The Charles Schwab Corporation Q1 FY2025 earnings call

Key Messages - Growth: First quarter of 2025 was about growth with core net new assets up 44% year - over - year to $138 billion, clients opened 1.2 million new accounts, and there was strong trading activity, margin utilization, and service levels. - Through Clients' Eyes strategy: Guided growth across client growth, solutions growth, and financial growth. Momentum in all client businesses, with retail NNA up 50% year - over - year, workplace business having a record quarter, and advisor services business continuing growth. - Investments: - Driving growth: Expanding branch footprint, hiring financial consultants, investing in self - directed client support including AI - powered capabilities, and increasing marketing spend. - Scale and efficiency: Launched Schwab Knowledge Assistant for advisor services clients and Schwab Intelligent Assistant for international clients, and working on removing paper from the system. - Brilliant basics: Enhancing digital processes with AAS easy score reaching 93%. - People: Optimizing workflows, talent development, and recognition programs. - New offers: Rolled out retail alternatives, discretionary option for Schwab Wealth Advisory, enhanced Schwab Personalized Indexing and Wasmer Schroeder offers, and made a strategic investment in Wealth.com. Also expanded trader offer with 24 by 5 trading capability on thinkorswim platform.

In the first quarter of 2025, core net new assets grew 44% year-over-year to $138 billion, representing a 5.5% annualized growth rate. New brokerage account openings grew to 1.2 million, an increase of 8% over the prior year quarter. Managed investing net flows increased 15% over the same period last year to a new record. Bank lending balances reached $47.1 billion, a 15% year-over-year increase. Daily average trades increased 24% to 7.4 million for the quarter. Core net new assets of $138 billion contributed a significant portion to overall revenue, with each of the client businesses - advisor services, retail, and workplace - seeing strong growth.

We expect strong revenue and earnings expansion in 2025. The first quarter of 2025 was strong with year - over - year revenue growth of 18%, record net revenues, and a 41% year - over - year increase in adjusted earnings per share. Currently, we are tracking around the upper end of the full year scenario outlined at the winter business update in January which implied earnings per share in the $4.10 to $4.20 range (excluding buyback impacts). However, key variables will likely continue to shift and we will provide a more comprehensive update on our full year 2025 financial scenario at the summer business update in July.

In a more volatile environment, we need to manage risk exposures. We have enhanced capabilities around the balance sheet such as funding diversification (both at the bank and nonbank), strengthened capital through organic earnings growth and managing the impact of interest rates on the investment portfolio. Our securities portfolio is resilient with more weighted towards HTM versus AFS and available - for - sale securities being short - dated. We have also enhanced tools using simple interest rate swaps to reduce sensitivity to lower rates. In terms of credit, where we do lend, it is secured and clients have strong credit profiles.

Q: Steven Chubak with Wolfe Research asked about the outlook for April, retail sentiment, and brokerage metrics.

A: Rick Wurster said April has brought historical levels of engagement with two highest trading days ever, 500 million log - ins in first quarter with acceleration into second quarter, and seen high levels of new account openings with clients wanting to get into Schwab and buy the dip or wanting a fuller service model. Mike Verdeschi added that the volume of transactions and cash growth more than offset earnings impact of some margin coming off.

Q: Dan Fannon with Jefferies asked about NNA acceleration, volatility impact, and confidence factors.

A: Rick Wurster said NNA acceleration was due to moving away from retail integration with retail NNA up 50% year - over - year, and volatility bringing NNA as Ameritrade clients bring money into Schwab to capture greater share of wallet. Advisor services also saw robust growth.

Q: Ken Worthington with JPMorgan asked about branch network build - out and advisor base.

A: Rick Wurster said they expect to open around 16 new branches this year and grow roughly 250 new financial and wealth consultants, as one - to - one relationships are important for growing net new assets.

Q: Bill Katz of TD Cowen asked about balance sheet growth and capital return.

A: Mike Verdeschi said focus is on managing balance sheet to meet client needs and bring down supplemental borrowings, with support for lending activity and expectation of good earnings growth and organic capital growth, and considering capital return through dividends, preferred security decision, and buybacks.

Q: Michael Cypress at Morgan Stanley asked about risk exposure management.

A: Mike Verdeschi said they feel good about risk management with enhanced balance sheet capabilities, strong capital, resilient securities portfolio, and tools to manage interest rate risk.

Q: Kyle Voigt with KBW asked about alternative investments platform.

A: Rick Wurster said they are meeting higher net worth clients' demand for alternatives, made alternative investments platform available to retail clients with more than $5 million in household assets, and expect to see innovation in alternatives available to investors of all sizes.

Q: Devin Ryan with Citizens Bank asked about NIM commentary and balance sheet performance.

A: Mike Verdeschi said still feel good about ability to expand NIM with pickup in cash and faster reduction of supplemental borrowings, but lower rate environment affects floating rate assets, overall still confident in expanding NIM and growing earnings.

Q: Ben Budish with Barclays asked about OpEx growth cadence.

A: Mike Verdeschi said 1Q OpEx uptick is typical seasonality and contemplated in full year range of 4.5% to 5.5% expense growth, and they are investing in growth and efficiency while maintaining low cost to serve.

Q: Ben Rubin with UBS asked about funding diversification.

A: Mike Verdeschi said funding diversification is about maintaining efficient and flexible funding sources, with progress in paying down bank supplemental funding and having a mix of funding sources in bank and nonbank to meet client needs.

Q: Mike Brown with Wells Fargo Securities asked about crypto ecosystem approach.

A: Rick Wurster said they are doing well in crypto with robust engagement in existing crypto ETFs, closed - end funds, and Bitcoin futures, expect to launch direct spot crypto in next 12 months as regulatory environment changes.

Q: David Smith with Truist Companies asked about closing gap with legacy TD customers.

A: Rick Wurster said he expects to close the gap with legacy TD customers as Ameritrade clients' satisfaction grows, they are getting more comfortable with the platform, and they will consolidate their assets with Schwab as they realize what Schwab can do for them.