Q3 2025 The Charles Schwab Corp Earnings Call

Speaker #2: Good morning, everyone, and welcome to SHWAB's 2025 Fall Business Update. Broadcasting live from our Westlake headquarters. This is Lauren Gaspar, Managing Director of Investor Relations.

Speaker #2: And I am The team is looking forward to sharing additional insights into those results along with a broader strategic and financial update as we head into the final chapter of 2025.

Speaker #2: joined by President and CEO, Rick Worcester, and CFO, Mike Verdeschi. Hopefully, everyone has had an opportunity to review our strong results for the third quarter that were released about an hour ago.

Speaker #2: As always, let's quickly hit on the typical housekeeping items. The slides for the business update will be posted to their usual spot on the IR website at the conclusion of today's prepared remarks.

Speaker #2: Q&A remains structured as one question, no follow-ups. And please, let's try to avoid the multi-layered questions disguised as one. This will allow us to address as many questions as possible during our time together.

Speaker #2: As always, please don't hesitate to reach out to your friendly IR team with any follow-up questions after today's business update. And last, but certainly not least, everyone's favorite part of these business updates, the forward-looking statements page.

Speaker #2: Given the importance of these statements, I would like to break from tradition and read them out loud in their entirety. Just kidding, but seriously, they are important, so do take a look at them and remember that outcomes can differ from expectations, so please keep in touch with our disclosures.

Speaker #2: And now, it is my pleasure to turn it over to Rick to start us off.

Speaker #3: Thank you, Lauren, and thanks everyone for joining us for our Fall Business Update. Our three client-sized strategy continues to drive growth on all fronts.

Speaker #3: In the third quarter, clients opened up $1.1 million new brokerage accounts and entrusted Schwab with approximately $138 billion in core net-new assets. Year-to-date, we've attracted nearly $356 billion in core net-new assets.

Speaker #3: Clients are deepening their relationships with us by conducting more of their financial lives here, as seen by our record wealth and lending flows. Daily average trades remained above $7 million for the third consecutive quarter, and margin balances reached a record $97.2 billion.

Speaker #3: With engaged clients, a supportive market, and strong execution, we delivered another quarter of record results with 27% year-over-year revenue growth and 70% year-over-year adjusted earnings growth.

Speaker #3: And we returned excess capital in multiple forms. As we head into the final stretch of 2025, we are playing offense with ongoing investments that will continue to drive profitable growth through the cycle.

Speaker #3: Equity markets reached all-time highs in the third quarter, and investors' sentiment landed in bold territory. We are here to support investors through market cycles and make a difference in their financial lives.

Speaker #3: This quarter, I visited 19 of our branches across the country, several of our SHWAB wealth advisory offices, and met with multiple dozens of our RIA clients.

Speaker #3: Broadly speaking, our clients are happy because markets are up. Client wealth is at all-time high, and they are asking us how to protect it, pass it along, and grow it.

Speaker #3: And this is when they turn to SHWAB. We provide exceptional service platforms and advice in the channel of our clients' choice. In the third quarter, we supported nearly $570 million digital logins, $7 million calls, 36% growth in interactions with our research content, and thousands of interactions in our 400 branches in local communities across our country and overseas.

Speaker #3: We are here for clients when, where, and how they need us. Our three client-sized strategy combined with our diversified business model and ongoing investments in client experiences and capabilities is powering growth on all fronts, with clients across our solutions and on all financial measures.

Speaker #3: Starting with client growth, investors opened more than 1 million new brokerage accounts, and we attracted $138 billion in core net-new assets in the third quarter.

Speaker #3: A 44% increase over last year. We said we'd make progress in getting back to our historic organic growth range, and as you can see, we've made substantial progress on our path to 5%.

Speaker #3: We believe we are positioned incredibly well in the two fastest-growing areas of the market. Through the cycle, we remain confident in our ability to grow at levels consistent with our historic range.

Speaker #3: This quarter, our strong N&A was helped by the market environment, improvement with legacy emeritary clients, and high client satisfaction and engagement. We're continuing to deepen relationships with former emeritary clients who have been positive contributors to N&A throughout 2025.

Speaker #3: While they have not yet reached the organic growth rate levels we see among legacy SHWAB clients, CPS scores among former emeritary clients have improved 11 points this year.

Speaker #3: Turning to our solutions growth, clients are deepening their SHWAB relationships by conducting more of their financial lives with us across our wealth, lending, and trading solutions.

Speaker #3: Managed investing net flows increased 40% year-over-year, with 30% of flows from legacy emeritary clients. SHWAB wealth advisory, our flagship wealth offer, achieved another quarter of record flows and continues to delight clients with a record client promoter score of 85.

Operator: Thank you for standing by. If you would like to ask a question, you can press star one. Thank you.

Lauren Gaspar: Good morning, everyone, and welcome to Schwab's 2025 Fall Business Update, broadcasting live from our Westlake headquarters. This is Lauren Gaspar, Managing Director of Investor Relations, and I am joined by President and CEO Rick Wurster and CFO Mike Verdeschi. Hopefully, everyone has had an opportunity to review our strong results for the third quarter that were released about an hour ago. The team is looking forward to sharing additional insights into those results, along with a broader strategic and financial update as we head into the final chapter of 2025. As always, let's quickly hit on the typical housekeeping items. The slides for the business update will be posted to their usual spot on the IR website at the conclusion of today's prepared remarks. Q&A remains structured as one question, no follow-ups. Please, let's try to avoid the multi-layered questions disguised as one.

Lauren Gaspar: This will allow us to address as many questions as possible during our time together. As always, please don't hesitate to reach out to your friendly IR team with any follow-up questions after today's business update. Last, but certainly not least, everyone's favorite part of these business updates: the forward-looking statements page. Given the importance of these statements, I would like to break from tradition and read them out loud in their entirety. Just kidding, but seriously, they are important, so do take a look at them. Remember that outcomes can differ from expectations, so please keep in touch with our disclosures. Now it is my pleasure to turn it over to Rick to start us off.

Rick Wurster: Thank you, Lauren, and thanks everyone for joining us for our Fall Business Update. Our through-client-size strategy continues to drive growth on all fronts. In the third quarter, clients opened up 1.1 million new brokerage accounts and trusted Schwab with approximately $138 billion in core net new assets. Year to date, we've attracted nearly $356 billion in core NNA. Clients are deepening their relationships with us by conducting more of their financial lives here, as seen by our record wealth and lending flows. Daily average trades remained above 7 million for the third consecutive quarter, and margin balances reached a record $97.2 billion. With engaged clients, a supportive market, and strong execution, we delivered another quarter of record results with 27% year-over-year revenue growth and 70% year-over-year adjusted earnings growth. We returned excess capital in multiple forms.

Rick Wurster: As we head into the final stretch of 2025, we are playing offense with ongoing investments that will continue to drive profitable growth through the cycle. Equity markets reached all-time highs in the third quarter, and investor sentiment landed in bold territory. We are here to support investors through market cycles and make a difference in their financial lives. This quarter, I visited 19 of our branches across the country, several of our Schwab Wealth Advisory offices, and met with multiple dozens of our RIA clients. Broadly speaking, our clients are happy because markets are up. Client wealth is at all-time high, and they are asking us how to protect it, pass it along, and grow it. This is when they turn to Schwab. We provide exceptional service, platforms, and advice in the channel of our client's choice.

Rick Wurster: In the third quarter, we supported nearly 570 million digital logins, 7 million calls, 36% growth in interactions with our research content, and thousands of interactions in our 400 branches in local communities across our country and overseas. We are here for clients when, where, and how they need us. Our through-client-size strategy, combined with our diversified business model and ongoing investments in client experiences and capabilities, is powering growth on all fronts with clients across our solutions and on all financial measures. Starting with client growth, investors opened more than 1 million new brokerage accounts, and we attracted $138 billion in core net new assets in the third quarter, a 44% increase over last year. We said we'd make progress in getting back to our historic organic growth range, and as you can see, we've made substantial progress on our path to 5%.

Rick Wurster: We believe we are positioned incredibly well in the two fastest growing areas of the market. Through the cycle, we remain confident in our ability to grow at levels consistent with our historic range. This quarter, our strong NNA was helped by the market environment, improvement with legacy Ameritrade clients, and high client satisfaction and engagement. We're continuing to deepen relationships with former Ameritrade clients who have been positive contributors to NNA throughout 2025. While they have not yet reached the organic growth rate levels we see among legacy Schwab clients, CPS scores among former Ameritrade clients have improved 11 points this year. Turning to our solutions growth, clients are deepening their Schwab relationships by conducting more of their financial lives with us across our wealth, lending, and trading solutions. Managed investing net flows increased 40% year over year, with 30% of flows from legacy Ameritrade clients.

Rick Wurster: Schwab Wealth Advisory, our flagship wealth offer, achieved another quarter of record flows and continues to delight clients with a record client promoter score of 85. Bank lending balances are up 24% overall, with PAL balances reaching record levels. Traders continue to turn to us for our world-class offer. Thinkorswim adoption among Schwab legacy clients has increased 98% over last year. We're also here for our clients who are looking for crypto exposure. Visits to our digital assets content on schwab.com are up 92% year over year, and Schwab has approximately a 20% share of the spot crypto ETP market. We know that our clients who have allocated a small portion of their portfolios in spot crypto at other firms are eager to bring those assets to Schwab. We remain on track to launch spot crypto in the first half of 2026, starting with Bitcoin and Ethereum.

Speaker #3: Bank lending balances are up 24% overall, with PAL balances reaching record levels. Traders continue to turn to us for our world-class offer, think or swim adoption among SHWAB legacy clients has increased 98% over last year.

Speaker #3: We're also here for our clients who are looking for crypto exposure. Visits to our digital assets content on schwab.com are up 92% year-over-year, and SCHWAB has approximately a 20% share of the spot crypto ETF market.

Speaker #3: We know that our clients who have allocated a small portion of their portfolios in spot crypto at other firms are eager to bring those assets to SHWAB.

Speaker #3: We remain on track to launch spot crypto in the first half of 2026 starting with Bitcoin and Ethereum. We'll launch this offer to SHWAB way, with the powerful combination of education, research, risk management, and the service clients expect all at great value.

Rick Wurster: We'll launch this offer the Schwab way, with a powerful combination of education, research, risk management, and the service clients expect, all at great value. Our offer will allow clients to access crypto directly alongside their existing investments and our banking capabilities, which will be a strong differentiator. Our financials are the third dimension of growth, and we delivered record results this quarter. Net revenues increased 27% year over year to a new quarterly record, and we delivered record quarterly adjusted earnings per share of $1.31. As we look to the future, we're confident in our ability to continue driving growth on all fronts and across a range of environments. I'll spend the next few minutes highlighting why. One, we are in a strong competitive position. We serve 45 million client accounts and $11.59 trillion in assets, making us number one among peers who report on that metric.

Speaker #3: Our offer will allow clients to access crypto directly alongside their existing investments and our banking capabilities, which will be a strong differentiator. Our financials are the third dimension of growth, and we delivered record results this quarter.

Speaker #3: Net revenues increased 27% year-over-year to a new quarterly record. And we delivered record quarterly adjusted earnings per share of $1.31. As we look to the future, we're confident in our ability to continue driving growth on all fronts and across a range of environments.

Speaker #3: And I'll spend the next few minutes highlighting why. One, we are in a strong competitive position. We serve 45 million client accounts and 11.59 trillion in assets, making us number one among peers who report on that metric.

Speaker #3: We are number one in RIA custodial assets, and we're number one in retail trading as measured by daily average trades, with no close second.

Rick Wurster: We are number one in RIA custodial assets, and we're number one in retail trading as measured by daily average trades, with no close second. We continue to receive recognition from respected third parties because we stand apart by putting clients' financial well-being at the forefront of every decision. Our no trade-offs approach offers an unmatched breadth of capabilities, education, research, and service, with a combination of industry-leading digital experiences and deep client relationships to help clients achieve their desired outcome. Two, our business fundamentals are healthy. We look at this across a few dimensions. With both Schwab and the markets, total client interactions within our branches on chat, email, and on the phones are up 19% year over year, and we exceeded 500 million digital client logins across mobile and web for the third consecutive quarter.

Speaker #3: We continue to receive recognition from respected third parties because we stand apart by putting clients' financial well-being at the forefront of every decision. Our no-trade-offs approach offers an unmatched breadth of capabilities, education, research, and service, with a combination of industry-leading digital experiences and deep client relationships to help clients achieve their desired outcomes.

Speaker #3: Two, our business fundamentals are healthy. We look at this across a few dimensions. We engage with both Schwab and the markets. Total client interactions within our branches on chat, email, and on the phones are up 19% year-over-year.

Speaker #3: And we exceeded $500 million digital client logins across mobile and web for the third consecutive quarter. Daily average trades remained above $7 million during the quarter, and clients have increased their use of margin to record levels, up 33% over last year.

Rick Wurster: Daily average trades remained above 7 million during the quarter, and clients have increased their use of margin to record levels, up 33% over last year. Second, we're delivering world-class service. We're answering the phones in less than 30 seconds on average, and more than 75% of questions are answered without the need to transfer the call. Third, most importantly, clients are happy. Overall satisfaction scores for our service organization are at an all-time high of 88%. Client promoter scores for IS and AS are at record levels, meaning we are delivering for clients when and where they need us. It's important to remember that for 50 years, we have championed our investors' financial goals and done everything we can to make clients better off in their financial life. Three, we're attracting a diverse range of clients.

Speaker #3: Second, we're delivering world-class service. We're answering the phones in less than 30 seconds on average, and more than 75% of questions are answered without the need to transfer the call.

Speaker #3: And third, most importantly, clients are happy. Overall satisfaction scores for our service organization are at an all-time high of 88%. Client promoter scores for IS and AS are at record levels, meaning we are delivering for clients when and where they need us.

Speaker #3: It's important to remember that for 50 years, we have championed our investors' financial goals and done everything we can to make clients better off in their financial life.

Speaker #3: Three, we're attracting a diverse range of clients. We're continuing to attract and serve RIAs of all sizes, and our advisor services business is thriving.

Rick Wurster: We're continuing to attract and serve RIAs of all sizes, and our advisor services business is thriving. In our retail business, we are attracting and serving investors of all ages, and we see significant engagement from younger clients. When we think about our mission and the opportunity to get more Americans invested, it is encouraging that industry research shows Gen Z is 45% more likely to start investing by the age of 21 as compared to Millennials. We see these trends playing out among our client base. This year, nearly one-third of new-to-firm retail households at Schwab are Gen Zers, investors between the ages of 13 and 28. One of the reasons they're turning to Schwab is because we're meeting them in the channels where they turn for information about investing. We know they learn about finances primarily through social media and family.

Speaker #3: In our retail business, we are attracting and serving investors of all ages, and we see significant engagement from younger clients. When we think about our mission and the opportunity to get more Americans invested, it is encouraging that industry research shows Gen Z is 45% more likely to start investing by the age of 21 as compared to Millennials.

Speaker #3: And we see these trends playing out among our client base. This year, nearly one-third of new to firm retail households at SHWAB are Gen Z-ers, investors between the ages of 13 and 28.

Speaker #3: One of the reasons they're turning to SHWAB is because we're meeting them in the channels where they turn for information about investing. We know they learn about finances primarily through social media and family.

Speaker #3: Their top online resource is YouTube, and we're the number one financial services firm on YouTube by followers. And younger investors at SHWAB are highly engaged in building their wealth over the long term.

Rick Wurster: Their top online resource is YouTube, and we're the number one financial services firm on YouTube by followers. Younger investors at Schwab are highly engaged in building their wealth over the long term. In fact, one-third of retail households who created a financial plan within the last two years are under the age of 40. While client assets are more concentrated among older generations today, the average age of our clients continues to get younger. A growing portion of new-to-firm households are traders. Traders of all ages and experience levels are coming to Schwab, including younger traders. Younger traders are turning to us because they recognize the potential that trading has in helping build wealth over time. They are turning to Schwab because we have the platforms, tools, education, coaching, expertise, and service they need to help them succeed, a combination they cannot find anywhere else.

Speaker #3: In fact, one-third of retail households who created a financial plan within the last two years are under the age of 40. While client assets are more concentrated among older generations today, the average age of our clients continues to get younger.

Speaker #3: Finally, a growing portion of new-to-firm households are traders. Traders of all ages and experience levels are coming to Schwab, including younger traders.

Speaker #3: Younger traders are turning to us because they recognize the potential that trading has in helping build wealth over time. And they are turning to SHWAB because we have the platforms, tools, education, coaching, expertise, and service they need to help them succeed.

Speaker #3: A combination they cannot find anywhere else. Finally, we remain committed to our four strategic focus areas to meet the evolving needs of our clients.

Rick Wurster: We remain committed to our four strategic focus areas to meet the evolving needs of our clients. At the start of the year, I laid out our priorities: growth, scale and efficiency, the brilliant basics, and our people. I'll spend just a few minutes sharing highlights on progress we've made. Our first focus area is driving growth by deepening relationships with our clients. I'll highlight just a few ways we're delivering on this priority. In our advisor services business, we're deepening relationships with the 16,000 RIA firms we serve by building a broader support ecosystem that extends beyond custody alone to add value for RIAs. We've grown our lending support, alternatives capability, and expanded our institutional no-transaction fee mutual fund platform to include funds from nearly 60 managers with no transaction fees for clients. We also launched Advisor Pro Direct, which helps breakaway advisors on their path to independence.

Speaker #3: At the start of the year, I laid out our priorities. Growth, scale and efficiency, the brilliant basics, and our people. I'll spend just a few minutes sharing highlights on progress we've made.

Speaker #3: Our first focus area is driving growth by deepening relationships with our clients. I'll highlight just a few ways we're delivering on this priority. In our advisor services business, we're deepening relationships with up to 16,000 RIA firms we serve by building a broader support ecosystem that extends beyond custody alone to add value for RIAs.

Speaker #3: We've grown our lending support, alternatives capability, and expanded our institutional no-transaction-fee mutual fund platform to include funds from nearly 60 managers with no transaction fees for clients.

Speaker #3: We also launched advisor pro direct, which helps breakaway advisors on their path to independence. Finally, we supported the largest advisor transition in the history of our industry by welcoming OpenArc to our platform in September.

Rick Wurster: Finally, we supported the largest advisor transition in the history of our industry by welcoming OpenArk to our platform in September. In our retail business, we're expanding our branch footprint and hiring Financial Consultants and Wealth Consultants to serve even more of our higher net worth clients. These investments are important because we know that clients who have an FC relationship have higher CPS scores, while also bringing in more than 2.5 times the NNA and engaging more in our trading, wealth, and banking solutions. We're investing in deepening relationships within clients and enhancing how we support their financial life. We've enhanced Schwab Wealth Advisory, adding a discretionary offer. We've launched alternatives. We've invested in tax, trusts, and estate capabilities, and we've added more experts to support more clients.

Speaker #3: In our retail business, we're expanding our branch footprint and hiring financial consultants and wealth consultants to serve even more of our higher net worth clients.

Speaker #3: These investments are important because we know that clients who have an FC relationship have higher CPS scores while also bringing in more than $2.5 times the N&A and engaging more in our trading, wealth, and banking solutions.

Speaker #3: We're investing in deepening relationships with clients and enhancing how we support their financial lives. We've enhanced Schwab's wealth advisory, adding a discretionary offer; we've launched alternatives; we've invested in tax trusts and estate capabilities; and we've added more experts to support more clients.

Speaker #3: Within our banking offer, our pledged asset line experience continues to lead the industry with cycle times of about one day, and clients can now borrow against most managed investing assets they hold at SHWAB, meaning they can borrow more.

Rick Wurster: Within our banking offer, our pledged asset line experience continues to lead the industry with cycle times of about one day, and clients can now borrow against most managed investing assets they hold at Schwab, meaning they can borrow more. We're continuing to invest in our trader experience. Our second focus area is creating value with scale and efficiency. These initiatives, which are primarily centered within service, operations, and technology, are a win for clients and are also helping enable us to keep our cost to serve clients low so that we can reinvest in our growth. We're using AI to supercharge our professionals through capabilities like our Schwab Knowledge Assistant and the rollout of our Service AI Assistant, which helps our client-facing professionals create post-call summaries and notes, among other capabilities. These efforts will help our reps serve clients more efficiently.

Speaker #3: And we're continuing to invest in our trader experience. Our second focus area is creating value with scale and efficiency. These initiatives, which are primarily centered within service operations and technology, are a win for clients and are also helping enable us to keep our cost to serve clients low so that we can reinvest in our growth.

Speaker #3: We're using AI to supercharge our professionals through capabilities like our SHWAB knowledge assistant and the rollout of our service AI assistant, which helps our client-facing professionals create post-call summaries and notes among other capabilities.

Speaker #3: These efforts will help our reps serve clients more efficiently. We've also made progress on improving status notifications to clients and removing more paper from our system.

Rick Wurster: We've also made progress on improving status notifications to clients and removing more paper from our system, reducing not-in-good-order errors, and saving time for our clients and professionals. Our third focus area is delivering on the brilliant basics. At the heart of it, this means being there for clients when and where they need us and delighting them in every interaction they have with us. It means our systems are available and experiences are easy. One measure of this is our client ease scores, which are near all-time highs: 94% for our retail client service organization and 93% ease of doing business score for advisor services. Finally, our finance team has done a great job of enhancing our approach to managing our balance sheet. Last but not least, the fourth focus area is investing in our people.

Speaker #3: Reducing not in good order errors and saving time for our clients and professionals. Our third focus area is delivering on the brilliant basics. At the heart of it, this means being there for clients when and where they need us and delighting them in every interaction they have with us.

Speaker #3: It means our systems are available and experiences are easy. One measure of this is our client ease scores, which are near all-time highs: 94% for our retail client service organization and 93% ease of doing business score for Advisor Services.

Speaker #3: Finally, our finance team has done a great job of enhancing our approach to managing our balance sheet. Last but not least, the fourth focus area is investing in our people.

Speaker #3: We couldn't do what we do without 32,000 employees working together united by a single mission. We're continuing to invest in our people and culture to retain and attract the best.

Rick Wurster: We couldn't do what we do without 32,000 employees working together, united by a single mission. We're continuing to invest in our people and culture to retain and attract the best. To wrap up, we've sustained positive momentum through 2025 and are continuing to deliver growth on all fronts. We are looking towards the future from a position of strength, continuing to play offense to power profitable growth over the long term. With that, I'll turn it over to Mike to dive into details on our financial results.

Speaker #3: To wrap up, we have sustained positive momentum through 2025 and are continuing to deliver growth on all fronts. We are looking towards the future from a position of strength, continuing to play offense to power profitable growth over the long term.

Speaker #3: With that, I'll turn it over to Mike to dive into the details of our financial results.

Speaker #4: Thank you, Rick, and good morning, everyone. SHWAB delivered strong third-quarter results across all fronts, highlighting our momentum as we continue to meet the evolving needs of individual investors and independent advisors.

Mike Verdeschi: Thank you, Rick, and good morning, everyone. Schwab delivered strong third-quarter results across all fronts, highlighting our momentum as we continue to meet the evolving needs of individual investors and independent advisors. The combination of our firm's focused execution across key strategic objectives and favorable macro tailwinds yielded record results. We saw another step up in our organic client growth trends during the period, and client engagement across our broad suite of products and solutions also remained robust. This sustained momentum translated into record revenue and earnings for the quarter, including year-over-year revenue growth of 27% to $6.1 billion, adjusted pre-tax margins exceeding 51%, and adjusted earnings per share of $1.31, an increase of 70% versus Q3 2024. Client cash levels continue to reflect normal behavior, inclusive of organic growth, stability, and strong client engagement as equity markets reached record levels.

Speaker #4: The combination of our firm's focused execution across key strategic objectives and favorable macro tailwinds yielded record results. We saw another step-up in our organic client growth trends during the period, and client engagement across our broad suite of products and solutions also remained robust.

Speaker #4: This sustained momentum translated into record revenue and earnings for the quarter, including year-over-year revenue growth of 27% to $6.1 billion, adjusted pre-tax margins exceeding 51%, and adjusted earnings per share of $1.31, an increase of 70% versus Q3 2024.

Speaker #4: Client cash levels continue to reflect normal behavior, inclusive of organic growth, stability, and strong client engagement, as equity markets reached record levels. We made further progress in reducing supplemental borrowings, which ended the quarter at $14.8 billion, or just within the upper bound of our business's usual range.

Mike Verdeschi: We made further progress in reducing supplemental borrowings, which ended the quarter at $14.8 billion, or just within the upper bound of our business's usual range. We also returned meaningful excess capital via common stock repurchases. Inclusive of these actions, our capital ratios stayed relatively flat versus the second quarter, finishing Q3 slightly above our target range. Now, let's unpack some of the key drivers influencing these record Q3 results before sharing our perspectives on the final chapter of 2025. Revenue increased 27% year over year to a record $6.1 billion for Q3, the fourth consecutive quarter of double-digit year-over-year growth across all major line items. Our further reduction in supplemental borrowings at the banks, client loan growth, and another strong quarter for securities lending activity helped expand net interest margins and powered a 37% increase in net interest revenue versus Q3 2024.

Speaker #4: We also returned meaningful excess capital via common stock repurchases. Inclusive of these actions, our capital ratios stayed relatively flat versus the second quarter, finishing Q3 slightly above our target range.

Speaker #4: Now, let's unpack some of the key drivers influencing these record Q3 results before sharing our perspectives on the final chapter of 2025. Revenue increased 27% year-over-year to a record $6.1 billion for Q3.

Speaker #4: The fourth consecutive quarter of double-digit year-over-year growth across all major line items. Our further reduction in supplemental borrowings at the banks, client loan growth, and another strong quarter for securities lending activity helped expand net interest margin and powered a 37% increase in net interest revenue versus Q3 2024.

Speaker #4: Strong equity markets, healthy asset gathering, and sustained client interest in Schwab's wealth and asset management offerings drove 13% year-over-year growth in asset management and administration fees to a record $1.7 billion.

Mike Verdeschi: Strong equity markets, healthy asset gathering, and sustained client interest in Schwab's wealth and asset management offerings drove 13% year-over-year growth in asset management and administration fees to a record $1.7 billion. Q3 trading revenue was up 25% versus Q3 2024, as our leading retail trading platform facilitated another robust quarter of activity, including 7.4 million daily average trades and approximately $6 trillion of gross notional value traded across equities, ETFs, and mutual funds. Bank deposit account fees moved higher year over year due to an improved net yield as lower yielding fixed-rate obligations continue to mature and converted into the floating rate bucket. September marked an inflection point for the BDA, as we transitioned into the new $60 to $90 billion operating range for the remainder of the agreement and regained the flexibility to move balances between the BDA and our balance sheet.

Speaker #4: Three Q trading revenue was up 25% versus three Q24 as our leading retail trading platform facilitated another robust quarter of activity including $7.4 million daily average trades and approximately $6 trillion of gross notional value traded across equities, ETFs, and mutual funds.

Speaker #4: Bank deposit account fees moved higher year-over-year due to an improved net yield, as lower-yielding fixed-rate obligations continued to mature and converted into the floating-rate bucket.

Speaker #4: September marked an inflection point for the BDA. As we transitioned into the new $60 to $90 billion operating range for the remainder of the agreement, we regained the flexibility to move balances between the BDA and our balance sheet.

Speaker #4: During the third quarter, we transferred $3 billion worth of balances to Schwab to accelerate the paydown of bank supplemental borrowings. Turning to expenses, adjusted expenses for the quarter were up 5% versus Q3 2024, as we continue to make ongoing investments to support sustainable growth, including opening new branches and hiring financial consultants.

Mike Verdeschi: During the third quarter, we transferred $3 billion worth of balances to Schwab to accelerate the paydown of bank supplemental borrowings. Turning to expenses, adjusted expenses for the quarter were up 5% versus Q3 2024, as we continue to make ongoing investments to support sustainable growth, including opening new branches and hiring financial consultants, supported very strong and sustained client engagement across our broad suite of modern wealth solutions, and seek to further unlock incremental efficiencies across our business. Further progress in reducing high-cost borrowings at the banks, equity market strength, and sustained trading volumes drove record top-line growth. In conjunction with balanced expense management, Schwab's adjusted pre-tax profit margin reached 51.3%. Quarterly adjusted earnings per share equaled a record $1.31, a year-over-year increase of 70%. Note that Q3 EPS included a $0.03 benefit related to state tax matters.

Speaker #4: Supported very strong and sustained client engagement across our broad suite of modern wealth solutions, and seek to further unlock incremental efficiencies across our business.

Speaker #4: Further progress in reducing high-cost borrowings at the banks, equity market strength, and sustained trading volumes drove record top-line growth. In conjunction with balanced expense management, SCHWAB's adjusted pre-tax profit margin reached 51.3%.

Speaker #4: Quarterly adjusted earnings per share equaled a record $1.31, a year-over-year increase of 70%. Note that Q3 EPS included a $0.03 benefit related to state tax matters.

Speaker #4: With the majority of this benefit realized in three Q3 2025, we expect our corporate tax rate to remain around the 23% to 24% zone in future periods.

Mike Verdeschi: With the majority of this benefit realized in Q3 2025, we expect our corporate tax rate to remain around the 23% to 24% zone in future periods. Moving on to our balance sheet, we supported our clients as their needs evolved against a shifting backdrop. Client demand for our lending solutions increased during the quarter. Outstanding PAL balances grew to $23.4 billion, representing a year-over-year increase of 37%. Client margin loan balances rose to $97.2 billion at quarter end, up 16% versus year-end 2024, reflecting rising equity markets and improved investor sentiment and certain tactical client trading activities, such as long-short strategies. Transactional sweep cash trends continue to reflect normal client behavior.

Speaker #4: Moving on to our balance sheet, we supported our clients as their needs evolved against a shifting backdrop. Client demand for our lending solutions increased during the quarter.

Speaker #4: Outstanding PAL balances grew to $23.4 billion, representing a year-over-year increase of 37%. Client margin loan balances rose to $97.2 billion at quarter-end, up 16% versus year-end 2024.

Speaker #4: Reflecting rising equity markets and improved investor sentiment, along with certain tactical client trading activities such as long-short strategies, transactional sweep cash trends continue to reflect normal client behavior.

Speaker #4: Following modest outflows during July and August, related to typical seasonality and client net buying activity, we saw $19 billion of cash inflows in September, bringing the quarter-end balance to $425.6 billion.

Mike Verdeschi: Following modest outflows during July and August related to typical seasonality and client net buying activity, we saw $19 billion of cash inflows in September to bring the quarter-end balance to $425.6 billion, which represents a quarter-over-quarter increase of $13.5 billion, or approximately 3%. This sequential build in cash, along with the use of investment portfolio proceeds and balances transferred from the BDA, allow us to further reduce high-cost funding at the banks. We'd expect normal cash behavior to continue in Q4, including typical seasonality such as advisor payments in October and the December cash build. Staying on high-cost bank funding for a moment, we made great progress during the third quarter, reducing supplemental funding balances by another $13 billion, bringing outstanding balances down to $14.8 billion, or approximately 85% below the peak in May 2023.

Speaker #4: Which represents a quarter-over-quarter increase of $13.5 billion, or approximately 3%. This sequential build in cash, along with the use of investment portfolio proceeds and balances transferred from the BDA, allowed us to further reduce high-cost funding at the banks.

Speaker #4: We'd expect normal cash behavior to continue in Q4, including typical seasonality such as advisor payments in October and the December cash build. Staying on high-cost bank funding for a moment, we made great progress during the third quarter, reducing supplemental funding balances by another $13 billion.

Speaker #4: Bringing outstanding balances down to 14.8 billion, or approximately 85% below the peak in May 2023. This level is just inside the upper bound of our business's usual range, of approximately 5 to 15 billion, which aligns with our long-term diversified funding profile.

Mike Verdeschi: This level is just inside the upper bound of our business as usual range of approximately $5 to $15 billion, which aligns with our long-term diversified funding profile. While outstanding balances may come down further and move around this range over time, we'll continue to support client loan needs and begin to focus more on new security purchases versus paydown activities. Our capital levels finished the quarter slightly above the upper bound of the firm's adjusted tier one leverage objective of 6.75 to 7%. The quarter-over-quarter build was primarily driven by earnings and the continued pull-apart of unrealized marks. The ratio also reflects our repurchases of common shares for $2.7 billion, bringing year-to-date total capital return across all forms to $8.5 billion.

Speaker #4: While outstanding balances may come down further and move around this range over time, we'll continue to support client loan needs and begin to focus more on new security purchases versus paydown activities.

Speaker #4: Our capital levels finished the quarter slightly above the upper bound of the firm's adjusted Tier 1 leverage objective of 6.75% to 7%. The quarter-over-quarter build was primarily driven by earnings and the continued pull-apart of unrealized marks.

Speaker #4: The ratio also reflects our repurchases of common shares for 2.7 billion. Bringing year-to-date total capital return across all forms to 8.5 billion. Looking ahead, we will continue to prioritize maintaining capital to support the needs of our clients and the growth of the franchise, while returning excess capital in multiple forms as part of our through-the-cycle financial growth story.

Mike Verdeschi: Looking ahead, we will continue to prioritize maintaining capital to support the needs of our clients and the growth of the franchise, while returning excess capital in multiple forms as part of our through-the-cycle financial growth story. Turning to our full-year 2025 scenario, during the summer business update in July, we provided an updated financial scenario informed by several inputs, including a mid-July forward interest rate curve calling for 225 basis point cuts to the Fed funds target rate, equity market appreciation of roughly 9% for the full year, and client trading volume that represented a slight pullback from levels observed during the first half of the year. Moving forward to today, the interest rate curve now calls for a total of 325 basis point cuts during 2025 versus a previous expectation for only two cuts. Markets continue to move higher during the third quarter, and client trading remains robust.

Speaker #4: Turning to our full-year 2025 scenario, during the summer business update in July, we provided an updated financial scenario informed by several inputs including a mid-July forward interest rate curve calling for two 25 basis point cuts to the Fed funds target rate.

Speaker #4: Equity market appreciation of roughly 9% for the full year, and client trading volume that represented a slight pullback from levels observed during the first half of the year.

Speaker #4: Moving forward to today, the interest rate curve now calls for a total of three 25 basis point cuts during 2025, versus a previous expectation for only two cuts.

Speaker #4: Markets continue to move higher during the third quarter, and client trading remains robust. However, as the last couple of weeks remind us, the environment can shift quickly.

Mike Verdeschi: However, as the last couple of weeks remind us, the environment can shift quickly. In terms of the remainder of the year, we are likely to see various puts and takes as both rates and the broader markets evolve with the macroeconomic backdrop. So far in October, we continue to see good engagement from clients, which can increase revenue as well as volume-related expenses. Assuming this engagement persists, we could see a lift in earnings of around 2% or a bit better relative to the upper end of the financial scenario range we shared back at the July business update. In terms of next year, we are still working through our annual planning process, though we expect to keep building upon our 2025 momentum. Like most years, we will need to navigate in an evolving macroeconomic environment, including potential shifts in sentiment and engagement levels.

Speaker #4: So, in terms of the remainder of the year, we are likely to see various puts and takes as both rates and the broader markets evolve with the macroeconomic backdrop.

Speaker #4: So far in October, we continue to see good engagement from clients, which can increase revenue as well as volume-related expenses. Assuming this engagement persists, we could see a lift in earnings of around 2% or a bit better relative to the upper end of the financial scenario range we shared back at the July business update.

Speaker #4: In terms of next year, we are still working through our annual planning process. Though we expect to keep building upon our 2025 momentum, like most years, we will need to navigate an evolving macroeconomic environment, including potential shifts in sentiment and engagement levels.

Speaker #4: We remain confident in our ability to continue balancing the investments necessary to support the needs of our clients while delivering on our near-term financial objectives such as top-line growth and positive operating leverage across a range of environments.

Mike Verdeschi: We remain confident in our ability to continue balancing the investments necessary to support the needs of our clients while delivering on our near-term financial objectives, such as top-line growth and positive operating leverage across a range of environments. Please stay tuned, and we'll come back to you with a more detailed 2026 financial scenario in January. In closing, as we approach the final months of 2025, we are excited with our progress to date. Momentum with clients continues to strengthen as they entrust us with an increasing amount of their assets and execute our broad suite of solutions, including wealth, trading, asset management, and banking. Schwab's diversified model, along with record equity markets and strong client engagement, have positioned us to deliver record financial results for the full year. While that is certainly a great position to be in, obviously, our time horizon extends beyond a single year.

Speaker #4: So, please stay tuned and we'll come back to you with a more detailed 2026 financial scenario in January. In closing, as we approach the final months of 2025, we are excited with our progress to date.

Speaker #4: Momentum with clients continues to strengthen, as they entrust us with an increasing amount of their assets and execute our broad suite of solutions including wealth, trading, asset management, and banking.

Speaker #4: SHWAB's diversified model along with record equity markets and strong client engagement have positioned us to deliver record financial results. For the full year. While we're strict while that is certainly a great position to be in, obviously our time horizon extends beyond a single year.

Speaker #4: We remain relentlessly focused on maintaining the strength of our diversified model, with the ability to efficiently serve the needs of individual investors and the independent advisors who serve them through a range of environments.

Mike Verdeschi: We remain relentlessly focused on maintaining the strength of our diversified model, with the ability to efficiently serve the needs of individual investors and the independent advisors who serve them through a range of environments. With that, let's move on to Q&A. Lauren, back to you.

Speaker #4: And with that, let's move on to Q&A. Lauren, back to you.

Speaker #1: Thanks, Mike. Operator, can you please walk everyone through the instructions for the Q&A session?

Lauren Gaspar: Thanks, Mike. Operator, can you please walk everyone through the instructions for the Q&A session?

Speaker #5: Thank you. We will now begin our question-and-answer session. If you would like to ask a question, please press star one. Please press star two if you would like to withdraw your question.

Operator: Thank you. We will now begin our question and answer session. If you would like to ask a question, please press star one. Please press star two if you would like to withdraw your question. Again, that's star one to ask a question. Our first question will come from Ben Budish with Barclays. Your line is open.

Speaker #5: Again, that's star one to ask a question. Our first question will come from Ben Buddish with Barclays. Your line is open.

Speaker #6: Hi, good morning, and thank you for taking my question. Rick, you talked a little bit about the advisor business, and you prepared comments. I was wondering if you could unpack the recent trends a little bit more?

[Analyst]: Hi. Good morning, and thank you for taking my question. Rick, you talked a little bit about the advisor business in your prepared comments. I was wondering if you could unpack the recent trends a little bit more. It seems like from some of your other publicly traded peers, they're calling out a bit of a slowdown environment across the industry, maybe since April, the kind of volatility events we've seen. Your results seem to be bucking that trend. Could you talk a little bit about what's going well more recently? To what extent is the NNA growth in that channel coming from existing advisors versus kind of net new firms to Schwab? Maybe talk a little bit about your engagement and activity with sort of legacy Ameritrade advisors that are now part of Schwab. Help us understand a little bit what's going on there. Thank you.

Speaker #6: It seems like, from some of your other publicly traded peers, they're calling out a bit of a slowdown environment, you know, across the industry, maybe since April, the kind of volatility events we've seen.

Speaker #6: You know, your results seem to be bucking that trend. So, could you talk a little bit about what's going well more recently? You know, to what extent is the N&A growth in that channel coming from, you know, existing advisors versus kind of net new firms to Schwab?

Speaker #6: Maybe talk a little bit about your engagement and activity with sort of legacy emeritary advisors that are, you know, now part of Schwab. You know, help us understand a little bit what's going on there.

Speaker #6: Thank you.

Speaker #3: Ben, thanks for the question. Our advisor business has really thrived and grown at an accelerated rate. We've seen net asset inflows pick up substantially in our advisor business this year versus last year.

Rick Wurster: Ben, thanks for the question. Our advisor business is really thriving and growing at an accelerated rate. We've seen NNA pick up substantially in our advisor business this year versus last year. I think it's a combination of things. Number one, I think we're executing and delivering for clients as strongly as we ever have. Part of that is having gone through the integration with Ameritrade, where we picked up some capabilities, integrated them into Schwab's already strong offering, and put them together. I think we had some clients, particularly Ameritrade clients and others, who during the transition were wondering how it was going to play out. Now they've had the chance to see how strong the combined offering is, and they're loving it. We're winning on all fronts as it relates to advisors.

Speaker #3: And I think it's a combination of things. Number one, I think we're executing and delivering for clients as strongly as we ever have. And part of that is having gone through the integration with emeritary where we picked up some capabilities, integrated them into SHWAB's already strong offering, and put them together.

Speaker #3: And so, I think we had some clients, particularly emeriti clients and others who, during the transition, were wondering how it was going to play out.

Speaker #3: And now they've had the chance to see how strong the combined offering is and they're loving it. And so, we're winning on all fronts as it relates to advisors and I'm not surprised that's resulting in others growing more slowly because our metrics like transfer of asset ratios and things like that are up meaningfully over last year, meaning we're winning more and more this year.

Rick Wurster: I'm not surprised that's resulting in others growing more slowly because our metrics like transfer of asset ratios and things like that are up meaningfully over last year, meaning we're winning more and more this year. You asked about what's driving it. We see it across every dimension. We look at growth in a few different fronts. First, growth from existing clients of advisors that we already work with, existing advisors that bring on new business and win new business that they direct towards us, and then new advisors that transition to us. Across every one of those dimensions, we've seen an acceleration, in particular among advisors converting to us and choosing independence and choosing to be with Schwab. Why wouldn't they? I think our offer is far and away the best in the industry, and I think that's reflected in the NNA that you're seeing.

Speaker #3: You asked about what's driving it. We see it across every dimension. We look at growth in a few different fronts. First, growth from existing clients of advisors that we already work with.

Speaker #3: Existing advisors that bring on new business and win new business direct towards us, and then new advisors that transition to us. Across every one of those dimensions, we've seen an acceleration.

Speaker #3: In particular, among advisors converting to us and choosing independence, and choosing to be with Schwab. And why wouldn't they? I think our offer is far and away the best in the industry, and I think that's reflected in the N&A that you're seeing.

Speaker #5: Thank you. Our next question comes from Alex Blosty with Goldman Sachs. Your line is open.

Operator: Thank you. Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

Speaker #6: Hey, good morning. Thank you for the question. I was hoping you guys could expand on the dynamics you're seeing, sort of core deposits, really nice build over the course of the quarter.

[Analyst]: Good morning. Thank you for the question. I was hoping you guys could expand on dynamics you're seeing in sort of core deposits, really nice build over the course of the quarter. More importantly, as you think about the trajectory of interest rates and sort of sensitivity to the trajectory of core deposits on the back of that, how are you thinking of that over the next couple of quarters here? Obviously, it's a pretty important component to the overall earnings growth profile. Thanks.

Speaker #6: And more importantly, as you think about the trajectory of interest rates and sort of sensitivity to the trajectory of core deposits on the back of that, how are you thinking of that, you know, over the next couple of quarters here?

Speaker #6: Because, obviously, it's a pretty important component to the overall earnings growth profile. Thanks.

Speaker #4: Hi, Alex. Thank you for the question. As we've said, we've looked at deposits this year, and we're seeing really that normal environment play out.

Mike Verdeschi: Hi, Alex. Thank you for the question. As we've said, we've looked at deposits this year, and we're seeing really that normal environment play out. That normal environment means you're seeing us attract deposits just from the core growth, of course, where as we're growing net new assets, a component of that is going to be in cash. We typically see seasonality, of course, as well, and that's played out from quarter to quarter. Client sentiment plays a big part in that as well, where early in the year you saw more pronounced selling and then subsequent months cash going back into the market as clients began to continue to engage and invest. From here, the path of rates, if you look at the forwards, is, of course, rates heading lower. We tend to pick up cash in that environment.

Speaker #4: And that normal environment means you're seeing us attract deposits just from the core growth, of course, where as we're growing net new assets, a component of that is going to be in cash.

Speaker #4: We typically see seasonality of course as well. And so, that's played out from quarter to quarter. And then, of course, client sentiment plays a big part in that as well, where early in the year you saw more pronounced selling and then subsequent months cash going back into the market as clients began to continue to engage and invest.

Speaker #4: From here, the path of rates if you look at the forwards is, of course, rates heading lower. We tend to pick up cash in that environment.

Speaker #4: How much remains to be seen, but we feel really good about what we've seen this year. Cash is still operating in that normal environment, again with an ability to pick up cash as rates begin to trend lower from here.

Mike Verdeschi: How much remains to be seen, but we feel really good about what we've seen this year, cash still operating in that normal environment, again with an ability to pick up cash as rates begin to trend lower from here. We think that will be supportive of continued strong earnings as we go into next year and conduct activity throughout the year.

Speaker #4: So, we think that will be supportive of continued strong earnings as we go into next year and conduct activity throughout the year.

Speaker #5: Thank you. Our next question comes from Ken Worthington with JP Morgan. Your line is open.

Operator: Thank you. Our next question comes from Ken Worthington with JPMorgan. Your line is open.

Speaker #6: Hi, good morning. Thanks for taking the question. Are you looking at crypto as a driver of near-term profit, or is crypto really about bringing in the next generation of future Schwab investors? To what extent is aggressive pricing below the level of competitors like Coinbase and Robinhood a factor that you're using to drive crypto clients to Schwab?

[Analyst]: Hi, good morning. Thanks for taking the question. Are you looking at crypto as a driver of near-term profit, or is crypto really about bringing in the next generation of future Schwab investors? To what extent is aggressive pricing below the level of competitors like Coinbase and Robinhood a factor that you're using to drive crypto clients to Schwab?

Speaker #3: Ken, great to hear from you, and thanks for the question. First, we're winning in crypto today. Our clients are highly engaged. Our traffic on our crypto site has gone up 90% year-over-year.

Rick Wurster: Ken, great to hear from you, and thanks for the question. First, we're winning in crypto today. Our clients are highly engaged. Our traffic on our crypto site has gone up 90% year over year. Our clients own 20% of the crypto exchange-traded product in the industry. Most of our clients we find are not using coins to transact on the blockchain. Most are wanting to get invested in the price change of crypto, and they feel very comfortable doing that in ETFs with a company they trust. That is why we're seeing what we're seeing in crypto. That said, we do want to launch spot crypto, and I hear from clients all the time that, "Hey, you know, I've been a long-time Schwab client.

Speaker #3: Our clients own 20% of the crypto exchange-traded product in the industry. And so, most of our clients, we find, are not using coins to transact on the blockchain.

Speaker #3: Most are wanting to get invested in the price change of crypto, and they feel very comfortable doing that in ETFs with a company they trust.

Speaker #3: And so, that's why we're seeing what we're seeing in crypto. That said, we do want to launch spot crypto, and I hear from clients all the time that, "Hey, you know, I've been a longtime Schwab client."

Speaker #3: I’ve got 99% of my assets with you, but I’ve got a little account over at a digital native firm where I keep my crypto.

Rick Wurster: I've got 99% of my assets with you, but I've got a little account over at a digital native firm where I keep my crypto, and I can't wait till I can bring it back to Schwab." We're excited. We're incredibly excited about that. In terms of both profitability or, you know, using it kind of to attract the next generation, I would say both to that. Here's why I would say that is the spreads at the moment and the amount of money that these digitally native firms are making in crypto are enormous. You can see some of the digital and native public firms. There is room, I think, to be both aggressive on price and to deliver great value and generate a profit for the firm. I think that's how I would think about it.

Speaker #3: And I can't wait until I can bring it back to Schwab. And we're excited. We're incredibly excited about that. In terms of both profitability, or, you know, using it kind of as to attract the next generation, I would say both to that.

Speaker #3: And here's why I would say that: the spreads at the moment and the amount of money that these digitally native firms are making in crypto are enormous.

Speaker #3: And you can see some of the digital and native public firms. And so, there's room, I think, to be both aggressive on price and to deliver great value.

Speaker #3: And generate a profit for the firm. So, I think that's how I would think about it. In terms of attracting the next generation, Ken, I want to be really clear.

Rick Wurster: In terms of attracting the next generation, Ken, I want to be really clear. Crypto will be great for clients and will certainly appeal to young investors, but we are absolutely crushing it with young investors today. One in three of our new-to-firm household numbers, which are, you know, really strong new-to-firm numbers, are under the age of 24. A third are Gen Zers under the age of 28. They're not just engaging with us in trading. They're engaging with us across the board. They're responsible for a lot of the financial planning conversations that we've had. They'll come in and, you know, want to consolidate loans into a pledged asset line balance so they can pay off their student debt. They'll talk to us about how to buy a house in the future.

Speaker #3: Crypto will be great for clients and will certainly appeal to young investors. But we are absolutely crushing it with young investors today. One in three of our new-to-firm household numbers, which are, you know, really strong new-to-firm numbers, are under the age of 24.

Speaker #3: A third are our Gen Zers under the age of 28. And they're not just engaging with us in trading, they're engaging with us across the board.

Speaker #3: They're responsible for a lot of the financial planning conversations that we've had. They'll come in and, you know, want to consolidate loans into a pledged asset line balance so they can pay off their student debt.

Speaker #3: They'll talk to us about how to buy a house in the future. These are clients that really want to be investors for the long term.

Rick Wurster: These are clients that really want to be investors for the long term and want our help navigating it. No one can compete with us as it relates to delivering for the young investor. I have 1,000 colleagues that wake up every day that are former trading professionals that answer the phones for any investors that want advice and expertise on how to trade. We put on 35 hours a week of live content for our investors about how to learn how to trade, how to learn how to invest, the power of things like compounding. The engagement in those types of things is off the charts. I think what we can offer the young investor in terms of the support, the service, the education, and of course, the leading platform with Thinkorswim and our digital capabilities, I think is unmatched.

Speaker #3: And we want our help navigating it. No one can compete with us when it comes to delivering for the young investor. We have a thousand colleagues who wake up every day as former trading professionals to answer the phones for any investors that want advice and expertise on how to trade.

Speaker #3: We put on 35 hours a week of live content for our investors about how to learn how to trade and how to learn how to invest.

Speaker #3: The power of things like compounding, and the engagement in those types of things, is off the charts. So, I think what we can offer the young investor, in terms of the support, the service, the education, and of course the leading platform with Thinkorswim and our digital capabilities, is unmatched.

Speaker #3: And that's why we're having so much success with young investors. I think crypto will be additive but we're already winning with them.

Rick Wurster: That is why we're having so much success with young investors. I think crypto will be additive, but we're already winning with them.

Speaker #5: Thank you. Our next question comes from Brennan Hawkins with Bank of Montreal. Your line is open.

Operator: Thank you. Our next question comes from Brennan Hawkins with Bank of Montreal. Your line is open.

Speaker #6: Good morning. Thank you for taking my question. Now that we have the wholesale funding, you know, back in the normal operating range, Mike, as you called it, we saw some BDA movement, as you identified, in between the cash buckets.

[Analyst]: Good morning. Thank you for taking my question. Now that we have the wholesale funding back in the normal operating range, Mike, as you called it, we saw some BDA movement, as you identified, in between the cash buckets. How are you thinking about redeployment and reinvestment? Should we be thinking that securities will be the likely target, and what level of duration would you expect? Is the floating rate bucket on the BDA side attractive as a capital light option? Thank you.

Speaker #6: How are you thinking about redeployment and reinvestment? You know, should we be thinking that securities will be the likely target, and what level of duration would you expect?

Speaker #6: Or is the floating rate bucket on the BDA side attractive as a capitalized option? Thank you.

Speaker #4: Thank you for the question. So, yes, we're happy with the progress we've made in the paydown. We could see a little bit more reduction in that supplemental borrowing balance, but you're right.

Mike Verdeschi: Thank you for the question. Yes, we're happy with the progress we've made in the paydown. We could see a little bit more reduction in that supplemental borrowing balance. You're right. As we have now cash coming in, we will deploy that into, of course, meeting our client borrowing needs. We've seen good momentum in lending, and we will continue to deploy funds, of course, to support that need. We, of course, have the opportunity then as well to invest in securities. That's with new cash, but also as we see the securities portfolio maturing, we'll reinvest those proceeds. Keep in mind, those yields on the existing securities are under 2%, so we'll get a nice lift on that. You asked about the duration.

Speaker #4: As we have now cash coming in, we will deploy that into, of course, meeting our client borrowing needs. We've seen good momentum in lending and we will continue to deploy funds, of course, to support that need.

Speaker #4: We, of course, have the opportunity then as well to invest in securities. And that's with new cash, but also, as we see the securities portfolio maturing, we'll reinvest those proceeds.

Speaker #4: And keep in mind those yields on the existing securities are under 2%, so we'll get a nice lift on that. You asked about the duration.

Speaker #4: I've talked about this before, where the average duration for the portfolio is probably in the two to four-year range. I will give you some sense of where the overall duration will be.

Mike Verdeschi: I've talked about this before, where the average duration for the portfolio probably being that two to four-year range, that will give you some sense of where the overall duration will be. That will be a function of how we look at the liability side of the balance sheet and the composition of deposits. You could have certain investments that are shorter than that two to four years, some that could be longer. Certainly, agency mortgages will extend a little bit beyond that, but we could buy very short-dated treasuries as well. We're going to maintain that two to four-year duration. In terms of the BDA, this is something that gives us a tremendous amount of flexibility. In terms of size, it's $60 to $90 billion, the range that we operate in. It also allows us to manage across our risk stripes efficiently.

Speaker #4: That will be a function of how we look at the liability side of the balance sheet and the composition of deposits. You can have certain investments that are shorter than that two to four years, some that could be longer.

Speaker #4: Certainly, agency mortgages will extend a little bit beyond that, but we could buy very short-dated Treasuries as well. But we're going to maintain that two- to four-year duration in terms of the BDA.

Speaker #4: This is something that gives us a tremendous amount of flexibility. In terms of size, it's $60 to $90 billion. The range that we operate in also allows us to manage across our risk stripes efficiently.

Speaker #4: And that means capital liquidity and our interest rate risk profile. So, as you saw us do less in the third quarter, we moved funds from the BDA onto our balance sheet and used those proceeds to pay down supplemental borrowings.

Mike Verdeschi: That means capital, liquidity, and our interest rate risk profile. As you saw us do less in the third quarter, we moved funds from the BDA onto our balance sheet and used those proceeds to pay down supplemental borrowings. We have the flexibility to place proceeds into the BDA, and that could help us with our interest rate risk management profile, where we could either place in at a floating rate or if we wanted to match off some of our deposits, we could also place in at a fixed rate. As we talked about before, if we wanted to free up some capital, we could also place some funds into the BDA with that consideration in mind as well.

Speaker #4: But of course, we have the flexibility to place proceeds into the BDA and that could help us with our interest rate risk management profile where we could either place in at a floating rate or if we wanted to match off some of our deposits, we could also place in at a fixed rate and of course, as we talked about before, if we wanted to free up some capital, we could also place some funds into the BDA with that consideration in mind as well.

Speaker #4: But I think from here, we're in a really good position to continue to meet the needs of clients in terms of their borrowing needs, while also investing in securities in that two to four-year duration, which will give us a very nice lift in earnings as well.

Mike Verdeschi: I think from here, we're in a really good position to continue to meet the needs of clients in terms of their borrowing needs while also investing in securities in that two to four-year duration, which will give us a very nice lift in earnings as well.

Speaker #5: Thank you. Our next question comes from Dan Fannin with Jefferies. Your line is open.

Operator: Thank you. Our next question comes from Dan Fannon with Jefferies. Your line is open.

Speaker #6: Thanks. Rick, I wanted to follow up on just the emeritary customer. You mentioned that growth is improving, but that's still not where you want it to be.

[Analyst]: Thanks. Rick, I wanted to follow up on just the Ameritrade customer. You mentioned that growth is improving, but not still where you want it to be. I was hoping you could put some numbers around that and/or think about the journey and where you think how long it will take to get them to the appropriate growth rates you are expecting.

Speaker #6: So, I was hoping you could put some numbers around that and/or think about the journey and where you think how long it will take to get them to the appropriate growth rates you are expecting.

Speaker #3: Yeah, thanks for the question, Dan. I think we have continued upside with our emeritary clients. If you look at over the last 18 to 24 months, they've gone from being net negative contributors to N&A.

Rick Wurster: Yeah, thanks for the question, Dan. I think we have continued upside with our Ameritrade clients. If you look at over the last 18, 24 months, they've gone from being net negative contributors to NNA to being net positive. Not yet at the level that we see from legacy Schwab clients, but I think that's just a matter of time. The reason I believe that's just a matter of time is that a couple of things. When we measure their client satisfaction scores relative to Schwab clients, legacy Schwab clients, they've gone up dramatically over the last 12 months, but even more so if you look over the last couple of years. That's really encouraging.

Speaker #3: To being net positive. Not yet at the, you know, the level that we see from legacy SHWAB clients, but I think that's just a matter of time.

Speaker #3: And the reason I believe that's just a matter of time is that a couple of things. When we measure their client satisfaction scores, relative to SHWAB client, legacy SHWAB clients, and they've gone up dramatically over the last 12 months, but even more so if you look over the last couple of years.

Speaker #3: So, that's really encouraging. I also want to get the chance to be in our branches and talk about how our emeritary clients are doing or talk to them.

Rick Wurster: I also, when I get the chance to be in our branches and talk about how our Ameritrade clients are doing or talk to them, they've gone from being frustrated that they got moved to another firm without being asked and trying to figure out how to navigate a completely, you know, somewhat new platform to them and a different experience to saying, "I don't know how I lived without Schwab while, you know, when I was at Ameritrade. We have so much more here." We see that because they're engaging in banking, they're engaging in wealth. I think they account for 30% of all our record wealth flows that we're seeing. They're engaging in all kinds of activities they didn't have access to at Ameritrade. I am bullish on our ability to get them to the level of NNA growth that we see from Schwab clients.

Speaker #3: They've gone from being frustrated that they got moved to another firm without being asked and trying to figure out how to navigate a completely somewhat new platform to them.

Speaker #3: And a different experience. Just saying, I don't know how I lived without Schwab while, you know, when I was at Emeritary. We have so much more here.

Speaker #3: And we see that because they're engaging in banking. They're engaging in wealth. I think they account for around 30% of all our record wealth flows that we're seeing.

Speaker #3: They're engaging in all kinds of activities they didn't have access to at elementary. So, I am bullish on our ability to get them to the level of N&A growth that we see from Schwab clients.

Speaker #3: And I'm hopeful that the progress we've seen and going from negative to zero to now positive, there's still a few percentage gap between SHWAB and legacy emeritary.

Rick Wurster: I'm hopeful that the progress we've seen in going from negative to zero to now positive, there's still a few percentage gap between Schwab and legacy Ameritrade, but I'm confident in the coming months that we'll continue to make progress in closing that. I couldn't be more enthusiastic about what we're seeing from our Ameritrade clients and how we're showing up and delivering for them.

Speaker #3: But I'm confident that in the coming months, we'll continue to make progress in closing that gap. I couldn't be more enthusiastic about what we're seeing from our emeritary clients and how we're showing up and delivering for them.

Potential future world where investors build access portfolios and long-term Investments through the blockchain. Curious what risks and opportunities might that present for Schwab and for the industry, what steps might you take over the next year? Imagine it could be a major cost efficiency unlock on 1 side, but then, if there are tokenized substitutes for deposits with atomic settlement, what implications could this have for transactional? Sweep cache, as well as revenue monetization and competitive Dynamics.

Potential future world where investors build access portfolios and long-term investment through the blockchain. Curious what risks and opportunities might that present for Schwab and for the industry? What steps might you take over the next year? And imagine it could be a major cost efficiency unlock on one side, but then, if there are tokenized substitutes for deposits with atomic settlement, what implications could this have for transactional sweep cash, as well as revenue monetization and competitive dynamics?

Yeah, thanks. Thanks for the question.

Yeah, thanks. Thanks for the question.

Speaker #5: Thank you. Our next question comes from Brian Vidal with Deutsche Bank. Your line is open.

Operator: Thank you. Our next question comes from Brian Vidal with Deutsche Bank. Your line is open.

Speaker #6: Great, thanks. Good morning. Thanks for taking my question. Maybe Mike, just back on the guidance for the rest of the year. Any color on the revenue and expense components of that?

[Analyst]: Great, thanks. Good morning. Thanks for taking my question. Maybe, Mike, just back on the guidance for the rest of the year, any color on the revenue and expense components of that? Obviously, things are trending much better than initially expected. Just wanted to see if you were able to offer a range or, you know, how much you think we could be beating that, you know, $18.5 to $19.5. Similarly on expense, obviously, that would bring higher expenses, of course, but would we still be in that range, or are you targeting a specific margin target? Any color on Q4 NIM and NII, if we think NII can expand at least in Q4, given the balances are growing nicely.

Speaker #6: Obviously, things are trending much better than initially expected. So, I just wanted to see if you were able to offer a range or, you know, how much you think we could be beating that, you know, $18.5 billion to $19.5 billion. And then, similar on expense, obviously that would bring higher expenses, of course.

50 years, it's been our mission to help investors get invested, and to help them achieve their financial goals and dreams. So if we find an Investor's want to hold Securities on the blockchain and and that brings more investors into investing, then we're going to, we're going to find a way to offer clients the opportunity to hold their Securities on the blockchain and and hold them at to as tokens if that's what they would. Uh if that's the way they would like to do it.

First thing I'd say, is for 50 years, it's been our mission to help investors get invested, and to help them achieve their financial goals and dreams. So, if we find an Investor's want to hold Securities on the blockchain and and that brings more investors into investing, then we're going to, we're going to find a way to offer clients the opportunity to hold their Securities on the blockchain and and hold them at to as tokens if that's what they would. Uh if that's the way they would like to do it.

Second.

Second.

I believe there's tokenization is more likely in some asset classes than others.

I believe tokenization is more likely in some asset classes than others.

Speaker #6: But, you know, would we still be in that range or are you targeting a, you know, targeting a specific margin target? And then I guess any color on for QNIM and NII if we think NII can expand at least in for Q given the balances, or growing nicely.

It's I incredibly efficient, the customer protection rules. Make a lot of sense, uh, that

It's, I think, incredibly efficient. The customer protection rules make a lot of sense.

Uh, spreads are very tight.

Uh, spreads are very tight.

Speaker #4: Hey, Brian. Thanks for the question. A lot packed in there. So, as you know, we provide the scenario twice a year, meaning that we give you a preliminary scenario in January; we update it in July.

Mike Verdeschi: Hey, Brian, thanks for the question. A lot packed in there. As you know, we provide the scenario twice a year, meaning that we give you a preliminary scenario in January. We updated it in July. What we wanted to do today is really just give you the direction of travel. As we've been saying, we've seen outstanding client engagement. The macro environment's been favorable. I wanted to give you the direction of travel where I mentioned earnings, again, relative to that July updated scenario, the top ends of that range, the implied EPS up 2% or a bit better. You will see a lift in earnings is what we're expecting. The components, yes, a lift in revenue. We're not going to update the ranges I mentioned. A lift in expenses as well. This is volume-related, therefore variable expense.

Speaker #4: What we wanted to do today is really just give you the direction of travel. As we've been saying, we've seen outstanding client engagement. The macro environment has been favorable.

Going to tokenization doesn't solve a lot of problems for public Equity. Investors and introduces a number of complications and risks that that make the pros and cons. I think, uh, you know, somewhat somewhat questionable. So I I it's hard for me to see that taking off though. If it does again, we're going to offer it and be ready to. I think it's more likely to be perhaps in some fixed income markets, where you could see tokenization in private markets in Collectibles and areas like that. But we'll see and we're open to any environment and we want our our investors to be able to hold Securities the way they want to hold securities.

Going to tokenization doesn't solve a lot of problems for public Equity. Investors and introduces a number of complications and risks that that make the pros and cons. I think uh, you know, somewhat somewhat questionable. So I I it's hard for me to see that taking off of it does. Again, we're going to offer it and be ready to. I think it's more likely to be perhaps in some fixed income markets, where you could see tokenization in private markets in Collectibles and areas like that. But we'll see and we're open to any environment and we want our our investors to be able to hold Securities the way they want to hold securities.

um,

um,

Speaker #4: And so, I wanted to give you the direction of travel where I mentioned earnings again relative to that July updated scenario, the top end of that range, the implied EPS.

On your question about what it means for our economics.

On your question about what it means for our economics.

Speaker #4: Up 2% or a bit better. And so, you will see a lift in earnings, which is what we're expecting from the components. Yes, a lift in revenue; we're not going to update the range, as I mentioned.

Speaker #4: A lift in expenses as well. Again, this is volume-related, therefore variable expense. And where we updated the scenario in July, we gave that five and a quarter top end of that expense range.

Uh, I think there's puts and takes on that 1. I mean, if you look at the tokenization markets today and and the public equities that have been tokenized in the trades that have done been done, uh, not that we would necessarily do this, but the the the they've been done at incredibly wide spreads that are inefficient for the end Trader, but there's a, you know, there's more money to be made for the intermediary in that situation. Now we we're always going to give clients great execution but but there's definitely uh, a put there on the take side Maybe.

Mike Verdeschi: Where we updated the scenario in July, we gave that $5.25 top end of that expense range. We'll be up against that or a bit above, perhaps. That'll just depend on the client engagement and volumes. Keep in mind that is going to be seeing a revenue on the other side in terms of the transactions and overall earnings accretive. With pre-tax profit margin, the way I think about it is that's a result of a very well-balanced approach to how we manage our financials. The more we see clients engage with us across our suite of products, we see good revenue diversification coming out of that. Of course, with our expenses, we take a balanced approach. We're making resources available for growth, but we're also investing in efficiency, and that supports durable earnings across a range of environments.

Uh, I think there's puts and takes on that 1. I mean, if you look at the tokenization markets today and and the public equities that have been tokenized in the trades that have done been done, uh, not that we would necessarily do this, but the the the they've been done at incredibly wide spreads that are inefficient for the end Trader, but there's a, you know, there's more money to be made for the intermediary in that situation. Now we, we're always going to give clients great execution, but, but there's definitely, uh, a put there on the take side. Maybe it's incrementally easier to move cash. I don't think it's overly hard to to click 1 button at Schwab today, and move your money from

Speaker #4: So, we'll be up against that or a bit above, perhaps. That'll just depend on the client engagement and volumes. But again, keep in mind that this is going to be seeing revenue on the other side in terms of the transactions and overall earnings that are creative.

Speaker #4: You know, what pre-tax profit margin, the way I think about it is that's a result of a very well-balanced approach to how we manage our financials.

Speaker #4: The more we see clients engage with us across our suite of products, we see good revenue diversification coming out of that. And, of course, with our expenses, we take a balanced approach.

Speaker #4: We're making resources available for growth, but we're also investing in efficiency. And that supports durable earnings across a range of environments. And the pre-tax profit margins really an output of the way we manage that balanced approach with revenue diversification and expenses.

Mike Verdeschi: The pre-tax profit margin is really an output of the way we manage that balanced approach with revenue diversification and expenses. You asked about net interest margin. We're up this quarter. Keep in mind that we now have three cuts. At least that's what the market is indicating for the full year. We expect to still be into the $2.80 for net interest margin to close out the fourth quarter. We'll come back to you in January with a 2026 scenario at that time. Based on what we see today, rates are going to be around that 3% range to end the year. We feel really good about the ability to continue to drive earnings in a range of environments, even in that lower rate environment. On the NIM side, we talked about asset sensitivity before.

It's incrementally easier to move cash. I don't think it's overly hard to to click 1 button at Schwab today and move your money from, uh, a sweep, uh, sweep into a, a purchase money fund. And, and not only that, we proactively remind you to do that. When we see large balances in your account. And when you log into schwab.com, it's very often, the first thing you see is move your calf. So, uh, there's not many barriers to doing that today, it might be incrementally easier on the blockchain because you could do it instantaneously. So uh, it's possible. There's there's a shift there, but I think there's going to be put some put some takes on the blockchain and if clients want to participate and hold Securities that way we certainly will. Uh we will accommodate that in our in our working towards that. And our crypto launches is different than how some other how some others are going about it others. I think are taking approach of basically introducing a client to a digitally native firm and and making the introduction and then the assets are custody there. We're building the books and records and capabilities.

Speaker #4: And so, you know, you asked about net interest margin. We're up this quarter. Again, keep in mind that we now have three cuts, at least that's what the market is indicating for the full year.

Doing that because we're taking a long-term view of this that we so that we can participate, things like thing like the blockchain and tokenization over time and offer that to our clients. So uh, that's a long-winded answer. Probably. But those are my top of Mind thoughts on tokenization.

So that we can custody the assets and we're doing that because we're taking a long-term view of this that we can so that we can participate things like thing, like the blockchain and tokenization over time and offer that to our clients. So uh, that's a long-winded answer. Probably. But those are my top of Mind thoughts on tokenization.

Speaker #4: So, we expect to still be into the 280s for net interest margin to close out the fourth quarter. And again, we'll come back to you in January with a 2026 scenario at that time.

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

Okay, operator. I think we have time for one final question before we wrap up.

Thank you. Our final question will come from David Smith with truist Securities. Your line is open.

Thank you. Our final question will come from David Smith with Truist Securities. Your line is open.

Speaker #4: Again, based on what we see today, rates are going to be around that 3% range to end the year. We feel really good about the ability to continue to drive earnings in a range of environments.

Uh, good morning. Um, staying on the vein of crypto and tokenization, um, you said you're on track to launch spot crypto in the first half of next year.

Uh, good morning. Um, staying on the vein of Krypton tokenization, um, you said you're on track to launch spot crypto in the first half of next year.

Speaker #4: Even in that lower rate environment, on the NIM side, you know we talked about asset sensitivity before. And while we have some asset sensitivity, keep in mind we were proactive in cutting out roughly one-third of that net interest revenue sensitivity. As I mentioned earlier on this call, as rates head lower, we tend to pick up cash.

Mike Verdeschi: While we have some asset sensitivity, keep in mind we were proactive in cutting out roughly one-third of that net interest revenue sensitivity. As I mentioned earlier on this call, as rates head lower, we tend to pick up cash. That will be a nice offset, as will be the reinvestment of securities. Even in that lower rate environment, despite the asset sensitivity, I expect some meaningful offsets to the impact of lower rates and the impact it would have on NIM. We feel really good heading into 2026.

Um, are there any meaningful? External constraints like regularly regulatory Clarity or anything like that? That you're still waiting at this point? Or is everything. Now just based on your own internal decision making and ensuring that everything is built out, you know, fully the year standards and ready to handle the size and potential volume of of your own client base.

If you're on client base.

Speaker #4: And so, that will be a nice offset. As will be the reinvestment of securities. So, even in that lower rate environment, despite the asset sensitivity, I expect some meaningful offsets to the impact of lower rates and the impact it would have on NIM.

Speaker #4: So, we feel really good heading into 2026.

Thanks for the question. Uh, at this point, it's in our hands. Certainly up until about 4 months ago, the regulatory environment made a challenging, which is why you don't see any banks in uh, in crypto today. And instead you see Banks announcing plans that they will be in crypto and coming months and quarters and years. Uh, but that that's a result of the change in the regulatory environment. Um, so I don't think that's standing in our way. What, what, what takes time is all the stuff I talked about? We, we want to build this for the long term.

Speaker #5: Thank you. Our next question comes from Bill Katz with TD Cowan. Your line is open.

Operator: Thank you. Our next question comes from Bill Katz with TD Cowen. Your line is open.

Speaker #6: Great. Thank you very much. It seems like there's a significant inflection in the business here. Now that you're done sort of paying down the predominantly done paying down the high costs, your organic growth is great.

[Analyst]: Great, thank you very much. It seems like there's a significant inflection in the business here now that you're predominantly done paying down the high costs. Your organic growth is great. Cash is building a little bit. How should we think about the interplay between interest earning asset growth and capital return? Clearly, bought back a ton of stock this quarter, off to a good start relative to the $20 billion. Just trying to think through where you are strategically thinking about driving the balance sheet growth versus maybe more sustained capital return to investors. Thank you.

Speaker #6: Cash is building— a little bit. So, how should we think about the interplay between interest-earning asset growth and capital return? Clearly, we brought back a ton of stock this quarter, off to a good start relative to the $20 billion.

Thanks for the question. Uh, at this point, it's in our hands. Certainly up until about 4 months ago, the regulatory environment made a challenging, which is why you don't see any banks in uh, in crypto today. And instead you see Banks announcing plans that they will be in crypto and coming months and quarters and years. Uh but that that's a result of the change in the regulatory environment. Um, so I don't think that's standing in our way. What, what, what takes time is all the stuff I talked about? We we want to build this for the long term. We want to do it thoughtfully, we want to be able to you know have our own books and records and things like that. That is a completely new build and we've got a group of technologists working on that. Uh and and of course we're going to want to roll it out in the right way and and have people pilot it and test it and roll it out to small group of clients in a large group of clients. So all those things take time I think we're moving quite rapidly giving the expansiveness of which we're thinking about it and the way we're building for the long term but uh but there's nothing from a regular.

We want to do it thoughtfully. We want to be able to you know have our own books and records and things like that. That is a completely new build and we've got a group of technologists working on that. Uh and and of course we're going to want to roll it out in the right way and and have people pilot it and test it and roll it out to small group of clients in a large group of clients. So all those things take time I think we're moving quite rapidly given the expansiveness of which we're thinking about it and the way we're building for the long term but uh but there's nothing from a regulatory standpoint standing in our way.

Toy standpoint standing in our way.

Speaker #6: Just trying to think through where you are strategically thinking about driving the balance sheet growth versus maybe more sustained capital return to investors. Thank you.

Speaker #4: Thank you. This year, yes, as we have talked about with the paydown of supplemental borrowings, interest-earning assets are probably coming down modestly. Now that we've paid down the vast majority of those borrowings, as I said earlier, we'll probably pay down a little bit more there.

And with that we will wrap up uh thanks so much for your engagement today. We love the opportunity to to be on the phone and have a chance to speak with all of you.

And with that, we will wrap up. Uh, thanks so much for your engagement today. We love the opportunity to be on the phone and have a chance to speak with all of you.

Mike Verdeschi: Thank you. This year, as we have talked about with the paydown of supplemental borrowings, interest earning assets probably coming down modestly. Now that we've paid down the vast majority of those borrowings, I said earlier, we'll probably pay down a little bit more there. You're likely to see us in the lower end of that supplemental borrowing range that I provided earlier. Over the course of next year, I think it'll be more about the growth of our client borrowing needs. We've seen good momentum in lending in a range of environments. We would expect that to continue. I think that would be reasonably modest growth of interest earning assets. We'll come back to you with a scenario that's more specific. On the capital side, we also feel very good in this environment where we've been, over the course of the year, able to return capital across our framework.

I'll leave you with three takeaways. First, we are delivering growth on all fronts: tracking assets and growing accounts from new and existing clients, increasing utilization of our Wealth Banking and trading solutions, and delivering record financial results.

I I'll I'll leave you with uh 3 takeaways. First, we are delivering growth on all fronts, the tracking assets and growing accounts from new and existing clients, increasing utilization of our wealth Banking and trading Solutions and delivering record Financial results.

Speaker #4: You're likely to see us in the lower end of that supplemental borrowing range that I provided earlier. Over the course of next year, I think it will be more about the growth of our client borrowing needs.

We anticipate a year-over-year revenue and earnings expansion to finish 2025.

We anticipate year-over-year revenue and earnings expansion to finish 2025.

Speaker #4: So, we've seen good momentum in lending and a range of environments where we would expect that to continue. But again, I think that would be, you know, reasonably modest growth of interest-earning assets.

And 3, we think the future is incredibly bright. We are well positioned to deliver profitable growth through the cycle. Most importantly, as we do. So we are making a real difference in the lives of millions of investors and we're energized by the opportunity. We have to empower even more Americans to take control of their financial futures.

And 3, we think the future is incredibly bright. We are well positioned to deliver profitable growth through the cycle. Most importantly, as we do, we're making a real difference in the lives of millions of investors, and we're energized by the opportunity we have to empower even more Americans to take control of their financial futures.

Speaker #4: Again, we'll come back to you with a scenario that's more specific. But on the capital side, we also feel very good in this environment where we've been over the course of the year.

We are in an incredible position to serve our clients and help them meet their financial goals. Thanks again, and thank you for joining today.

We are in an incredible position to serve our clients and help them meet their financial goals. Thanks again and thanks for joining today.

Speaker #4: We've been able to return capital across our framework, and as we've said before, that's an important part of our financial story. We're generating very good earnings.

Mike Verdeschi: As we've said before, that's an important part of our financial story. We're generating very good earnings. That's building capital for us. We continue to be in a very flexible position to generate good earnings to meet the needs of our clients while being able to return capital in multiple forms. We think we're in a very good position.

Speaker #4: That's building capital for us. And so, we continue to be in a very flexible position to generate good earnings, meet the needs of our clients, while being able to return capital in multiple forms.

Speaker #4: So, we think we're in a very good position.

Speaker #5: Thank you. Our next question comes from Kyle Voight with KBW. Your line is open.

Operator: Thank you. Our next question comes from Kyle Voigt with KBW. Your line is open.

Speaker #6: Hey, good morning. Maybe just regarding the strong pledged asset line growth, I'm just wondering if you could comment on what ending you think you are in terms of penetrating your existing client base there.

[Analyst]: Hey, good morning. Maybe just regarding the strong pledged asset line growth, just wondering if you could comment on what ending you think you are in in terms of penetrating your existing client base there. I think you effectively began to hedge some of those loans in the fixed. Can you just give us an update on how that trended in Q3 and how to think about future hedging as those balances continue to grow strongly from here?

Speaker #6: And I think you effectively began to hedge some of those loans in the fixed. Can you just give us an update on how that trended in Q3 and how to think about future hedging as those balances continue to grow strongly from here?

Speaker #4: Thanks for the question, Kyle. Yes, we've seen good momentum in that experience, making it very easy for clients to engage with that product. We've seen a good lift.

Mike Verdeschi: Thanks for the question, Kyle. Yes, we've seen good momentum in that experience, very easy for clients to engage in that product. We've seen a good lift, and we expect continued engagement in that product. Again, this is something that we're going to be responding to client needs. In terms of penetration, when you look at our bank lending activity, it's relatively low penetration. We do think there is good upside that we could experience there, and we are looking forward to that. Yes, we have hedged some of those PAL balances. That just gives us another tool for how we match our assets and liabilities. Typically, we've invested in securities as a way of matching, but again, using these interest rate swaps against our underlying assets and liabilities just creates another flexible tool to manage that interest rate risk profile.

Speaker #4: We expect to continue engagement in that product. Again, this is something that we're going to be responding to client needs. In terms of penetration, when you look at our bank lending activity, it's relatively low penetration.

Speaker #4: So, we do think there is good upside that we could experience there, so we are looking forward to that. Yes, we have hedged some of those PAL balances, which gives us another tool for how we match our assets and liabilities.

Speaker #4: Typically, we've invested in securities as a way of matching. But again, using these interest rate swaps against our underlying assets and liabilities just creates another flexible tool to manage that interest rate risk profile.

Speaker #4: As those balances grow, that continues to give us flexibility. But we'll also look to broaden out how we think about those hedges, or there are other underlying assets—floating rate assets, for example—that we could utilize.

Mike Verdeschi: As those balances grow, that continues to give us flexibility. We'll also look to broaden out how we think about those hedges of their other underlying assets, floating rate assets, for example, that we could utilize. All of this is with the intent of building additional flexibility in how we manage our balance sheet. This is a win-win. We're meeting our client needs, we think there's more upside there, and we're ensuring that we're building ourselves flexibility in how we manage the balance sheet and drive efficiency and good financial outcomes.

Speaker #4: So, all of this is with the intent of building additional flexibility in how we manage our balance sheet. So, again, this is a win-win.

Speaker #4: We're meeting our client needs. We think there's more upside there. But also, we're ensuring that we're building ourselves flexibility in how we manage the balance sheet and drive efficiency and good financial outcomes.

Speaker #5: Thank you. Our next question comes from Devin Ryan with Citizens. Your line is open.

Operator: Thank you. Our next question comes from Devin Ryan with Citizens Bank. Your line is open.

[Analyst]: Great. Good morning, Rick and Mike. Question on retail investor engagement. Obviously, you're seeing great results here, and they're clearly highly invested right now with low transactional cash. DATs are elevated. Margin balances are at a record. At the same time, a number of other ratios aren't stretched. A question we've been getting a fair amount recently is whether level for retail investor engagement or if this is something normal. Just love to get some thoughts there. Thank you.

Rick Wurster: Devin, it's a good question. Daily average trades are definitely up above what they were when you look back 12 or 18 months ago. It used to be 5.8 or 6 million was a good month, and now, you know, we're running at 7.5 million as being pretty normal. Clients are definitely more engaged. I think there's some structural elements to that and also some sort of market environment with a real strong bull market now that's gone on for a couple of years. You've got some topics that are of great interest to investors like AI and crypto, and I think that's driving engagement. It's hard to know whether this level of engagement will persist or grow. I do think that I would call out, though, that I believe our investor base tends to trade in any environment.

Rick Wurster: These aren't new investors who came in and got excited about the entertainment of investing. These are investors that do research, that invest thoughtfully, and are engaged in markets. They oftentimes are countercyclical traders. We've actually seen our traders do what we've called sell the rip and buy the dip. They've been very active on updays selling, and then when they get a little down move, they've been back in buying. I think our engagement is likely to be more sustainable perhaps than some others. The overall market environment, I think, will also play a role in how engaged clients are.

Operator: Thank you. Our next question comes from Michael Cypress with Morgan Stanley. Your line is open.

[Analyst]: Good morning. Thanks for taking the question. I just wanted to ask a bigger picture thought question on tokenization. Just curious how you're thinking about in a potential future world where investors build access portfolios and long-term investments through the blockchain. Curious what risks and opportunities might that present for Schwab and for the industry. What steps might you take over the next year? Imagine it could be a major cost efficiency unlock on one side, but then if there are tokenized substitutes for deposits with atomic settlement, what implications could this have for transactional sweep cash as well as revenue monetization and competitive dynamics?

Rick Wurster: Yeah, thanks for the question. First thing I'd say is for 50 years, it's been our mission to help investors get invested and to help them achieve their financial goals and dreams. If we find that investors want to hold securities on the blockchain and that brings more investors into investing, then we're going to find a way to offer clients the opportunity to hold their securities on the blockchain and hold them as tokens if that's the way they would like to do it. Second, I believe tokenization is more likely in some asset classes than others. It's incredibly efficient. The customer protection rules make a lot of sense. The spreads are very tight. Going to tokenization doesn't solve a lot of problems for public equity investors and introduces a number of complications and risks that make the pros and cons, I think, somewhat questionable.

Rick Wurster: It's hard for me to see that taking off, though if it does, again, we're going to offer it and be ready to. I think it's more likely to be perhaps in some fixed income markets where you could see tokenization, in private markets, in collectibles, and areas like that. We'll see, and we're open to any environment, and we want our investors to be able to hold securities the way they want to hold securities. On your question about what it means for our economics, I think there's puts and takes on that one. If you look at the tokenization markets today and the public equities that have been tokenized and the trades that have been done, not that we would necessarily do this, but they've been done at incredibly wide spreads that are inefficient for the end trader.

Rick Wurster: There's more money to be made for the intermediary in that situation. We're always going to give clients great execution, but there's definitely a put there. On the take side, maybe it's incrementally easier to move cash. I don't think it's overly hard to click one button at Schwab today and move your money from a sweep into a purchased money fund. Not only that, we proactively remind you to do that when we see large balances in your account. When you log into schwab.com, it's very often the first thing you see is move your cash. There's not many barriers to doing that today. It might be incrementally easier on the blockchain because you could do it instantaneously. It's possible there's a shift there. I think there's going to be puts and takes on the blockchain.

Rick Wurster: If clients want to participate and hold securities that way, we certainly will accommodate that and are working towards that. Our crypto launch is different than how some others are going about it. Others, I think, are taking an approach of basically introducing a client to a digitally native firm and making the introduction, and then the assets are custody there. We're building the books and records and capabilities so that we can custody the assets. We're doing that because

Operator: We're taking a long-term view of this so that we can participate in things like the blockchain and tokenization over time and offer that to our clients. That's a long-winded answer probably, but those are my top-of-mind thoughts on tokenization.

Lauren Gaspar: Okay, operator, I think we have time for one final question before we wrap up.

Rick Wurster: Thank you. Our final question will come from David Smith with Truist. Your line is open.

Mike Verdeschi: Good morning. Staying on the vein of crypto and tokenization, you said you're on track to launch spot crypto in the first half of next year. Are there any meaningful external constraints like regulatory clarity or anything like that that you're still waiting on at this point, or is everything now just based on your own internal decision-making and ensuring that everything is built out fully to your standards and ready to handle the size and potential volume of your own client base?

Operator: Thanks for the question. At this point, it's in our hands. Certainly, up until about four months ago, the regulatory environment made it challenging, which is why you don't see any banks in crypto today. Instead, you see banks announcing plans that they will be in crypto in coming months and quarters and years. That's a result of the change in the regulatory environment. I don't think that's standing in our way. What takes time is all the stuff I talked about. We want to build this for the long term. We want to do it thoughtfully. We want to be able to have our own books and records and things like that. That is a completely new build, and we've got a group of technologists working on that.

Operator: Of course, we're going to want to roll it out in the right way and have people pilot it and test it and roll it out to a small group of clients and a large group of clients. All those things take time. I think we're moving quite rapidly given the expansiveness of which we're thinking about it and the way we're building for the long term. There's nothing from a regulatory standpoint standing in our way. With that, we will wrap up. Thanks so much for your engagement today. We love the opportunity to be on the phone and have a chance to speak with all of you. I'll leave you with three takeaways. First, we are delivering growth on all fronts: attracting assets and growing accounts from new and existing clients, increasing utilization of our wealth, banking, and trading solutions, and delivering record financial results.

Operator: Two, we anticipate year-over-year revenue and earnings expansion to finish 2025. Three, we think the future is incredibly bright. We are well-positioned to deliver profitable growth through the cycle. Most importantly, as we do so, we are making a real difference in the lives of millions of investors. We're energized by the opportunity we have to empower even more Americans to take control of their financial futures. We are in an incredible position to serve our clients and help them meet their financial goals. Thanks again, and thanks for joining today.