- Company name
- Charles Schwab
- Sector
- Brokerage & wealth management
- About
- Charles Schwab runs a large brokerage, banking, and wealth management business. Clients hold cash and investments at Schwab. Schwab earns net interest revenue on client cash that it holds on its own balance sheet. It invests this cash in securities and lends it as margin loans and bank loans. Schwab sweeps more client cash to TD Bank under an insured deposit account agreement and earns a fee on these deposits. Schwab also earns asset-based fees on managed portfolios, mutual funds, and advisory accounts, plus trading revenue. In 2025, net interest revenue was about half of total net revenues.
- Thesis
- Schwab still trades as if client cash could sort back into money market funds and other higher-yielding places. That is the fear that hit the whole brokerage industry in 2023. That fear has kept fading. Net interest margin rose to 3.04% in the third quarter of 2026, from 2.88% a year earlier. Core net new assets reached a record $190.4 billion in that quarter, 38% more than a year earlier. But some client cash still moves. Total sweep cash grew in the third quarter only because of cash tied to client long/short strategies, and bank deposits fell. On October 15, 2026, management also said that 2026 revenue growth and net interest margin will be toward the low end of the ranges it gave in July. A second worry came in September 2026. Schwab stock fell about 6% in one day on fear that AI assistants built into rival apps, such as Meta's new Muse, could weaken the loyalty that keeps clients on one brokerage's platform. For the first fear to keep fading, Schwab needs net interest margin and net new asset growth to keep showing up in its results, and sweep cash outside long/short strategies to stop falling. For the AI-loyalty fear to fade, Schwab needs to show that its own AI tools keep clients and advisors on its platform. These tools include Charley, its assistant for retail clients, and a partnership that brings Claude to more than 16,000 independent advisor firms. The Federal Reserve raised rates in September 2026, and its officials expect one more increase this year. Higher rates help the yield on Schwab's assets, but they also make money market funds more attractive than sweep cash. The next test is the fourth quarter report, expected in mid-January 2027, when Schwab also plans to give its 2027 outlook. If both trends keep confirming in the next two to three quarters of earnings, the market's caution looks overdone and the gap can close. If deposit competition or client movement to AI-native tools shows up instead, the discount could persist into 2027.
- Risks
- Schwab holds a large fixed-income investment portfolio, built up when deposits were high. If the Federal Reserve cuts interest rates faster than expected, yields on this portfolio reprice down before deposit costs fall as much, which can compress net interest margin. The Fed raised rates 0.25 points in September 2026, and the median projection of its officials keeps rates near that level through 2027. A change in this outlook can bring the risk back.
A large share of client cash sits in low-yielding bank sweep accounts. If money market fund yields pull further ahead of sweep rates, clients can move cash out of sweep and into higher-yielding funds. This lowers the low-cost deposit base Schwab lends against. Higher Fed rates make this gap larger. In Q3 2026, sweep cash outside client long/short strategies fell by about $12.5 billion, and bank deposits fell by $5.6 billion.
Schwab now competes directly with other platforms on commission-free trading, crypto trading, and cash yields. Its own crypto trading service only launched in 2026, so it is unproven against established crypto-focused competitors.
AI assistants built into other companies' apps, such as Meta's Muse, could reduce the friction that keeps clients using a single brokerage's app and tools. The market sold Schwab stock on this fear in September 2026, even with no confirmed change to Schwab's own client or asset numbers.
- Balance sheet
- Schwab is a savings and loan holding company. Client money, not borrowed money, funds most of its $520.7 billion balance sheet. At September 30, 2026, bank deposits were $244.1 billion, down from $249.7 billion at June 30, and payables to brokerage clients were $125.2 billion. Schwab invests this money in securities, margin loans and bank loans. In 2026, margin loans and bank loans grew faster than deposits, so Schwab uses more wholesale funding. Its own long-term debt was $23.8 billion at September 30, mostly unsecured senior notes of the parent company. The parent issued $5.85 billion of new senior notes in May, June and August 2026, for general corporate purposes. Schwab also had $14.2 billion of other short-term borrowings, mostly commercial paper and bank repurchase agreements, and $2.0 billion from the Federal Home Loan Bank. Moody's, S&P and Fitch rate the senior notes A2, A- and A. For liquidity, Schwab had $36.7 billion of cash at September 30, and the parent company had $12.1 billion of liquidity. At June 30, 2026, Schwab also had $32.8 billion of unused Federal Home Loan Bank capacity, and its liquidity coverage ratio was 135%. $31.8 billion of segregated cash and investments belongs to clients by regulation, so it is not free cash. Capital is the real limit. The preliminary Tier 1 leverage ratio at September 30 was 8.9%. Unrealized losses in accumulated other comprehensive income, mostly on securities, lower Tier 1 capital by $10.4 billion when they are included. With them included, the ratio was 7.0%. This is at the top of the company's 6.75% to 7.00% target. Stockholders' equity, including preferred stock, was $51.4 billion. Future buybacks must come mostly from new earnings. Schwab bought back $3.9 billion of its stock in the first nine months of 2026, $0.5 billion of it in the third quarter, and had about $10.6 billion left of its $20 billion authorization. The securities loss shrinks as bonds mature, so capital room grows slowly over time.
As of 2026-09-30.
- Checkpoints
- Oct 15, 2026: Q3 2026 results and fall business update: margin, new assets, client cash. Passed. Watch: Net interest margin at or above the Q2 level of 3.00% and more core net new assets than a year earlier pass; a lower margin or client cash leaving sweep accounts fails. Outcome: Net interest margin rose to 3.04%, core net new assets rose 38% to a record $190.4 billion, and total sweep cash grew $7.1 billion, although only because of cash tied to client long/short strategies.
Q4 2026 (estimate): Charley AI assistant rollout and advisor AI tools. Pending. Watch: Client asset and account growth that holds up while Charley and the Claude advisor tools roll out pass; slower net new assets or account closures linked to outside AI apps fail.
Jan 15, 2027 (estimate): Q4 2026 results and 2027 outlook. Pending. Watch: A Q4 net interest margin about 0.25 to 0.30 percentage points above a year earlier, a 2027 outlook with a higher margin, and the adjusted Tier 1 leverage ratio near 7% while buybacks continue pass; a lower margin outlook, falling sweep cash outside long/short strategies, or a pause in buybacks fails.
- Recent events
- 2026-10-16: Schwab stock fell about 5% in the two trading days after the Q3 report and the more careful full-year guidance.
2026-10-15: Schwab reported Q3 2026 results. Total net revenue was a record $7.17 billion, up 17% from a year earlier. Diluted earnings per share were $1.62, and $1.69 adjusted, both up 29%. Net interest margin rose to 3.04%, from 3.00% in Q2. Core net new assets were a record $190.4 billion, up 38%. Total client assets were $13.33 trillion at September 30, up 15%. Schwab bought back 4.7 million shares for $0.5 billion in the quarter.
2026-10-15: Transactional sweep cash rose $7.1 billion in Q3 2026, to $492.8 billion at September 30. Short credits from client long/short strategies rose $19.6 billion in the same quarter, so other sweep cash fell. Bank deposits fell to $244.1 billion, from $249.7 billion at June 30.
2026-10-15: At its Fall Business Update, Schwab said it expects about 8 percentage points of positive operating leverage in 2026. Management said that full-year revenue growth and net interest margin will be toward the low end of the ranges it gave in July. It expects net interest margin to grow again in Q4 2026 and in 2027, and it plans to give a 2027 outlook in January. Management also said that Schwab blocks AI agents that log in for clients without approval, and that Charley will reach all retail clients in the coming months.
2026-10-07: Schwab common stock started to trade on the Texas Stock Exchange as a second listing. The New York Stock Exchange stays its primary listing.
2026-09-30: Schwab announced Charley, a generative AI assistant for retail clients. It will roll out in phases on Schwab.com and Schwab Mobile, starting in October 2026.
2026-09-22: Schwab stock fell about 6% in one day. The market reacted to Meta's new Muse AI assistant app, which reached the top of the US App Store within two weeks of launch, on fear that AI assistants could weaken the customer loyalty that brokerage and wealth firms depend on.
2026-09-17: Schwab announced its Fall Business Update for October 15, 2026, with CEO Rick Wurster and CFO Mike Verdeschi.
2026-09-16: The Federal Reserve raised its benchmark interest rate 0.25 percentage points, to a range of 3.75% to 4.00%, its first increase since 2023. The median projection of Fed officials shows one more increase before the end of 2026.
2026-09-15: Schwab reported core net new assets of $64.8 billion for August 2026, up 46% from August 2025. Total client assets were $13.41 trillion at the end of August, up 19% from a year earlier.
2026-09-14: Schwab and Anthropic announced that Schwab Advisor Services will bring Claude for Financial Advisors to more than 16,000 independent registered investment advisor firms on Schwab's platform.
2026-07-21: Schwab reported Q2 2026 results. Total net revenue was $7.07 billion, a record and up 21% from a year earlier. Net interest margin was 3.00%. Core net new assets reached $62.7 billion in June alone.
2026-05-13: Schwab began rolling out direct spot trading in bitcoin and ether to retail clients.