Charles Schwab reported third-quarter results on Thursday, October 15. Net revenues: $7.17 billion, GAAP net income: $2.91 billion, $1.62 a share - up 17%, 23% and 29% from the same quarter a year earlier. The earnings release calls revenue and earnings per share records. Core net new assets reached $190.4 billion, and bank deposits fell for the third time in a row.
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What was reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Net revenues | 7,171 | 6,135 | +17% |
| Net interest revenue | 3,476 | 3,050 | +14% |
| Asset management and administration fees | 1,913 | 1,673 | +14% |
| Trading revenue | 1,158 | 995 | +16% |
| Expenses excluding interest | 3,394 | 3,114 | +9% |
| Pre-tax income | 3,777 | 3,021 | +25% |
| Net income (GAAP) | 2,906 | 2,358 | +23% |
| Diluted earnings per share, GAAP (dollars) | 1.62 | 1.26 | +29% |
| Diluted earnings per share, adjusted (dollars) | 1.69 | 1.31 | +29% |
| Net interest margin (NIM) | 3.04% | 2.88% | +16 bps |
| Net new assets, total (billions of dollars) | 192.4 | 134.4 | +43% |
| New brokerage accounts (thousands) | 1,243 | 1,143 | +9% |
| Daily average trades (millions) | 10.69 | 7.42 | +44% |
| Bank deposits at quarter-end (billions of dollars) | 244.1 | 239.1 | +2% |
In millions of dollars, except rows where the unit is stated, per-share figures and the margin. Source: the company's earnings release, October 15, 2026. Adjusted earnings are a non-GAAP measure defined by the company.
Where the money was made
Each of the three largest revenue lines grew by at least 14%. Net interest revenue rose 14% to $3.48 billion and is almost half of revenue. Asset management and administration fees rose 14% to $1.91 billion, and trading revenue rose 16% to $1.16 billion. Bank deposit account fees rose 40% to $345 million. The "Other" line jumped from $170 million to $279 million, and the release does not explain the jump.
The net interest margin (NIM) rose to 3.04%, from 2.88% a year ago, and average interest-earning assets grew 8% to $451.5 billion. Both NIM figures are on a recast basis: since the fourth quarter of 2025, the margin on long/short strategies and short credits is excluded from the calculation, and the 2025 figures were restated.
In trading there is a gap between volume and revenue. Daily average trades jumped 44% to 10.69 million, but revenue per trade fell 20%, from $2.11 to $1.69 - so trading revenue rose only 16%. Versus the second quarter, when the average was 11.92 million trades a day, trades fell 10% and trading revenue fell 5%.
Assets, accounts and deposits
Core net new assets reached $190.4 billion, a record according to the release and up 38% from the same quarter a year earlier, an annualized growth rate of about 5.8%. Inflows accelerated month by month: $58.1 billion in July, $64.8 billion in August and $67.5 billion in September. Total net new assets were $192.4 billion, versus $134.4 billion a year ago and $118.7 billion in the second quarter. CEO Rick Wurster framed the quarter around two numbers: 1.2 million new brokerage accounts and $190.4 billion in core inflows.
Client assets reached $13.33 trillion, up 15% from a year ago and 1.9% from the end of the previous quarter, but down 0.6% from the end of August, when they stood at $13.41 trillion. The company opened 1.24 million new brokerage accounts, up 9% from the same quarter a year earlier but down 10% from the second quarter, when 1.39 million were opened. Active brokerage accounts reached 40.26 million, up 6%, and total client accounts reached 48.6 million.
Bank deposits ended the quarter at $244.1 billion, down 2.2% from $249.7 billion at the end of the second quarter. Before that they stood at $253.0 billion at the end of the first quarter and $255.7 billion at the end of 2025 - the third decline in a row. Against the same quarter a year earlier ($239.1 billion), they are still up 2%.
On the other side, cash in the trading accounts (transactional sweep cash) rose in September to $492.8 billion, an increase of $7.1 billion from the previous quarter and up 16% from a year ago. The release attributes the rise to long/short strategies and organic growth, partly offset by clients' allocation decisions. The figure includes $63.3 billion of short credits in September.
Lending grew faster than deposits. Bank loans reached $72.3 billion, up 35% from a year ago and 8% from the previous quarter. Margin loans reached $187.9 billion, up 93% from a year ago and 14% from the previous quarter, and about $60.7 billion of them are margin loans of the long/short strategies. The Pledged Asset Line balance reached $37.3 billion, up 59%.
Funding moved too. Other short-term borrowings rose to $14.2 billion, up 118% from a year ago, and FHLB borrowings stood at $2.0 billion, versus $0.5 billion in the second quarter. According to the Motley Fool transcript of the earnings call, management said credit is growing faster than deposits, and it is therefore diversifying its funding sources.
Earnings, costs and capital
Pre-tax income rose 25% to $3.78 billion, and the GAAP pre-tax margin reached 52.7%, from 49.2% a year ago and 51.9% in the previous quarter. Expenses excluding interest rose 9%, less than the pace of revenue. The effective tax rate rose to about 23% from about 22%, so net income (23%) grew more slowly than pre-tax income.
The gap between GAAP and adjusted earnings comes from transaction-related costs of $151 million: $141 million of amortization of acquired intangibles, and $10 million of acquisition and integration costs, mainly compensation. Their after-tax effect on net income is $115 million, 7 cents a share, and without them adjusted earnings are $3.02 billion, or $1.69 a share. The amortization recurs every quarter ($127 million a year ago), so this is not a one-off item in the full sense of the word.
Return on equity rose to 25% from 21%, and return on tangible equity (a non-GAAP measure) to 44% from 38%. The Tier 1 leverage ratio was 8.9% on a preliminary basis, and the adjusted ratio, which includes AOCI (accumulated other comprehensive income), was 7.0%. According to management on the call, the adjusted ratio is at the top of the 6.75% to 7% range.
In the quarter the company bought back 4.7 million shares for about $0.5 billion. The CFO said on the call that almost $4 billion was repurchased in the first nine months. The average diluted share count fell 4%, to 1,733 million. The quarterly dividend declared is $0.32 a share, versus $0.27 a year ago, up 19%, and unchanged from the previous two quarters.
The outlook, according to the transcript
The following comes from the Motley Fool transcript of the earnings call, not from the earnings release. The CFO said revenue and net interest margin growth in 2026 are expected to land toward the lower end of the ranges given at the summer update, and expenses at the low end of their range. He put the positive operating leverage at about 8 percentage points, roughly double the expectation at the start of the year. For the fourth quarter he expected the margin to be 25 to 30 basis points higher than in the fourth quarter of 2025, and added that it will keep expanding in 2027; a detailed 2027 scenario will be given at the winter update, in January.
According to the transcript, management expects the positive trends (client engagement, lending and trading) to continue next quarter, with seasonal cash inflows through year-end. Growth in the long/short program was throttled from mid-September, and according to the CEO, inflows in Advisor Services are not slowing.
Versus expectations, and the stock
According to Zacks, as published by Yahoo Finance, analysts expected earnings of $1.66 a share and revenue of $7.19 billion. Adjusted earnings of $1.69 beat the forecast by 3 cents, but GAAP earnings of $1.62 are below it. Revenue of $7.17 billion came in slightly below it. In Zacks' line items: net interest revenue of $3.53 billion was expected versus $3.48 billion actual, bank deposit account fees $361 million versus $345 million, and client assets $13.43 trillion versus $13.33 trillion.
The report came out before the market opened, so the stock's reaction is that day's close: it closed at $94.16, down 2.73%, from $96.80 the day before.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What catches my eye in this report is two measures standing against each other. Asset gathering is strong and accelerating, and bank deposits have fallen three quarters in a row. The release mentions clients' allocation decisions as an offsetting factor in cash balances, and nothing more than that.
There are two ways to read this. One, cash moving from deposits into investments and trading is exactly what a broker wants: assets grow, accounts open, and the funding gap is closed with other borrowings. Two, margin loans almost doubled, credit is growing faster than deposits, and funding leans more on short-term borrowings and FHLB - and a model that leans more on margin and outside funding is tested differently when the market turns. And one more open question: part of the margin and the cash is tied to the long/short program, whose growth was throttled from mid-September, and only the coming quarters will show how much this growth depended on it.
The stock fell 2.73% on a day when adjusted earnings beat the forecast and revenue missed it by a little. I cannot know what the market priced, and both readings remain open.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
