Q2 2025 Charles Schwab Corp Earnings Call

July 18, 2025

Good morning everyone and welcome to Schwab's 2025 summer business update broadcasting live from our very warm and toasty Westlake headquarters. This is Jeff Edwards head of investor relations and I'm joined by our president and CEO, Rick, wurster, and CFO Mike padayachy

Hopefully, hopefully you've had the opportunity to peruse our strong learnings release. That hit the wires about an hour ago. The team is excited to provide some additional color around those strong results.

As well as provide a broader strategic and financial update. As we move into the back half of the year.

Let's quickly hit on the typical housekeeping items. The slides for the business update will be posted to the usual spot on the IR website, at the conclusion of today's prepared. Remarks Q&A is structured as a 1 question, no follow-up.

Thus, allowing time to get as many questions from all.

The interested parties as we can. During today's meeting, as always, please don't hesitate to reach out to the IR team with any follow-up questions. After today's business update,

And yes the wall of words a forward-looking statements page which reminds us that outcomes can differ from expectations. So please keep in touch with our disclosures with that. It's my pleasure to turn it over to Rick.

Thank you, Jeff and good morning everyone. Thank you for joining us for our summer business update.

Rick: Our long-standing through client size approach to serving investors powered strong results. During the first half of 2025 coordinate, new assets, reached 218 million in the first half of the Year up. 39%

Rick: In the second quarter, investors open 1.1 million, new brokerage accounts demonstrating that Schwab continues to be where Americans turn for investing. Because they know, we will Champion their goals with passion and integrity and help them achieve their financial dreams.

Rick: We offer, clients a differentiated value, proposition award-winning service platforms, support expertise to support investors every type. All like great value and with a firm, they know puts them at the Forefront of every decision.

We are deepening relationships with our clients and serving more of their financial needs across our wealth, banking trading and asset management offers and our clients remain. Highly engaged in the markets daily average trades reach 7.6 million for the second quarter and margin. Balances were 83.4 billion following record trading days in early April.

Rick: Our focus on serving client needs combined, with our Diversified model. Resulted in robust year-over-year, Revenue growth in record earnings per share.

Rick: And we continue to return capital in multiple forms.

Rick: From a position of strength, We are continuing to play offense.

Rick: We're investing in initiatives that will help fuel client growth and evolve the way we meet clients needs.

Rick: We continue to anticipate strong revenue and earnings growth in 2025, which Mike will elaborate on in just a few minutes.

Rick: This is supported by our client growth and growing utilization of our wealth and lending capabilities alongside expense discipline and the pay down of supplemental borrowing.

Rick: And we expect to continue opportunistic excess, Capital return as we move forward.

Rick: In summary. We are moving full steam ahead to deliver long-term profitable growth.

Rick: After a period of volatility at the start of April, both markets and investor sentiment rebounded throughout the second quarter.

Rick: Are different throughout auto market. We were there when and where our clients needed us.

Rick: Year to date, we answered more than 14 million calls across all client facing businesses, and did so quickly in an average of under 30 seconds.

Rick: With 1,000 trading experts, answering the phone in 15 seconds on average, ready to support our Trader clients every day.

We help nearly 16,000 advisors support their clients. We welcome thousands of clients into our retail branches on a daily basis and we produced hours of training Market, insights and coaching providing guidance for our clients, no matter where they are in their investing Journey,

Rick: Our mission is to make our clients Financial lives better. And we do this, in many ways through the financial consultants and our branches through our service professionals, answering the phones, to our advisor services to our digital channels. When that's how our clients want to engage. We offer so much more than just an app.

Rick: our buyer, our unwavering through client side strategy, we are delivering strong growth across all fronts

Rick: With a Relentless focus on serving our clients. We attracted 80.3 billion in core net. New Assets in the second quarter, an increase of 31% over the same period last year.

Core nna for June was 42.6. Billion a 46% increase over June of 2024

Rick: Increased 11%.

Rick: Over the second quarter of 2024 to 1.1 million.

During now to Solutions growth, our clients remain, highly engaged across wealth, lending and trading.

Highly engaged across wealth, lending and trading.

Managing vesting, net flows, increased 37% year-over-year for the second quarter and we reached an all-time record level of flows for the first 6 months of the year.

Managing besting, net flows, increased 37% year-over-year for the second quarter and we reached an all-time record level of flows for the first 6 months of the year.

Within managed investing our Flagship wealth, offering Schwab wealth, advisory had over 10 billion in net flows in the first half of 2025.

and net Flows In Schwab personalized, indexing increased 44% over the first half of 2024

Thanking balances increased 19% over the second quarter of last year and daily average trades increased 38% over Q2 supported by a headline driven macro environment.

Bank lending balances increased 19% over the second quarter of last year and daily average trades increased 38% over Q2 supported by a headline driven macro environment.

These statistics show, we are clearly a Growth Company.

With strong client engagement and our Diversified model total revenue. For the second quarter was 5.9 billion up 25%. Over the same period last year.

22, 2025 adjusted earnings per share reached A14. If 56% increase over the second quarter of last year

22, 2025 adjusted earnings per share reached a $1.14. If 56% increase over the second quarter of last year

As we look to the future, we remain confident. We'll continue to drive growth on our range of environments.

As we look to the future, we remain confident. We'll continue to drive growth across a range of environments.

Our competitive position remains unmatched.

We are number 1 in the industry. Across several key measures including total client assets. Among peers that report on this data. Ria custodial assets and daily, average trades.

We continue to receive industry recognition. Most recently, for our investing platforms, our customer service, and our banking offer.

Our business fundamentals are healthy total client interactions across all channels in our branches in our service centers on our digital channels are up 17% over last year. Margin loans are up 16%

Are pledged asset line. Balances, reached a record, 21 billion.

our pledged asset line, balances reached a record, 21 billion.

And record management, flows and rebounding, Equity markets, helped Assets. In both our wealth and our asset management businesses reach all-time highs.

And record management, investing flows and rebounding, Equity, markets, helped Assets in both our wealth and our asset management businesses reach all-time highs.

We're continuing to attract new clients across sizes and demographics.

Our investment class Raya business supports advisors all sizes.

Our passion class Raa business supports advisors of all sizes.

in our retail business, we attract 66

In our retail business, we attract 606.

thousand new to firm households in the first half of the year.

Thousand new to firm households in the first half of the year.

And we're continuing to win with younger investors and Traders. In fact, 1 in 6 new to Firm retail, households are under the age of 24.

More than 30% of our new to firm. Clients are under the age of 30 and nearly 60% are under the age of 40.

And we're continuing to win with younger investors and Traders. In fact 1 in 6 new to Firm retail, households are under the age of 24, more than 30% of our new to firm. Clients are under the age of 30 and nearly 60% are under the age of 40.

And increasing number of Traders, are turning to us for best-in-class trading experience.

And increasing number of Traders, are curing to us for best-in-class trading experience.

2 clients, who exhibit more advanced.

Or high single option, volume now account for 1/3 of new, Traders up from about 1/5 just 2 years ago.

New clients, who exhibit more advanced trading Behavior, such as complex options or high single option volume now account for 1/3 of new, Traders up from about 1/5 just 2 years ago.

And finally, it is worth highlighting that investors and Traders of all ages are turning to us to invest in digital assets. Through ETFs Futures and closed end funds.

swab is an industry leader in crypto etps with over 25 billion of our clients Assets in the

Swab is an industry leader in crypto etps with over 25 billion of our clients Assets in those products today, representing around 20% of the total Market.

Those products today representing around 20% of the total Market.

This is a reflection of a client base, that wants exposure to digital Assets in a straightforward, safe, low-cost and low tax way. All alongside an ecosystem of expertise education and support that our clients know they can expect from Schwab.

As we build out our digital assets offer, which will include spot trading on bitcoin and ethereum. We are also focused on helping educate and support our millions of clients around how digital assets can fit within a diversified portfolio as well as the opportunities and risks that Define this asset class.

We are continuing to invest in and deliver on our 4 strategic Focus areas growth.

Scale and efficiency the brilliant Basics and our people.

Our first strategic Focus area is driving growth.

We do this by attracting nna from new and existing clients as we provide the capabilities and solutions. They need

At the same time we are also deepening relationships to help our clients conduct more of their financial lives. In 1 place here at Schwab, which also results in further diversification of our revenue streams

Which also results in further diversification of our revenue streams.

And we delivered on this, in the second quarter.

In our advisor Services business, we launched advisor, Pro direct a fee-based, membership-driven offer to designed to support Independence for new raas.

Advisor, Services business. We launched advisor Pro direct a fee-based, membership-driven offer to designed to support Independence for new raas.

In our retail business, we continue to invest in deepening relationships.

Clients with a Financial Consultant relationship, bringing more than 2 times the net new assets and are more engaged and are managed investing in banking offers and clients without a relationship.

Clients with a Financial Consultant relationship, bringing more than 2 times. The net new assets and are more engaged in our managed investing in banking offers and clients without a relationship.

These relationships are impactful and we're on track to open more than 10 retail. Branches this year and to hire hundreds of FC's and wealth Consultants to be there for our clients and connect them with the capabilities and solutions. They need to meet their goals.

You know, wealth business. We continue to invest in Schwab wealth. Advisory we launched the discretionary version of our full service wealth management, capability and important step in meeting the holistic needs of our clients.

In our wealth business, we continue to invest in Schwab wealth. Advisory we launched the discretionary version of our full service wealth management capability and an important step in meeting the holistic needs of our clients.

This quarter, we also broadly rolled out our retail Alternatives platform to our eligible clients.

We are enhancing our tax trust and estate capabilities, including plans to offer, wealth.com estate planning tools, to our retail clients,

we are enhancing our tax trust and estate capabilities, including plans to offer, wealth.com estate planning tools, to our retail clients,

As we look to the future, we see a number of ways to monetize. Our product platforms, beyond what we are doing today. We will share more details in the coming quarters, but I want to highlight that we see a meaningful Revenue opportunity here.

Turning to our second strategic Focus area.

Our scale and efficiency efforts.

Well not only help us keep our cost to serve clients low so we can reinvest in new capabilities and experiences to serve their evolving needs but we'll be a win for clients as well.

Will not only help us keep our cost to serve clients low so we can reinvest in new capabilities and experiences to serve their evolving needs but we'll be able to win for clients as well.

These include investments in artificial intelligence.

In the near term. These AI efforts will help power our client facing reps. As they serve our clients and help make our internal teams more efficient

Today, we have 40 AI, use cases in various stages of development, including in use.

Over the longer term, We Believe AI will meaningfully enhance. The way we serve our clients and allow us to reach our clients in an even more personalized way,

This area is.

Basics and make every interaction, they have with us, feel easy, they were rewarded us with more business.

Our third Focus area is the brilliant Basics when we deliver for clients on the basics and make every interaction, they have with us feel easy, they will reward us with more business.

Rick: We are delivering a cross, the board.

Rick: Our Schwab wealth advisory client, promoter scores are some of the highest in The Firm.

Our Schwab wealth advisory client, promoter scores are some of the highest in The Firm.

Legacy of Merit trade client promoter scores, continue to approve. Each quarter approaching the consistently strong scores we see with Legacy Schwab clients.

Rick: Was 93% for the quarter.

And our advisor service is easy score was 93% for the quarter.

Rick: Last but certainly not least. We are continuing to invest in our people.

Last but certainly not least. We are continuing to invest in our people.

Rick: The more we can do to make our colleagues more efficient.

The more we can do to make our colleagues more efficient.

Rick: Their jobs easier.

Their jobs easier to make Schwab a place where they want to work to help them develop professionally. The better. We will be able to serve our clients

Rick: To make Schwab a place where they want to work to help them develop professionally, the better. We will be able to serve our clients

Rick: We are continuing to build momentum as we head into the second half of 2025, Guided by our through client's eyes strategy. We are playing offense.

Rick: We are continuing to build momentum as we head into the second half of 2025 Guided by our through client side strategy. We are playing offense

Rick: We're attracting net, new assets and new clients to Schwab as we deepen relationships, to serve even more of their wealth and financial needs.

Rick: We're investing in scale and efficiency initiatives, delivering brilliantly on the basics. Continuing to invest in our people who are key to all we do here at Schwab.

In short, we are well, positioned to continue growing on all fronts and for the long term.

Rick: And with that, I'll turn it over to Mike for an overview of our financial picture and an updated view on our financial scenario.

Mike: Thank you, Rick. And good morning, everyone.

Rick: Thank you, Rick. And good morning, everyone.

This was indeed a dynamic quarter with markets, very much on the move and a host of macroeconomic factors influencing investors around the globe.

Rick: This was indeed a dynamic order with markets, very much on the move and a host of macroeconomic factors influencing investors around the globe against this shifting landscape. Schwab strong momentum continued with growth across the franchises. We serve our clients needs with our broad array of modern world Solutions.

Against this shifting landscape Schwab strong momentum continued with growth across the franchise as we serve our clients needs without broad array of modern world Solutions.

Rick: We posted our third consecutive quarter of over 1 million new brokerage accounts.

We posted our third consecutive quarter of over 1 million new brokerage accounts.

Cornet new assets during the second quarter exceeded 80 billion bringing the year to date total to 218 billion or an increase of nearly 40% versus the first half of 2024.

Rick: And we saw robust flows into our managed investing and lending products as well as supported another strong quarter in trading with 7.6 million daily, average trades.

And we saw robust flows into our managed investing and lending products as well as supported another strong quarter in trading with 7.6 million daily, average trades.

Rick: In addition to healthy organic growth and sustained product utilization, we delivered record Financial results during the second quarter with year-over-year Revenue growth of 25% to 5.9 billion.

adjusted pre-tax, margins exceeding, 50% and adjusted earnings per share of a dollar 14 and increase of 56% versus 2q 24,

Rick: adjusted pre-tax, margins exceeding, 50% and adjusted earnings per share of a dollar 14 and increase of 56% versus 2q 24,

Rick: Transactional. Cash levels continue to reflect normal cash. Behaviors inclusive of organic growth.

Rick: Typical 2q taxes, anality and client engagement, albeit with an investor sentiment remaining somewhat cautious.

Rick: Typical 2q tax seasonality and client engagement. I'll be with an investor sentiment remaining somewhat cautious.

Rick: At the same time we made further progress and reducing higher cost funding at the banks.

Rick: At the same time we made further progress and reducing higher cost funding at the banks, bringing the level down to approximately 28 billion.

Bringing the level down to approximately 28 billion.

Rick: We also increase the return of capital via the Redemption of our series, Chief preferred stock and the continuation of common stock repurchases.

Rick: We also increase the return of capital via the Redemption of our series G, preferred stock, and the continuation of common stock repurchases.

Rick: Inclusive of these actions. Our Capital ratios expanded versus the first quarter finishing slightly above our target range.

Before diving into our latest thinking, regarding the remainder of 2025, let's take a moment to walk through some of the drivers influencing our strong through key results.

Rick: Before diving into our latest thinking, regarding the remainder of 2025, let's take a moment to walk through some of the drivers influencing our strong 2 key results.

Rick: Revenue, increased 25% year-over-year to a record 5.9 million for 2q representing, a third consecutive quarter of double-digit year-over-year growth across all line items.

Revenue, increased 25% year-over-year to a record 5.9 billion for 2q representing a third consecutive quarter of double digit, year-over-year growth, across all line items.

Rick: The further reduction of high cost borrowings at the bank.

Sequential bills and client transactional. Sweet cash and a latte quarter. Uptake in Securities. Lending activity, helped. Expand net. Interest margin and drive a 31%. Increase in net, interest. Revenue versus 2q 24.

Rick: The sequential bills and client transactional, sweep cash, and a latte quarter. Uptake in Securities. Lending activity, helped. Expand net. Interest margin and drive a 31%. Increase in net. Interest. Revenue versus 2q 24.

Rick: Asset Management Administration. Fees of 1.6 billion represent a year-over-year. Increase of 14% driven by rebounding Equity markets, healthy organic, growth and continued client adoption of Schwab's wealth and Asset Management Solutions.

Rick: As a management and administration fees of 1.6 billion represent a year-over-year, increase of 14% driven by rebounding Equity markets, healthy, organic growth, and continued climate adoption of Schwab's wealth and Asset Management Solutions.

Rick: Client trading volumes remain robust in the second quarter, increasing 38% year-over-year to 7.6 million daily. Average trades with client engagement across equities ETFs and index options accounting for the vast majority of the year-over-year uptick in trading activity.

Bank deposit account fees move higher due to an improved net yield as a growing percentage of the balances continue to convert to the floating rate bucket.

Rick: Bank deposit account fees, moved higher due to an improved net yield as a growing percentage of the balances continue to convert to the floating rate bucket.

Corporate proxy season as well as elevated client, trading volumes.

Note that there was a slight offset in this other line due to the fcc's decision to lower exchange processing pieces zero beginning in mid-may.

Finally, the other Revenue line, reflected typical 2q seasonal, items related to corporate proxy season as well as elevated client trading volumes note, that there was a slight offset in this other line due to the fcc's decision to lower exchange processing pieces zero beginning in mid-may.

Rick: Of course, this rate change is pnl neutral as there is a corresponding decrease in the other expense line as well.

In terms of expenses adjusted expenses for the quarter were up 5% versus 2 Q, 24, as we continue to make ongoing Investments to support sustainable growth, including opening new branches and hiring Financial Consultants.

In terms of expenses, adjusted expenses for the quarter were up, 5% versus 2q 24, as we continue to make ongoing Investments to support sustainable growth, including opening new branches and hiring Financial Consultants.

Rick: As well as evolving, our suite of offerings to clients with new products and capabilities such as our retail Alternatives platform.

Rick: And further driving efficiencies by powering our client-facing reps with AI as they serve our clients.

Rick: Our continued progress and reducing high cost borrowing at the banks and strong trading volumes powered record. Topline growth.

Rick: our continued progress in reducing high cost, borrowings at the banks and strong trading volumes powered record, Topline growth

Rick: in conjunction with balance, expense management, adjusted pre-tax profit margin reached 50.1%

Rick: Adjusted earnings per share was a dollar 14 or a year-over-year increase of 56%.

Rick: adjusted earnings per share was a dollar 14 or a year-over-year increase of 56%.

Rick: These second quarter Financial results, reflect the continued positive inflection in Schwab's earnings trajectory through the first 6 months of 2025, as well. As highlight the durability of our Diversified model, in delivering Financial results, across a range of environments.

Rick: Moving on to our balance sheet, we continue to support our clients as their needs of evolved through this Dynamic environment.

Rick: Following the deleveraging that began in late 1 q and extended into April client. Margin balance is at the broker dealer rebounded, during 2 Q to finish at 83.4 billion or down slightly from year end 2024 levels.

Rick: Following DD leveraging that began in late 1 q and extended into April client. Margin balance is at the broker dealer rebounded, during 2 Q to finish at 83.4 billion or down slightly from year end 2024 levels.

Rick: Bank loans grew with pal, balances of 24% versus the prior year end.

Rick: Bank loans grew with Cal balances of 24,000 versus the prior year end.

Rick: And as anticipated, we saw seasonal tax related outflows in client transactional, sweet cash during April and after another slight reduction in May transactional sweet cash bills during the month of June, bringing the quarter over quarter, increase to approximately 4.3 billion.

And as anticipated, we saw seasonal tax related outflows in client transactional, sweep cash during April and after another slight reduction in May transactional sweet cash Bill during the month of June, bringing the quarter over quarter, increase to approximately 4.3 billion.

Rick: Okay, continuation of normal client cache Trends. We were able to utilize a combination of cash flows. Coming off of the Securities portfolio, as well as excess. Cash on hand to further reduce high cost funding at the banks.

Rick: looking ahead, We Believe Trends will continue to reflect normal client activity and we plan to keep a close eye on a range of macro factors, as shift in Market sentiment tend to influence client cache allocations

Rick: With a continuation of normal client cache Trends. We were able to utilize a combination of cash flows. Coming off of the Securities portfolio as well as excess cash on hand to further reduce high cost funding at the banks looking ahead. We Believe Trends will continue to reflect normal client activity and we plan to keep a close eye on a range of macro factors, as shift in Market sentiment tend to influence client cache allocations

As I've noted previously, we are focused on maintaining flexibility in managing the balance sheet in a manner that keeps us, well, positioned to navigate a wide range of potential environments.

Rick: Turning the high costs Bank funding.

Turning the high cost Bank funding following, the nearly 12 billion pay down.

Rick: Following the nearly 12 billion pay down there. We reduced the balances by another 10 billion during the second quarter of 25.

Rick: The first quarter, we reduced the balances by another 10 billion during the second quarter of 25.

Rick: Bringing the outstanding balance as of, June 3027 billion or down more than 70% from the peak.

Rick: Bringing the outstanding balance as of June 30 to 27.7 billion or down more than 70% from the peak.

As previously mentioned, we are not planning to reduce Bank, wholesale funding levels for zero. However, as we move into the back, half of the year, we expect to make additional progress each quarter until these higher cost Bank liabilities are in a Range more consistent with our long-term Diversified funding profile.

Rick: As previously mentioned, we are not planning to reduce Bank, wholesale funding levels to zero. However, as we move into the back, half of the year, we expect to make additional progress each quarter until these higher cost Bank liabilities are in a Range more consistent with our long-term Diversified funding profile.

Rick: Our Capital levels finish the quarter slightly above the upper bound of the firm's adjusted Tier 1, leverage objective of 6.75 to 7%.

Our Capital levels finish the quarter slightly above the upper bound of the firm's adjusted Tier 1, leverage objective of 6.75 to 7%.

Rick: The quarter of a quarter bill was primarily driven by earnings and the continued pull Lear of unrealized marks.

The quarter of a quarter bill was primarily driven by earnings and the continued to pull the par of unrealized marks.

Rick: The ratio also reflects the 5.3 billion in total Capital return through the first 6 months including an increased common dividend, the Redemption of the 2.5 billion series, G preferred stock and the resumption of open market. Common stock repurchases, in June, where we were purchased approximately 350 Million worth of stock.

Rick: The ratio also reflects the 5.3 billion in total Capital returned through the first 6 months, including an increased common dividend, the Redemption of the 2.5 billion series, G preferred stock and the resumption of open market. Common stock repurchases, in June, where we were purchased approximately 350 Million worth of stock.

Rick: Bringing the year to date buyback, total to 1.85 billion including the 1.5 billion. We were purchased back in February.

Bringing the year to date buyback. Total to 1.85% back in February.

Looking ahead, we will continue to prioritize maintaining Capital to support the needs of our clients and the growth of our franchise.

Rick: Looking ahead, we will continue to prioritize maintaining Capital to support the needs of our clients and the growth of our franchise.

Rick: Cycle Financial growth story.

Rick: While returning excess capital in multiple forms, as part of our through the cycle, Financial growth stories.

Now, let's turn our attention to the full year 2025

Rick: Now, let's turn our attention to the full year 2025

Rick: Back in January, we outlined an initial Financial scenario informed by a host of inputs.

Rick: back in January, we outlined an initial Financial scenario, informed by a host of inputs, including a mid January forward, interest rate curve, which called, for a single 25 basis point cut to Fed funds.

Rick: Including a mid January forward, interest rate curve, which called, for a single 25 basis point cut to Fed funds.

Rick: 6.5% annualized Equity Market appreciation and client trading volume. Generally consistent with mix and volumes of observed, during 4 q 24,

Rick: 6.5% annualized Equity Market appreciation and client trading volume. Generally consistent with mixing volumes observed during 4q 24.

Rick: Obviously things have evolved quite a bit. So it's part of our updated full year 2025 scenario. We have refreshed these inputs

Rick: the interest rate forward curve, currently calls for 225 basis point Cuts before year end

Rick: Markets rebounded, from early April lows, to finish the quarter strong.

Rick: Markets rebounded from early, April loans to finish the quarter strong.

Therefore, applying an annualized 6.5% Equity Market return from June 30th levels.

Rick: Implies full year S&P returns.

Therefore, applying an annualized 6.5% Equity Market return from June 30th, implies full year S&P returns.

Rick: Of approximately 9% for 2025.

Of approximately 9% for 2025.

Rick: While we have observed sustained, strength in client trading over the first 6 months.

While we have observed sustained, strength in client, trading over the first 6 months, this is the last from pullback in volumes.

Rick: So we still anticipate full year 2025 daily, average trading volume to finish significantly higher than the 4q 24 levels used for the initial Financial scenario, discussed back in January.

Rick: The updated scenario allows for some pullback in volumes though, we still anticipate full year, 2025 daily, average trading volume to finish significantly higher than the 4q 24 levels used for the initial Financial scenario, discussed back in January.

Rick: From a trading mix perspective.

Rick: We expect first half Trends to generally, persist though, macro factors and client preference will inform the ultimate mix.

Assuming these updated factors. And keeping in mind, the current macro backdrop, we would expect total revenue growth of 18.5 to 19.5% for the full year 2025

Rick: Updated factors. And keeping in mind, the current macro backdrop, we would expect total revenue growth of 18.5 to 19.5% for the full year 2025

Rick: The scenario assumes further reduction in high cost funding at the banks to a level. Generally consistent with our long-term Diversified funding profile.

The scenario assumes further reduction in high cost funding at the banks to a level. Generally consistent with our long-term Diversified funding profile.

Rick: Full year. Net interest margin of 2.65 to 2.75%, which is up slightly from the January scenario. Due to the pace of pay Downs year to date transactional, sweet cash Trends. And a recent pickup insecurities lending activity.

In this scenario, average 4, q name is expected to expand well into the 280s basis, point range.

Rick: In this scenario, average 4q name is expected to expand well into the 280s basis, point range.

In full year, average interest earning assets is still expected to decline slightly in 2025 versus 2024.

Rick: And full year, average interest earning assets is still expected to decline slightly in 2025 versus 2024.

Rick: Full year 2025 expenses is still training towards the mid single digit Zone, though. We

Rick: Full year 2025 expenses is still trending towards the mid single digit Zone, though. We slightly tighter with a slightly tighter range of

Rick: slightly tighter with a slightly tighter range of

4.75 to 5.25%.

Rick: This reflects year-to-date Investments across our key priorities aimed at supporting growth across all fronts.

This reflects year-to-date Investments across our key priorities aimed at supporting growth across all fronts.

Rick: As well as the elevated level of client engagement including transaction and related asset level fees.

Rick: And the mid-may reduction of the SEC, 31 fee rate to zero.

Speaker Change: And the mid-may reduction of the SEC, 31 fee rate to zero.

Speaker Change: We continue to feel good about this range of spending for 2025 and how it positions us to achieve our objectives.

We continue to feel good about this range of spending for 2025 and how it positions us to achieve our objectives.

Speaker Change: Of course, market levels and client trading levels, during the second half, will continue to shape the absolute dollar amount for the year.

Speaker Change: Of course, market levels and client trading levels. During the second half, will continue the shape. The absolute dollar amount for the year.

Speaker Change: so, putting the pieces together,

Speaker Change: the combination of strong Topline growth and balance and expense management implies pre-tax, margins in the very high 40s for the full year

Speaker Change: the combination of strong Topline growth and balance the expense management implies pre-tax margins in the very high 40s for the full year

If you follow the map all the way down to the bottom line, this full year scenario implies potential, adjusted earnings in the $455 to $465 area. Excluding the impact of any incremental Buybacks in the second half

Speaker Change: if you follow the math, all the way down to the bottom line, this full year scenario implies potential adjusted earnings in the 4505 to 4.65 area, excluding the impact of any incremental Buybacks in the second half

Speaker Change: representing potential year-over-year, earnings growth into the very high 40% Zone.

Speaker Change: Representing potential year-over-year, earnings growth into the very high 40% Zone.

Speaker Change: The first half of this year, served as a reminder, that market expectations can change quickly, so we'd encourage you to continue to reference. This static setup of Revenue, sensitivities included in today's summer, business update, to help you craft a high level perspective of how changes from these assumptions could influence results.

The first half of this year, served as a reminder, that market expectations can change quickly, so we'd encourage you to continue to reference. This static setup of Revenue, sensitivities included in today's summer, business update, to help you craft a high level perspective of how changes from these assumptions could influence results.

Speaker Change: These directional figures have been refreshed and based on June 30th, 2025 levels.

These directional figures have been refreshed and are based on June 30202 levels.

Speaker Change: 1 additional item might flag for you is that the FED fund sensitivity, incorporates hedging programs. We have stood up over recent quarters to help manage through different interest rate environments.

Speaker Change: Underlying assumptions for the firm's updated, 2025 Financial scenario.

Please don't hesitate to reach out to the IR team with any questions about these sensitivities or the underlying assumptions for the firm's updated, 2025 Financial scenario.

Speaker Change: Drought Schwab's history. The Firm is made Investments to support sustainable through the cycle, growth on multiple fronts, as well as further enhancing our capabilities.

These capabilities help bolster our flexibility to manage the firm in a manner that enables us to serve the evolving needs of our clients with a growing Suite of modern world Solutions. While this most recent quarter highlights the power of our financial model when strategy capabilities and macroeconomic Tailwind intersect. History tells us that rates markets client engagement levels and many other variables can change quickly.

Speaker Change: These capabilities help bolster our flexibility to manage the firm in a manner that enables us to serve. The evolving needs of our clients with a growing Suite of modern build Solutions. While this most recent quarter highlights the power of our financial model when strategy capability and macroeconomic lens intercepts. History tells us that race markets client engagement levels and many of variables can change quickly. However, Schwab's through client side strategy, enhanced set of capabilities and diversified model Keeps Us positioned to deliver strong financial outcomes across a wide range of environments.

Speaker Change: However, Schwab's through client size strategy, enhanced set of capabilities and diversified model Keeps Us positioned to deliver strong financial outcomes across a wide range of environments.

In closing, it has been a strong first half of 2025 helping to sustain the momentum that began last year following the completion of the Ameritrade integration. While the environment continues to evolve, we plan to stay on offense, investing to support long-term organic growth and continuing to ensure our value proposition and client experience remained Best in Class. While the environment can change quickly, Schwab's Diversified model.

Speaker Change: In closing, it has been a strong first half of 2025 helping to sustain the momentum that began last year following the completion of the Ameritrade integration. While the environment continues to evolve, we plan to stay on offense, investing to support long-term organic growth and continuing to ensure our value proposition and client experience remained Best in Class. While the environment can change quickly, Schwab's Diversified model.

Helps keep us well, positioned heading into the months ahead and supports our confidence in the long-term trajectory for the firm Beyond 2025. And with that, Jeff, let's move on to Q&A.

Speaker Change: Helps keep us well, positioned heading into the months ahead and supports our confidence in the long-term trajectory for the firm Beyond 2025. And with that, Jeff, let's move on to Q&A.

Speaker Change: Operator, can you please walk everyone through the instructions for the Q&A session?

Sure thing. As a quick, reminder, if you'd like to ask a question, please press star, then 1 remember to unmute your phone and record your name and Company when prompted, if you'd like to withdraw that question, you may press star 2. Okay? Now first question comes from Ken Worthington with JP Morgan, your line is open.

Question, please. Press star. Then 1 remember to unmute your phone and record your name and Company when prompted, if you'd like to withdraw that question. You may press star 2, okay? And our first question comes from Ken Worthington with JP Morgan. Your line is open.

Good morning. Thanks for taking the question. Um, starting high level for Rick.

Speaker Change: So Chuck built this business in part by the incumbents. Uh and we continue to see pockets of success or even outright success from emerging BMS, like Robin Hood and Weeble despite not having nearly the breadth or depth of products and services offered by Schwab. Um, this seems sort of like, classic Christensen and innovators dilemma.

Speaker Change: Good morning. Thanks for taking the question, um, starting high level for Rick. So, Chuck built this business in part by disrupting the the incumbents. Uh, and we continue to see pockets of success or even outright success from emerging firms, like Robin Hood and Weeble despite not having nearly the breadth or depth of products and services offered by Schwab. Um, this seems sort of like, classic Christianson and innovators dilemma

Speaker Change: In addition to spot crypto, can you talk about to what extent and how you're adjusting the strategy, the services and the marketing to pursue some of the opportunities that these younger smaller Brokers are capitalizing on? And then can, or do you think you can do what you do? Well,

Speaker Change: But also pursue what they do well at the same time and be successful in both.

Speaker Change: For the question Ken, I would not trade positions.

Speaker Change: Thanks for the question Ken, I would not trade positions with anyone. I I think what we do is is much is very much differentiated from uh from from others and the fact that we can deliver platforms far beyond our competitors in terms of the breadth of what you can trade in and invest in, we have service that can't be matched, we have in-person experience.

Speaker Change: I I think what we do is is much is very much differentiated from uh from from others and the fact that we can deliver platforms far beyond our competitors in terms of the breadth of what you can trade and invest in, we have service that can't be matched. We have in-person experiences and over 400 locations across our country. We have 16,000 advisors in every community that you can walk in and talk to

Speaker Change: Is in over, 400 locations across our country. We have 16,000 advisors in every community that you can walk in and talk to

for for serious investors, who want to Young investors, who want to think about how to pay off their college debt, how to buy a house, there's no better place to be than here at, uh, than here at Schwab and, um,

Speaker Change: That's true. I think across all ages all types of investors and, and we're winning in the market. We see it with our TOA ratio, which, uh, uh, has been really strong in our, our net new assets would get which continue to strengthen over over last year. So we feel really good about our positioning at the same time as we've done for 50 years. We are always willing to disrupt ourselves and to do what's required to make sure that we are the firm. Meaning the needs of clients in our industry. And, and where that's necessary, we will do it, uh, as it relates to more specifically to your crypto question. We feel like we're meeting clients needs in crypto today. Uh, is the first thing, uh, I'd point out in that, you know, we have more than a 20% share of all exchange traded product Assets in crypto sit on our custody platform. So what we're seeing and hearing from our clients is, they're not sure about crypto, but they feel like they've shown a little and they want to do it through a product and through a firm that they trust and that and that's why we see those assets. Second at the same time

Speaker Change: Is first thing I'd point out in that we have more than a 20% share of all exchange traded product Assets, in crypto sit on our custody platform. So what we're seeing and hearing from our clients is, they're not sure about crypto, but they feel like they've shown a little and they want to do it through a product and through a firm that they trust and that and that's why we see those assets. Second at the same time we are working on launching uh Bitcoin and ethereum. When those launch, I expect those to be a meaningful accelerate or, or, or a meaningful growth driver. And the reason I believe that because they talked to clients all the time, who tell me the following

Speaker Change: We are working on launching uh, Bitcoin and ethereum. When those launch, I expect those to be a meaningful accelerate or, or, or a meaningful growth driver. And the reason I believe that, because I talked to clients all the time, who tell me the following

Speaker Change: % of my assets sitting at Schwab and 2% at a small firm that specializes in crypto. You know, some digital native firm and they say, I can't wait until you have

Speaker Change: I've got 98% of my assets sitting at Schwab and 2% at a small firm that specializes in crypto, you know, some digital native firm and they say, I can't wait until you have

Uh Bitcoin or ethereum because I want to move all those assets to Schwab because I trust you and I want them sitting alongside my other assets. So I feel great about where we are we were we we continue to be an Innovative firm and disrupt ourselves where necessary, but we continue to win with investors of all sizes and ages.

Speaker Change: Uh Bitcoin or ethereum because I want to move all those assets to Schwab because I trust you and I want them sitting alongside my other assets. So I feel great about where we are we were we we will continue to be an Innovative firm and disrupt ourselves where necessary, but we continue to win with investors of all sizes and ages.

Dan Fannon: Thank you. And our next question comes from Dan Fannon with Jeff. Jalen is open.

Speaker Change: Thank you. And our next question comes from Dan Fannon, with Jeffrey's. Your line is open.

Thanks, good morning. Uh, Rick was hoping you could expand upon the current environment, you guys are seeing great account growth elevated, retail trading. And now in June you have cash levels building despite, you know, the market, you know, grinding up. So I was hoping you could just talk about the sustainability of these Trends as we think about the rest of this year. And into next year, giving some of the, the Frank you're seeing

Speaker Change: Why don't I take the client side of that and maybe Mike can talk a little bit about the, the cache on the client side. We, we're running offense, we seek continue to acceleration of our nna. Uh, June was up, I believe 46% over over last June. Uh, so each month it goes by. We feel more and more solid about our our net new asset growth and what gives us comfort about that and why they say why I say that is some of the things happening under

Speaker Change: Underneath the surface be behind the headline numbers and I'll and I'll share a few of those number 1. When you look at our net new asset growth year-over-year, we've seen a real acceleration in the retail side of our of our business and so coming out of the integration, that's what we expected to see. And that's exactly what we've seen. Our advisor Services business continues to grow at a very healthy level just as it did last year and now we're really seeing retail kick in underneath that. Retail number. We're really seeing uh, tremendous progress with our Legacy and Merit trade clients again, just as we expected. But now we're seeing we've seen uh, over 100% growth in the last year. In our net, new assets, from a merit trade clients, and what I hear from them when I meet with them or or talk with our financial consultants, who, who are working with them every day is that

Speaker Change: We've seen our advisor Services business continues to grow at a very healthy level just as it did last year. And now we're really seeing retail kick in underneath that. Retail number. We're really seeing uh tremendous progress with our Legacy and Merit trade clients again, just as we expected. But now we're seeing we've seen uh over 100% growth in the last year. In our net, new assets from Ameritrade clients and what I hear from them when I meet with them or or talk with our financial consultants, who, who are working with them every day is that

Speaker Change: You know, at first, they were dealing with a new system, a new platform, maybe a new relationship, and they were getting used to it. And now they say they've never been happier in their in their investing life. That they had everything they had at Ameritrade and now they have so much more at Schwab whether it's our wealth capabilities, our our lending capabilities, the combination of our digital platforms. Our award-winning service, those clients have never been happier and you see it with the every quarter of the client promoter scores from that group of clients continues to go up and up and their net new assets. Continues to go up and up. So I couldn't be more excited about where we are today and the growth we've seen. And at the same time, uh, equally excited about the future and serving all

Speaker Change: You know, at first, they were dealing with a new system, a new platform, maybe a new relationship, and they were getting used to it. And now they say they've never been happier in their in their investing life. That they had everything they had at Ameritrade and now they have so much more at Schwab whether it's our wealth capabilities, our our lending capabilities, the combination of our digital platforms. Our award-winning service, those clients have never been happier and you see it with the every quarter of the client promoter scores from that group of clients continues to go up and up and their net new assets. Continues to go up and up. So I couldn't be more excited about where we are today and the growth we've seen. And at the same time uh equally excited about the future and serving all these clients. Mike, do you want to take the cash part? Sure. Uh, hey, Dan, um, relate to uh cash? Yes. We continue to see. Good Trends in cash allowing us to pay down those supplemental. Borrowings if if you look at the second quarter of course you have that tax related uh out

Speaker Change: All these clients. Mike, do you want to take the cash part? Sure. Uh, hey, Dan, um related to uh cash. Yes, we continue to see. Good Trends in cash allowing us to pay down those supplemental. Borrowings if if you look at the second quarter of course you have that tax related uh outflows that we normally see, but that was offset by some selling in the quarter and that selling more pronounced in the beginning of the quarter. But we still saw some net selling in June uh contributing to that pickup as well as some Redemption related activities. So we're really seeing that normalized cash environment, allowing us to continue to progress to pay down of those supplemental. Borrowings nicely.

Speaker Change: Workflows that we normally see but that was offset by some selling in the quarter and that selling more pronounced in the beginning of the quarter. But we still saw some net selling in June, uh, contributing to that pickup as well as some Redemption related activity. So we're really seeing that normalized cash environment, allowing us to continue to progress to pay down of those supplemental. Borrowings nicely.

Thank you, on our next question comes from Bill cats, with TD, cow on your line is open.

Speaker Change: Thank you, on. Our next question comes from Bill cats, with TD, cow in your line is open.

Speaker Change: Great, thank you very much so long if we could delve into maybe the balance sheet strategy from here, if I think about a 5 to 7% organic growth rate on a 10 trillion dollar denominator, you'd be in a descending of 500, 600 billion dollars plus of net, new assets, if I then assume that cash holds about 10% of those assets, um you're going to be generating 50 to 70 billion dollars of cash per atom wondering how you think about maybe redeploying that to balance sheet growth versus other initiatives and how we should think about how that would then tie into a more sustained buyback opportunity. Thank you.

Speaker Change: Great, thank you very much. So if we could delve into maybe the balance sheet strategy from here, if I think about a 5 to 7% organic growth rate on a 10 trillion denominator you'd be in a descending of 5, 600 billion dollars plus of net, new assets, if I then assume that cash Holes about 10% of those assets, um, you can be generating 50 to 70 billion dollars of cash per atom wondering how you think about maybe redeploying that to balance sheet growth versus other initiatives and how we should think about how that would then tie into a more sustained buyback opportunity. Thank you.

Speaker Change: Hi Bill, thanks for the question. Um, so when we think about that balance sheet, I mean just taking a step back for a minute and those principles that have often talked about, we're going to ensure the balance sheet is going to support our client needs. Uh secondly, we're going to manage that balance sheet on a foundation of safety and soundness and of course then we're going to manage that balance sheet.

Speaker Change: The way that it's going to be optimized to ensure the durable learning staff. Um, so when I, I think about where we are today, um, you know, obviously we've made a lot of progress in paying down those borrowings. Uh, and at some point, uh, we will be resuming, uh, I would say more, uh, Securities purchases. Um, and so, when we think about that balance sheet growth, it is going to be to support our client needs. We've seen a, a good pick up and lending activities, uh, that continues to, um, you know, be a strong factor for us. Uh, both in our margin lending activity, as well as in the bank. Uh, but but then again, uh the uh, ability to continue to make those investments in Securities. Um, and again that uh, will be a key part of the strategy. So we feel like with that, with that pickup, uh, in cash, we will be able to put that to work nicely in the way that's going to be accretive. And again, when you think about the more we're doing for clients, broadly, that's leading to

Speaker Change: You know, obviously we've made a lot of progress in paying down those borrowings. Uh, and at some point, uh, we will be resuming, uh, I would say more uh, Securities purchases. Um, and so, when we think about that balance sheet growth, it is going to be to support our client needs. We've seen a, a good pick up and lending activities, uh, that continues to, um, you know, be a strong factor for us. Uh, both in our margin lending activity, as well as in the bank. Uh, but but then again, uh the uh, ability to continue to make those investments in Securities. Um, and again, that uh, will be a key part of the strategy. So we feel like with that, with that pickup, uh, in cash, we will be able to put that to work nicely in the way that's going to be accretive. And again, when you think about the more we're doing for clients broadly, that's leading to revenue diversification the way we manage our expenses. Uh, in that balanced fashion, we're going to continue to invest in our capabilities while

Speaker Change: Investing in scale and efficiency as well. That's going to build us durable earnings and that to us is going to continue to build a capital organically, which is going to allow us to ensure. We could build that Capital to support the growth of the franchise but also be able to return it uh in multiple forms as well.

The revenue diversification the way we manage our expenses. Uh, in that balanced fashion, we're going to continue to invest in our capabilities, while investing in scale and efficiency as well. That's going to build us durable earnings and that to us is going to continue to build a capital organically, which is going to allow us to ensure. We could build that Capital to support the growth of the franchise but also be able to return it uh in multiple forms as well.

Brian Bedell: Sorry, it's on mute. Okay. And our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Sorry, it's on mute. Okay now next question comes from Brian Bedell with Deutsche Bank, your line is open.

Brian Bedell: Oh great. Thanks, thanks. Good morning. Thank you. My question. Um, maybe if you could just talk a little bit about, um, the organic growth backdrop for the second half. I mean, uh, the, you know, 2025 started out quite nicely up at, you know, 5% uh in the first quarter, obviously tax affected in the second quarter but um, ending June at like 4.9%. So if you can talk about your confidence and being within that um, 5 to 7% uh or or organic growth, then for the full um, on an annualized basis for the full second half. Um, and some of the maybe potential incremental drivers, um, coming from your, you know, a variety of growth initiatives and I'll just layer in. Did you expect to, um, launch that, uh, you know, your crypto, your spot crypto platform before you render? Is that more of a 226, uh, you know, early 26th event,

Brian Bedell: Obviously tax affected in the second quarter. But um, ending June at like 4.9%. So if you can talk about your confidence in being within that um, 5 to 7% uh or organic growth ban for the full um, on an annualized basis for the full second half. Um, and some of the maybe potential incremental drivers um, coming from your, you know, a variety of growth initiatives and I'll just layer in, you know, do you expect to um, launch that uh, you know, your crypto, your stock crypto platform before your renders that more of a 2026. Uh, you know, early 26 event

Speaker Change: For the question Brian. First on the 5-7 we committed in our winter business update that we that we'd make progress towards the 5 to 7. And we're very confident that that will be the case.

Speaker Change: Thank thanks for the question, Brian. First on the 5 to 7 we committed in our winter business update that we that we'd make progress towards the 5 to 7. And we're very confident that that will be the case.

Brian Bedell: and uh, we feel really

and uh, we feel really

Brian Bedell: Uh, confident in our second half pain and a I think once you get past the tax related, flows of of April, that that that went into May in many states. Uh, because tax payments were delayed and you get to June again you see the the the the what I think is impressive acceleration of our net new assets. And so we're confident that we'll continue through the back to the second half of the year. And and that we'll we will demonstrate that progress that we talked about at the beginning of the year.

Brian Bedell: Uh, confident in our second half pain and a I think once you get past the tax related, flows of of April that that that went into May and many states. Uh, because tax payments were delayed and you get to June again, you see the the the the what I think is impressive acceleration of our net new assets. And so we're confident that we'll continue through the back to the second half of the year. And and that we'll we will demonstrate that progress that we talked about at the beginning of the year.

Brian Bedell: I think more broadly, it's important to think about our growth as a firm.

I think more broadly, it's important to think about our growth as a firm.

Brian Bedell: In uh sort of in 2 prongs. The the first 1 is our net new asset growth. And we continue to think that 5 to 7 is the right uh assumption over the long term with 3 to 5 of it coming from existing clients and 1 to 2 are coming from due to firm clients. Just

Brian Bedell: In uh sort of in 2 prongs. The the first 1 is our net new asset growth. And we continue to think that 5 to 7 is the right assumption over the long term with 3 to 5 of it coming from existing clients and 1 to 2 are coming from due to firm clients just as we've done.

Has done.

Consistently. Historically um the second and and important part of our growth and and I think people ought to think about this as analysts firms are driving our future value. Is that there's a lot more we can do for our clients and there's a lot more they want us to do for them.

Brian Bedell: Consistently. Historically um the second and and important part of our growth and and I think people ought to think about this as analysts firms are driving our future value. Is that there's a lot more we can do for our clients and there's a lot more they want us to do for them.

Brian Bedell: There there is a bull market for convenience in our country. Our 45 million client accounts would love to handle more of their financial life here at Schwab and they, they already bring a lot of it to us already across Banking and lending and wealth and investing and trading, but we are seeing them do more with us in wealth. We saw our managed investing flows, uh, increase 37% on top of what was in all.

All time record last year, our our loan originations and our pledged asset lines are are up 100% year-over-year. So we've made conscious efforts to to do more for our clients, to diversify, our Revenue, at the same time, and we've made those Investments the past few years, and they are really paying off. So, I, I feel terrific about our growth picture as a, as a company.

There there is a bull market for convenience in our country. Our 45 million client accounts would love to handle more of their financial life here at Schwab and they, they already bring a lot of it to us already across Banking and lending and wealth and investing and trading, but we are seeing them do more with us in wealth. We saw our managed investing flows, uh, increased 37% on top of what was an all-time record last year, our L, our loan originations and our pledged asset lines are up a 100% year-over-year. So we've made conscious efforts to to do more for our clients, to diversify, our Revenue, at the same time, and we've made those Investments the past few years, and they are really paying off. So, I, I feel terrific about our growth picture as a, as a company.

Speaker Change: Thank you. You know, our next question comes from Alex, blasting with Goldman Sachs, your line is open.

Brian Bedell: Thank you. You know, our next question comes from Alex, blasting with Goldman Sachs, your line is open.

Brian Bedell: When you use them out a bit, you talked about AI efficiency. You talked about a waste of further monetization nii trajectories really accelerating here as well. So as you think about the margins of the business all the time and where they could go off of this number, um balancing with obviously reinvestment back in the business. How how are you thinking about that? What do you think is the ultimate profitability destination for the firm?

Alex: Hi, good morning, thank you for the question. Um, uh, question for you guys around profitability, really impressive margin in the quarter north of 50%, and understand that. Obviously, there's some 1-off events perhaps that could have benefited, you know, given the robust trading bag for, but when you zoom out a bit, you talked about AI efficiency, you talked about a ways to further monetize, the asset base, obviously knee trajectories really accelerating here as well. So as you think about the margins of the business or time and where they could go for this number, um, balancing with obviously reinvestment back in the business. How are you thinking about that? What do you think is the ultimate profitability destination for the farm?

Yeah, um hey, thank you for the question. Um,

Brian Bedell: Yeah, um, hey, thank you for the question. Um, so when we think about this, yes, obviously, we're happy with that. Um, that expansion of margin, uh, being driven by the Top Line, very strong Revenue growth. Uh, and as in our scenario, we're still expecting that, uh, for the back half. Um, when you think about our strategy, our strategy is is growth and bringing new clients to the firm, uh, evolving our, our suite of capabilities for them to meet their uh evolving needs. And that the more we do for clients that relates to um, a a series of activities that were engaged in and output of that is revenue diversification. And the way, then you pair that with the way we're managing expenses, we're investing in growth.

Brian Bedell: So when we think about this, yes, obviously, we're happy with that. Um, that expansion of March in, uh, being driven by the Top Line, very strong Revenue growth. Uh, and as in our scenario, we're still expecting that, uh, for the back half. Um, when you think about our strategy, our strategy is is growth and bringing new clients to the firm, uh, evolving our, our suite of capabilities for them to meet their uh evolving needs. And that the more we do for clients that relates to um, a a series of activities that we're engaged in and output of that is revenue diversification. And the way, then you pair that with the way we're managing expenses, we're investing in growth, we're investing in scale and efficiency as well. That's enabling us to expand margin rather than nicely but that expense management objective again is that balanced approach where we will opportunistically continue to invest in those capabilities where we see that opportunity. So I think a natural outcome

Of of that uh, approach is that expansion? Of course, as you point out too. Uh the environment is going to be a key factor in that as well. But uh, we feel good about our growth. We feel good about the balanced approach where we're maintaining Investments uh both in growth but also the ability to um invest in that scale and efficiency as well to uh sustained margin.

Speaker Change: She watched sustained margin?

Speaker Change: Thank you. Our next question comes from Kano Voight with KBW. Your line is open.

Speaker Change: Thank you to our next question. Comes from Kano void with KBW. Your line is open.

Hi, good morning, thanks for taking my question. Uh, so Mike in your prepared remarks, you flagged newer hedging programs you've set up over the last few quarters, to manage your interest rate exposure. Uh obviously Pals and and margin balances have continued to grow strongly and still a significant portion of your assets on balance sheet and increasingly in the BDA are tied to the short end of the Curve.

Speaker Change: Hi, good morning, thanks for taking my question. Uh, so Mike in your prepared remarks, you flagged newer hedging programs you've set up over the last few quarters, to manage your interest rate exposure. Uh obviously Pals and and margin balances have continued to grow strongly and still a significant portion of your assets on balance sheet and increasingly in the BDA are tied to the short end of the Curve.

Speaker Change: I'm just curious if you could outline, the reason steps you've taken on the hedging program to manage that short end rate, exposure and whether you think there's incrementally more that could be done with derivatives and the hedging program, over the coming quarters to further reduce some of that earnings exposure to the short end, as we're approaching Cuts in the forward curve.

Speaker Change: I'm just curious, if you could outline, the recent steps, you've taken on the hedging program to manage that short end rate, exposure and whether you think there's incrementally more that could be done with derivatives and the hedging program, over the coming quarters to further, reduce some of that earnings exposure to the short end, as we're approaching Cuts in the foreground

Speaker Change: Thanks for the question. And, uh, yes, we've uh, when we look at the interest rate risk profile, we think about that holistically and uh, again, uh, the multiple tools that we have to manage. Um, that interest rate risk position. Of course, part of that is managed through, uh, the Investment Portfolio, uh, where we're maintaining a a range of duration of 2 to 4 years. But the, uh, interest rate swap program is a nice complement to that to ensure we have multiple tools to manage that interest rate risk profile. Um and as we've been

Thanks for the question. And, uh, yes, we've uh, when we look at the interest rate risk profile, we think about that holistically and uh, again, uh, the multiple tools that we have to manage. Um, that interest rate risk position. Of course, part of that is managed through, uh, the Investment Portfolio, uh, where we're maintaining a a range of duration of 2, to 4 years. But the, uh, interest rate swap program is a nice complement to that to ensure we have multiple tools to manage that interest rate risk profile. Um, and as we've been deploying these programs, we've done. So in a way that, uh, build some protection for earnings in that lower rate scenario. And so we've done it in 2 ways either you're looking at your fixed rate liabilities and converting those to float such that you get the benefit when rates reset lower or you're looking at some of those floating rate lending activities,

Speaker Change: Deploying these programs we've done. So in a way that, uh, build some protection for earnings in that lower rate scenario. And so we've done it in 2 ways either you're looking at your fixed rate liabilities and converting those to float such that you get the benefit when rates reset lower or you're looking at some of those floating rate lending activities,

Speaker Change: Uh, and converting them to fix. That's that you get that, uh, fixed coupon, uh, even in that lower interest rate environment. So we've, uh, taken off roughly a third of of that interest rate risk profile in that downward rate environment. Um, and so we will continue to evolve those hedging programs and capabilities to make sure we just continue to build flexibility for ourselves. But we feel like we put ourselves in a good position.

Speaker Change: Uh, and converting them to fix such that, you get that, uh, fixed coupon, uh, even in that lower interest rate environment. So we've, uh, taken off roughly a third of of that interest rate risk profile in that downward rate environment. Um, and so we will continue to evolve those hedging programs and capabilities to make sure we just continue to build flexibility for ourselves. But we feel like we put ourselves in a good position.

Thank you. My next question comes from Michael Cyprus with Morgan Stanley. Your line is open.

Speaker Change: Thank you. My next question comes from Michael Cyprus with Morgan Stanley. Your line is open.

Speaker Change: Hey, good morning. Thanks for taking the question. I just hope you to Circle back on digital assets. I just hope you can elaborate a little bit on your strategy and digital how you use these Schwabs the role evolving over the next couple of years. You mentioned potential for Bitcoin and, uh, ether spot trading. But what about, uh, staking non facilitates that otherwise are you thinking about also partnering or with others, or would you envision, uh, custody in this all yourself on the swap platform, like you do for other asset classes and just also more Curious, broadly around tokenization. And how you see the potential to

Speaker Change: Hey, good morning. Thanks for taking the question. I just hoping to Circle back on digital assets. I just hope you can elaborate a little bit on your strategy and digital how you see Schwab's role evolving over the next couple of years. You mentioned potential for Bitcoin and, uh, ether spot trading. But what about, uh, staking non wallets and other Rise? Are you thinking about also partnering or with others? Or would you envision seing this? All yourself on the swap platform like you do for other asset classes and just also more Curious, broadly around tokenization. And how you see the potential to, uh, for that to accelerate growth? Maybe even overseas. Thanks.

Speaker Change: Uh, for that to accelerate growth, maybe even overseas. Thanks.

Speaker Change: To all of it. But uh, appreciate you asking first as as it relates to crypto.

Speaker Change: Question. I'll try to get to uh to all of it. But uh appreciate you asking first as as it relates to crypto. Yeah, we're going to start with Bitcoin in a, in a, in an ether. And and the reason we're doing that is we think about coins in, in 3 buckets, there's there's Bitcoin where they try to put in its own category, which is sort of been established as the, the, the the crypto that for people that are engaged in crypto and that they Trust and Believe in and then they they're sort of Full Faith behind so that I think that's an important 1. I think there's a second uh, category of of cryptocurrencies that are built around, block the blockchains and and being native to the blockchain. And so, if you want to transact on that blockchain, you need to you need that cryptocurrency. And I think those cryptocurrencies could be valuable, then there's a third set of of, uh, currencies that I would consider to be more than me oriented coins, like, the Dogecoin, which I think was started as a as a joke to, to some extent.

Yeah, we're we're going to start with Bitcoin in a, in a, in an ether. And and the reason we're doing that is we think about coins in, in 3 buckets, there's there's Bitcoin with a try to put in its own category which is sort of been established as the the the the crypto that for people that are engaged in crypto and that that they Trust and Believe in and then they they're sort of Full Faith behind so that I think that's an important 1. I think there's a second uh, category of of cryptocurrencies that are built around, block the blockchains and and being native to the blockchain. And so, if you want to transact on that blockchain, you need to you need that cryptocurrency. And I think those cryptocurrencies could be valuable, then there's a third set of of, uh, currencies that I would consider to be more than me oriented coins, like the Dogecoin, which I think was started as a as a joke to, to some extent. But I know a lot of people have bought, we're going to focus our efforts on those first 2 categories. And within those categories,

Speaker Change: But I know a lot of people have bought, we're going to focus our efforts on those first 2 categories. And within those categories, you asked about stable coins. Uh, stable coins are likely to play a role in transacting on, on blockchains. And, uh, and and that's something that we do want to be able to offer we. We will have a stable coin at some point, we want to get, uh, Bitcoin and

You asked about stable coins. Uh, stable coins are like to play a role in transacting on on blockchains and uh and and that's something that we do want to be able to offer we. We will have a stable coin at some point, we want to get uh Bitcoin and ethereum out first. But but uh stable coins will come next. You you asked them about whether we're we're going to partner on that or how we're going to do it.

We're we're looking at multiple ways, we, we have had conversations with, uh, you know, the large Banks and around, uh, you know, a Consortium of efforts to to handle stable coin or deliver stable coin to the market. And at the same time, we're also exploring our our own Avenues and and we're making a decision that we think is is best for our uh, best for our clients.

Speaker Change: Make a decision that we think is is best for our uh, best for our clients.

Speaker Change: On the tokenization front.

It'll be interesting to see how that plays out, and, and in which asset classes. It becomes uh, more mainstream, I think for public equities.

Speaker Change: It'll be interesting to see how that plays out, and, and in which asset classes. It becomes uh, more mainstream, I think for public equities.

We've got to ask ourselves what the problem is being solved and and what are the? What are the externalities that come with tokenization? And I think if you, if you look at maybe the

Speaker Change: We've got to ask ourselves what the problem is being solved and and what are the? What are the externalities that come with tokenization? And I think if you, if you look at maybe the

Speaker Change: You could argue that are being solved or the the new features you get 24.

Speaker Change: 7 Trading.

Speaker Change: You could argue that are being solved or the the new features you get 24 by 7 trading of arguably is a feature of of tokenization, what we've gone to 24 by 5 and and we see less than 1% of the trace.

Speaker Change: I believe is a feature of of tokenization. What we've gone to 24 by 5 and and we see less than 1% of the trades.

Speaker Change: Uh, on our platform being done outside of Market hours, so I'm not sure that's a huge leap forward for for investors. Uh, nor am I sure that that that we couldn't go to 24/7, uh, via traditional trading paths

And and there are some externalities that come with tokenization. Um, number 1, our traditional markets have built up the safest most transparent. Most liquid and deepest markets in the world that that executes most efficiently. And I think tokenizing public equities at the moment. I'm not sure you have access to to to all of those things. Um you don't have to publish where trades are being uh, executed. Like like we do you don't have to have the uh deal with the know, your client and and

Speaker Change: And and there are some externalities that come with tokenization, uh, number 1, our traditional markets have built up the safest most transparent. Most liquid and deepest markets in the world that that executes most efficiently. And I think tokenizing public equities at the moment. I'm not sure you have access to to to all of those things. Um, you don't have to push where trades are being uh, executed. Like like we do, you don't have to have the uh deal with the know, your client and anti-money laundering rules that prevents nefarious, actors from from money, laundering money through systems. So there's all kinds of things that um, externalities around tokenization and so

Speaker Change: We'll see how much this picks up and and how the regulatory environment plays out clearly. If if clients want to transact via the blockchain and Via tokenization, if we're going to be there and we're going to be the institution that people trust to do it so we're not sitting here twiddling our funds and thumbs as it relates to tokenization, if that's the way markets go we're going to be there but we want to make sure that the whole Market goes there in a thoughtful way because for 50 years at Schwab. We have been the a leader in Innovation that we've always done it from a standpoint of what's right for clients and let's do it alongside Regulators in a way that creates trans transparency, low cost effective, uh, markets. And, uh, and thankfully, we enjoy those today. And, and any new innovation we'd want to expand on that and not bring us backwards.

Monterey laundering rules that prevents nefarious actors from from money, laundering money through systems. So there's all kinds of things that um externalities around tokenization. And so uh, we we'll see how much this picks up and and how the regulatory environment plays out clearly. If if clients want to transact via the blockchain and Via tokenization, if we're going to be there and we're going to be the institution that people trust to do it. So we're not sitting here twiddling our funds thumbs as it relates to tokenization, if that's the way markets go we're going to be there but we want to make sure that the whole Market goes there in a thoughtful way because for 50 years at Schwab. We have been the a leader in Innovation that we've always done it from a standpoint of what's right for clients and let's do it alongside Regulators in a way that creates trans transparency, low cost effective, uh, markets. And, uh, and thankfully, we enjoy those today. And, and any new innovation we'd want to expand on that and not bring us backwards.

Okay, my next question comes from Devin Ryan with citizens. Your line is open.

Speaker Change: Okay, my next question comes from Devin Ryan with citizens. Your line is open.

Uh, thanks, good morning, good morning, Mike. Um, I want to follow up on the balance, balance sheet, conversation, just kind of broader Capital optimization and um, he's going back in your last year. You all brought up kind of longer term plans to de-emphasize the balance sheet a bit. Um over time just increasingly sweeping customer cash. All balance sheet and don't obviously lower the capital intensity but you protect economics. And so I'm just curious.

Speaker Change: Considerations there is the optimized between earnings and uh Capital intensity, thanks.

Whether that's still the plan um and and and you know the timing just after replacing short-term funding or or how we should think about that. And just the considerations there is the optimized between earnings and uh Capital intensity thanks.

Speaker Change: Thanks for the question. Um, we take a step back again, as we said before, our focus is growth, bringing new clients to the firm evolving, our suite of services for the for those clients. And when we think about the bank, uh, as a platform, uh, that is an important platform to help us to achieve that strategy and support the ongoing clients needs. So, when we think about the balance sheet over time, uh, of course, we're going to make that available to our clients and meet their, uh, borrowing needs, uh, at the same time, you know, they'll be components of that balance sheet, which we've talked about is, is the reduction of the supplemental borrowings but, but over time, uh, what we've talked about is having the capability of of moving some of those monies, uh, off balance sheet as a capability. Again, the strategy of the firm is growth, but you know, if you find yourself in a situation where you have some excess cash and might you want to deploy that?

Uh, off-balance sheet. Uh, that's more a, a capability that we want to have. We have that, of course, with the, uh, deposit program, uh, with TD. Um, but it's important that we, we think about that in a way that 1 focus on the client impact. Might, we want to offer more fcic, uh, insurance but also thinking about the economics and of course, cash on back.

Balance sheet is, is quite a creative. Um, so it's really in those, uh, rare times where perhaps rates are extremely low. And therefore, when you think about use of the balance sheet, it's it's perhaps not economical. But I think about that off-balance sheet, uh, activity is more a tactical capability. Not really a primary driver of our strategy, which is growth.

Speaker Change: More a tactical capability, not really a primary driver of our strategy, which is growth.

Okay, operator. I think we have time for 1 final question.

Speaker Change: Okay, operator. I think we have time for 1 final question.

Okay, and our last question comes from Ben Buddhist with barcela, Yolanda's open.

Speaker Change: Okay, and our last question comes from Ben Buddhist with barcela is Yolanda's open.

Speaker Change: Hey, good morning, and thanks for taking my question. Um, I wanted to follow up on some earlier, comments on progress, meeting with the Merit trade. I think you mentioned that, you know, the nna growth is, um, is up over 100% year-over-year. Curious, you know what, the absolute number looks like relative to Legacy Schwab blue, um, and and also curious, if you could maybe unpack, uh, some of the Cross sell comments, you've made, you know, where are you seeing particular levels of product adoption going to be things like bank loans, where we've seen a really meaningful pickup um or anywhere else in particular that you're seeing you know strong residents uh with that client base. Thank you.

Speaker Change: Hey, good morning, and thanks for taking my question. Um, I wanted to follow up on some earlier comments on progress, meeting with the Merit trade. I think you mentioned that, you know, the nna growth is, um, is up over 100% year-over-year. Curious, you know what, the absolute number looks like relative to Legacy Schwab blue, um, and and also curious, if you could maybe unpack, uh, some of the Cross sell comments, you've made, you know, where are you seeing particular levels of product adoption? Could it be things like bank loans, where we've seen a really meaningful pickup or anywhere else in particular that you're seeing you know, strong residents uh, with that client base. Thank you.

Sure. On on

On on a merit trade.

I don't believe we.

Speaker Change: Share that number. But it's, you know, our, our swab Legacy blue are still the dominant, uh, part of our, uh, retail nna.

Speaker Change: Sure. On on on, on a merit trade, I don't believe we share that number, but it's, you know, our, our swab Legacy blue are still the dominant, uh, part of our, uh, retail nna.

Speaker Change: Uh but but Ameritrade is becoming a bigger contributor and and and growing nicely. If you if you go back over the past few years

Uh but but American Trade is becoming a bigger contributor and and and growing nicely. And if you go back over the past few years,

Speaker Change: I think, you know, we we did the largest. I think most consequential integration in the in the history of our industry and we went from a period of losing assets with the Merit trade clients to pretty stable last year. And now we're now we're seeing growth and and I expect that will accelerate over time and become an even more meaningful part of our nna.

I think, you know, we we did the largest. I think most consequential integration in the in the history of our industry and we went from a period of losing assets with the Merit trade clients to pretty stable last year. And now we're now we're seeing growth and and I expect that will accelerate over time and become an even more meaningful part of our nna as it relates to cross sales, or

As it relates to cross sales or cross sales. I think of it more as doing more to help our clients across their financial lives. And and where we're seeing it is in our wealth business where there is a bull market for advice more and more of our clients are wanting someone to

Speaker Change: The cross sells, I think of it more as doing more to help our clients across their financial lives. And and where we're seeing it is in our wealth business where there is a bull market for advice more and more of our clients are wanting someone to

Speaker Change: Essentially take over their financial life or at a minimum sit by their side and help guide them through the financial life. And uh, and we're playing a bigger role there. We saw, uh, impressive growth in our overall wealth flows and in our proprietary Schwab advisory business. And the same thing is true in lending side, might talk about how our earnings have been um, accelerated by the pay down of supplemental borrowing on the liability side and there's still more earnings growth from the pay down on the liability side of our, our balance sheet, the next wave of of earnings growth. After that is going to be more of an asset Side Story. Both uh funds maturing and being able to invest at higher rates and also the growth of of our land, and we're seeing that our pal, uh, pledged asset line, originations are up.

Speaker Change: Essentially take over their financial life or at a minimum sit by their side and help guide them through their financial life. And uh, and we're playing a bigger role there. We saw, uh, impressive growth in our overall wealth flows and in our proprietary Schwab wealth advisory business. And the same thing is true in The Lending side. Mike talked about how our earnings have been um accelerated by the pay down of supplemental borrowing on the liability side and there's still more earnings growth from the pay down on the liability side of our, our balance sheet, but the next wave of of earnings growth after that is going to be more of an asset Side Story. Both uh, bonds maturing and being able to invest at higher rates and also the growth of of our lending, and we're seeing that our pal, uh, pledged asset line. Originations are up more than 100% And I think that is a testament to the investment. We made 3 or 4 years ago to make it a digital more straightforward seamless process. It used to take

To serve them and make a difference.

30 days to get a pledged asset line. Now it takes a day and we've had clients, call us up at the beginning of a house tour that they were doing. And by the end, they had money money in their account so it can be done even more quickly. So we're just investing in our capabilities, making them better and stronger. And as we do more and more clients are turning to us for for that aspect of their financial life, and we couldn't be happier to serve them and make a difference.

Speaker Change: And with that, why don't I close out the call? Thanks everyone for, uh, for your questions, for your engagement this morning. We're, we're grateful that you joined. I hope that, uh, you take away 3. Things from today's call.

Speaker Change: And with that, why don't I close out the call? Thanks everyone for, uh, for your questions for your engagement. This morning. We're grateful that you joined. I hope that, uh, you take away 3. Things from today's call.

Speaker Change: Number 1.

Speaker Change: We are growing on all fronts, in our client metrics, in our Solutions, and in our financials.

We are growing on all fronts, in our client metrics, in our Solutions, and in our financials.

Number 2, a consistent focus on clients and our disciplined approach has enabled us to deliver record Financial results during this quarter.

Speaker Change: Number 2. A consistent focus on clients and our disciplined approach has enabled us to delivered record Financial results during this quarter.

And number 3, our competitive position has never been stronger than our confidence has never been higher.

Speaker Change: And number 3, our competitive position has never been stronger than our confidence has never been higher.

Thanks everyone.

Speaker Change: Thanks everyone.

Q2 2025 Charles Schwab Corp Earnings Call

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