Charles Schwab (SCHW) Q3 2026 earnings review
Schwab gathers record new assets, but clients keep pulling cash
Schwab's clients brought it record new money, but they are also pulling cash out of their sweep accounts. Core net new assets reached $190 billion, up 38%, and revenue set another record. Yet by our math, cash in sweep accounts fell about $12 billion once you set aside advisers' long/short balances.
| Core net new assets | $190.4B +38% from a year ago |
|---|---|
| Revenue | $7.17B +17% from a year ago |
| Profit per share, excluding one-offs | $1.69 +29% from a year ago |
| Fourth-quarter interest margin target, set in July | 3.25–3.30% 3.04% this quarter |
⚖️ Verdict: ⚪ Neutral
The story did not change: the quarter strengthened one half of the case and weakened the other. Lending and new money delivered: bank loans rose 35%. The bad news: the interest margin rose only 0.04 percentage points while the cash behind it slipped away. The fourth-quarter target now needs a jump Schwab has not shown.
The question now is whether the interest margin can reach its fourth-quarter target while clients keep moving cash out. Loans and cheaper deposits could deliver the step, or the margin could stay near 3% while the revenue plan leans on trading. The Fall Business Update and fourth-quarter results will tell.
🐂 Bull Case
Clients Brought Schwab a Record $190 Billion
Schwab measures its own growth by core net new assets, the money clients bring in before any market moves. Chief executive Rick Wurster said clients "entrusted Schwab with $190.4 billion in core net new assets – an annualized growth rate of 5.8%". He credited a value proposition that "continues to resonate with investors and RIAs", the independent advisers who keep client money at Schwab.
- Core net new assets: $190.4 billion, up 38% from a year ago
- Advisor Services, the business serving independent advisers: $120.1 billion, up 47%
- Investor Services, the retail business: $72.3 billion, up 37%
- Nine months: $450 billion, against $350 billion a year earlier
This matters because new money is the one source of growth Schwab controls. Markets added little to client assets this quarter, so the record came from clients rather than from prices. It also ran well above the 5% yearly pace Schwab planned in July.
What to watch: October's core net new assets in the monthly report due in mid-November. A month above $50 billion would show the summer pace holding into the fourth quarter.
Lending Has Become the Engine of Interest Income
Schwab earns most of its revenue from interest, and it has been moving money from low-yield bonds into loans. Bank loans reached $72.3 billion in September, up 35% from a year ago.
- Pledged Asset Lines, loans against assets a client pledges: $37.3 billion, "up 59% year-over-year"
- Yield on bank loans: 4.43%, against 1.72% on bonds held to maturity
- Interest-earning assets: up 8%, four times slower than loans
Each dollar moved from bonds into loans earns roughly 2.7 percentage points more, so the shift lifts interest income without a bigger balance sheet. But Schwab also leaned on borrowings costing 3.5% to 4.1% this quarter.
What to watch: bank loan balances in December. Another step of about $5 billion would keep lending on the pace the margin target needs.
Expenses Grew at Half the Pace of Revenue
Schwab's profit margin widened again because revenue outgrew costs. Revenue rose 17% while expenses excluding one-offs rose 9%. Finance chief Mike Verdeschi credited a "diversified business model" and "industry leading scale" for the earnings growth.
- Pre-tax profit margin, excluding one-offs: 54.8% of revenue, up 3.5 percentage points
- Compensation and benefits: 24.5% of revenue, down 2.5 points
- Staff: 33,900 full-time equivalents, up 4% against client assets up 15%
The scale claim holds, because each employee now serves more client money. One caution: the one-offs are $151 million of amortization and acquisition costs. The amortization recurs every quarter, so the margin on the reported basis is a lower 52.7%.
What to watch: fourth-quarter expenses excluding one-offs. Growth near 9% again would put the year below the cost range Schwab set in July.
🐻 Bear Case
Clients Are Moving Cash Out of Sweep Accounts
Schwab's biggest source of profit is the cash clients leave uninvested in their accounts, which it sweeps into its bank. The release said sweep cash rose $7.1 billion in the quarter, "reflecting continued demand for long/short strategies" and "partially offset by client asset allocation decisions".
That demand is cash from advisers' long/short strategies, which Schwab books as short credits. Those balances rose to $63.3 billion from $43.7 billion in June. Strip them out and, by our math, sweep cash fell about $12.5 billion in three months.
- Bank deposits: $244.1 billion, down $5.6 billion from June
- Client cash as a share of client assets: 8.9%, the lowest in five quarters
- Rate Schwab pays on bank deposits: 0.23%, down from 0.43% a year ago
This matters because sweep deposits are Schwab's cheapest funding, while the borrowings replacing them cost about 4%. Every dollar that leaves narrows the margin the fourth-quarter target depends on.
What to watch: sweep cash less short credits in the October monthly report. Another decline would mean the fourth-quarter margin step must come entirely from loans and bond runoff.
Long/Short Trades Flatter the Interest Margin
Schwab reports a net interest margin of 3.04%, its profit on interest-earning assets, up for a second quarter. Since late 2025 it leaves advisers' long/short loans out of that asset base but keeps their yield in interest revenue.
- Average long/short margin loans: $51.4 billion, up from $33.1 billion in the second quarter
- Margin with those loans counted, by our math: 2.73%, against 3.04% reported
The gap has widened to 0.31 points from 0.21 last quarter. The fourth-quarter target is set on the reported basis, so part of the planned expansion is presentation rather than cheaper funding.
What to watch: the reported fourth-quarter margin next to average long/short balances in the same table. A margin at target with balances still rising would mean the clean figure stays near 2.7%.
Trading Activity Has Come Off Its Summer Peak
Clients trade more when markets rise, and Schwab's trading revenue follows. Daily average trades fell to 10.7 million in the third quarter from 11.9 million in the second, the first quarterly decline in a year.
- Daily average trades: still up 44% from a year ago
- Trading revenue: $1.16 billion, down 5% from the second quarter
- Revenue per trade: $1.69, the first rise in five quarters
The next two quarters compare with busier periods, so growth will slow even if clients stay active. Revenue per trade had fallen for five straight quarters, and one 3% rise does not reverse that.
What to watch: October daily average trades in the monthly report. A reading below 10 million would mean the summer, not a new normal, set this year's records.
Risks This Quarter Did Not Answer
Four standing risks got no new numbers in this release. The Fall Business Update ran the same morning but is not part of these results, so each stays open.
- Equity market drawdown: markets added only $56 billion to client assets, so a fall has not yet tested asset-based fees.
- Rate path: cash yields fell to 3.59% from 4.26% a year ago, and the release gives no view on where rates go next.
- Tokenization and custody bypass: nothing in the release; the next management commentary will show whether the topic is still live.
- New businesses: the release notes "plans to expand digital assets available in Schwab Crypto" but gives no Forge or crypto revenue.
👓 Other Themes
Schwab Adds an AI Assistant and Single-Stock Futures
Schwab introduced Charley, "a new AI-powered assistant that provides U.S. retail clients with conversational access to Schwab’s tools and insights". It also partnered with Anthropic "to bring Claude for Financial Advisors directly to the independent RIAs Schwab serves". And it announced single stock futures on its thinkorswim platform. None of these has a revenue figure yet, so they stay outside the case for now.
💲 Other KPIs
Schwab bought back $0.5 billion of its stock, half the second quarter's amount and a fifth of the first quarter's. The pullback came even though its main capital ratio rose to 7.0% from 6.8%. The share count is still 4% lower than a year ago, which lifts earnings per share.
Fees from accounts where Schwab manages the money for a charge rose 23% from a year ago, the fastest growth in five quarters. Assets in those accounts grew at the same pace, while net flows into managed solutions rose 22%, down from 53% in the second quarter. The slower flow growth has not yet reached the fee line.
Fees Schwab earns on client cash held at third-party banks rose 40% from a year ago. The balances behind them fell 13%, to $68.0 billion, so a higher rate on a shrinking pool carried the increase. The line has grown for four straight quarters even as the cash it sits on keeps leaving.
🔮 Guidance
Unchanged in this release; Schwab set the range in July and did not revisit it here. Nine-month growth is 17.9%. By our math the fourth quarter needs revenue growth of 16.5% to 20.3% from a year ago. At this quarter's pace the year lands near the bottom of the range, at about 17.6%.
Unchanged in this release. The target asks the margin to climb 0.21 to 0.26 points in a single quarter. This quarter's step was only 0.04 points. By our math, reaching the middle of the range adds roughly $265 million of quarterly interest revenue. Loan growth and cheaper deposits have to deliver it.
Unchanged in this release. The nine-month margin is 2.97%. If the fourth quarter reaches its own target, by our math the year finishes at 3.04–3.05%, inside the range but in its lower half. A fourth quarter that merely repeats this one would leave the year at about 2.99%, just under the range.
Unchanged in this release. Expenses excluding one-offs rose 9% this quarter and 8% over nine months, both below the range. The plan therefore implies a jump nothing in the last five quarters resembles. By our math fourth-quarter growth would have to reach 14% to 18%. If costs keep growing at this quarter's pace instead, the year ends near 8%, below the plan and good for the margin.
Unchanged in this release. Clients averaged 10.8 million trades a day over nine months. By our math the plan therefore needs only about 9.9 million a day in the fourth quarter, below this quarter's level. Schwab raised the figure once, in July, after a first half far above the original plan.
❓ Key Questions
Does the Fall Business Update keep the fourth-quarter margin target?
Schwab set the target in July, and this quarter's margin moved only 0.04 points toward it. The update ran the same morning as these results, so the answer exists, but it is not in the release.
How much sweep cash left once long/short balances are excluded?
The release reports sweep cash up $7.1 billion, including short credits from long/short strategies, which rose $19.6 billion. Only Schwab can confirm the underlying outflow our math points to.
What is the interest margin with long/short loans counted?
The reported margin excludes $51.4 billion of average margin loans. Readers need the gross figure to judge how much of the fourth-quarter target is presentation and how much is real.
Why did buybacks fall while the capital ratio rose?
Repurchases dropped to $0.5 billion from $2.4 billion in the first quarter, yet the main capital ratio improved. Is Schwab holding capital for lending, for long/short balances, or for something else?
Did the crypto transfer pilot start, and is Forge live?
In July Wurster said Schwab was on track to begin piloting crypto transfers, and the firm planned to bring Forge's private-market products to its clients. The release mentions expanding digital assets but neither milestone.