21% in Q3 and 20% year-to-date, up from 14% in both prior-year periods. Return on tangible common equity (ROTCE) reached 38% in Q3 and 37% year-to-date, up from 31% and 33%, respectively.

Balance Sheet Optimization and Capital Deployment

Schwab has made substantial progress in optimizing its balance sheet and enhancing its capital position. A key focus has been the aggressive reduction of high-cost bank supplemental funding. In the first nine months of 2025, Schwab reduced total bank supplemental funding by $35.10 billion, a 70% decrease, including a $12.90 billion reduction during Q3. Remaining balances stood at $14.80 billion as of September 30, 2025, which is now within the company's "business as usual" range of approximately $5 billion to $15 billion, aligning with its long-term diversified funding strategy. This reduction was facilitated by principal and interest payments from its securities portfolio and the strategic transfer of $3 billion of Bank Deposit Account (BDA) balances to Schwab's balance sheet in September 2025.

With supplemental borrowings largely under control, Schwab is shifting its focus towards supporting client loan needs and initiating new security purchases. Client margin loans increased to a record $97.20 billion at September 30, 2025, up 16% from year-end 2024. Bank loans totaled $53.60 billion, growing 18% in the first nine months of 2025, driven by Pledged Asset Lines (PALs) and First Mortgages. The company has also employed interest rate swaps to hedge some PAL balances, providing additional flexibility in managing its interest rate risk profile. The average duration for the investment portfolio is expected to be in the 2- to 4-year range, with reinvestment of maturing securities (currently yielding under 2%) offering a "nice lift" to earnings.

Schwab's capital management framework prioritizes supporting business growth while returning excess capital to stockholders. Year-to-date, the company returned $8.5 billion in capital, including $4.60 billion in common stock repurchases, an 8% increase in the common dividend to $0.27 per share, and the redemption of $2.50 billion Series G preferred stock. The consolidated Tier 1 Leverage Ratio was 9.70% at September 30, 2025, slightly above the firm's adjusted Tier 1 leverage objective of 6.75% to 7%. This strong capital position, coupled with organic capital generation from net income, provides flexibility for continued capital returns.

Competitive Dynamics and Strategic Positioning

Schwab's "no trade-offs" approach and diversified model provide a significant competitive advantage in the financial services industry. The company's market leadership is evident in its number one position for total client assets, RIA custodial assets, and retail trading. This broad appeal allows Schwab to effectively compete across various client segments and against a diverse set of rivals.

Against traditional full-service firms like Morgan Stanley (MS) and Bank of America (BAC) (through Merrill Edge), Schwab's value proposition emphasizes accessibility, lower costs, and a robust digital-first experience complemented by a strong physical branch network. While MS excels in institutional depth and specialized advisory services for ultra-high-net-worth clients, Schwab's focus on democratizing investing and providing comprehensive support for self-directed and independent advisors allows it to capture a broader market share in the retail and RIA segments. Schwab's operational efficiency and scalable technology enable it to offer competitive pricing and maintain strong profitability, potentially outperforming rivals in cost-sensitive areas.

Compared to technology-driven brokerages like Interactive Brokers (IBKR) and Robinhood Markets (HOOD), Schwab offers a more holistic and trusted ecosystem. While IBKR provides sophisticated tools for active traders and HOOD excels in mobile-first, commission-free trading for younger demographics, Schwab integrates advanced trading platforms like thinkorswim (with adoption among legacy Schwab clients up 98% year-over-year) with extensive educational resources, personalized advice, and a full suite of wealth management and banking services. This comprehensive offering fosters deeper client relationships and higher satisfaction, as evidenced by record Client Promoter Scores and an 11-point improvement among former Ameritrade clients. Schwab's ability to attract Gen Z investors (nearly one-third of new-to-firm retail households are Gen Zers) and its leadership as the #1 financial services firm on YouTube by followers demonstrate its effectiveness in engaging younger clients, directly challenging Robinhood's traditional stronghold.

Schwab's strategic initiatives, such as the expansion of its branch network (16 new branches planned for 2025) and the hiring of financial consultants, directly address the demand for in-person guidance, a service often less emphasized by purely digital competitors. The planned acquisition of Forge Global Holdings, Inc. (FRGE) for $660 million will enhance Schwab's private markets capabilities, further diversifying its offerings and competitive edge. This continuous innovation and client-centric expansion allow Schwab to maintain its leadership, drive NNA growth, and deepen client relationships, translating into diversified revenue streams and resilient financial performance.

Outlook and Risks

Schwab's outlook for the remainder of 2025 and into 2026 remains optimistic, with management anticipating continued strong momentum. For the full year 2025, the company expects a lift in earnings of "around 2% or a bit better" relative to the upper end of its July financial scenario, reflecting sustained client engagement and favorable macroeconomic conditions. The corporate tax rate is expected to remain around the 23% to 24% zone in future periods. Normal cash behavior, including typical seasonality, is anticipated for Q4 2025, with net interest margin projected to "still be into the 2.80s" to close out the fourth quarter. Capital expenditures for full-year 2025 are expected to be on the lower end of the 3-5% of total net revenues range.

Looking to 2026, Schwab expects to "keep building upon our 2025 momentum," with a more detailed financial scenario to be provided in January. The long-term NNA growth target of 5-7% remains a key objective, with management confident in making progress towards this range.

Despite the positive outlook, several risks warrant consideration. General economic and market conditions, including interest rate levels, equity market valuations, and volatility, can significantly impact financial results. Client cash allocation behavior, particularly sensitivity to deposit rates, and competitive pressure on pricing could affect net interest revenue and profitability. Regulatory guidance and potential adverse impacts from new or changed legislation, rulemaking, or regulatory expectations, such as the U.S. Department of Labor's broadened definition of fiduciary or proposed capital rules, pose ongoing uncertainties. The company's exposure to rates decreasing is greater than to rates increasing, as measured by Economic Value of Equity (EVE) simulations. Liquidity risk, including rollover risk on borrowings, is actively managed but remains a factor. Furthermore, while the proposed settlement in the Corrente Antitrust Litigation is pending, the outcome and impact of other legal proceedings and regulatory matters are inherently difficult to predict. The planned launch of spot crypto, while strategic, also introduces new regulatory and operational complexities, as U.S. financial firms are seeking greater clarity on anti-money laundering (AML) rules for crypto expansion.

Conclusion

The Charles Schwab Corporation is in a period of significant strength and strategic expansion, successfully transitioning from a complex integration phase to one of accelerated growth and innovation. Its "Through Clients' Eyes" strategy, coupled with a diversified business model, has enabled record financial performance in 2025, marked by robust revenue and earnings growth, optimized balance sheet management, and substantial capital returns. The company's technological leadership, particularly in AI-powered efficiencies and the strategic foray into spot crypto trading, reinforces its competitive moat and positions it to attract and serve a diverse, evolving client base.

Schwab's market leadership in client assets, RIA custody, and retail trading, alongside its commitment to expanding client relationships through a comprehensive suite of solutions, underpins a compelling investment thesis. While macroeconomic shifts and regulatory developments present ongoing considerations, Schwab's disciplined approach to risk management and its proactive investments in client-centric capabilities and technological advancements are expected to drive durable financial outcomes and sustained shareholder value through various market cycles. The firm's ability to consistently deliver on its core purpose, adapt to industry trends, and strategically differentiate itself suggests a bright long-term trajectory.