The Charles Schwab Corporation Q3 FY2025 earnings call

• Through Clients' Eyes strategy continues to drive growth: Clients opened 1.1 million new brokerage accounts and had $138 billion in core NNA in Q3; year-to-date, core NNA is nearly $356 billion. Daily average trades remained above $7 million for the third consecutive quarter, and margin balances reached $97.2 billion.
• Financial results: Delivered record results with 27% year-over-year revenue growth and 70% year-over-year adjusted earnings growth. Returned excess capital in multiple forms.
• Competitive position: Serves 45 million client accounts and $11.59 trillion in assets, #1 among peers in RIA custodial assets and retail trading by daily average trades.
• Business fundamentals: High client engagement (over 500 million digital client logins across mobile and web for third consecutive quarter), world-class service (entering calls in less than 30 seconds on average, over 75% of questions answered without transfer), and all-time high overall satisfaction scores (88%).
• Attracting diverse clients: Gen Z making up 1/3 of new-to-firm retail households at Schwab; younger investors highly engaged in building wealth long term, with 1/3 of retail households who created a financial plan in the last 2 years under 40.
• Strategic focus areas:
  • Driving growth: Deepening relationships with clients in Advisor Services (e.g., supporting largest adviser transition, launching Advisor ProDirect) and retail business (expanding branch footprint, hiring financial consultants). Enhancing Schwab Wealth Advisory, banking offer, and trader experience.
  • Creating value with scale and efficiency: Using AI to supercharge professionals, improving status notifications, reducing paper, and unlocking efficiencies.
  • Delivering brilliant basics: Near all-time high Client Easy Scores (94% for retail client service, 93% ease of doing business for Advisor Services).
  • Investing in people: Continuing to invest in culture to retain and attract talent.

In the third quarter, clients opened 1.1 million new brokerage accounts and had core net new assets of approximately $138 billion. Year-to-date, core net new assets (NNA) stand at nearly $356 billion. Managed investing net flows increased 40% year-over-year with 30% of flows from legacy Ameritrade clients. Schwab Wealth Advisory achieved record flows, and bank lending balances are up 24% overall with PAL balances at record levels. thinkorswim adoption among Schwab legacy clients has increased 98% over last year. Visits to Schwab's 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.

• 2025: Interest rate curve now calls for 325 basis point cuts during 2025 vs previous 225 basis point cuts. Assuming client engagement persists, could see a lift in earnings of around 2% relative to the upper end of the financial scenario range shared in July.
• 2026: Still working through annual planning process; expect to build upon 2025 momentum. Detailed 2026 financial scenario to be shared in January.
• Crypto: On track to launch spot crypto in the first half of 2026, starting with Bitcoin and Ethereum.

• Market environment shifts: The last couple of weeks remind of the quick shift in the environment, which can impact results.
• Regulatory uncertainties: Especially relevant for crypto and potential tokenization, though Schwab is prepared to adapt to regulatory changes.

Q: Ben Budish from Barclays asked about Advisor business trends.

A: Rick Wurster discussed Advisor business growth, NNA pickup, integration with Ameritrade, and how Schwab is winning more advisers with a strong combined offering.

Q: Alex Blostein from Goldman Sachs asked about core deposits.

A: Mike Verdeschi talked about normal deposit behavior, cash operating in normal environment, and rates impacting deposits.

Q: Kenneth Worthington from JPMorgan asked about crypto's role.

A: Richard Wurster spoke about crypto engagement, client interest, and plans to launch spot crypto, seeing both profitability and attraction for next-gen investors.

Q: Brennan Hawken from Bank of Montreal asked about redeployment of funds.

A: Michael Verdeschi discussed deploying funds to meet client borrowing needs, investing in securities with 2-4 year duration, and flexibility with the BDA.

Q: Daniel Fannon from Jefferies asked about Ameritrade customer growth.

A: Richard Wurster talked about continued upside with Ameritrade clients, improving satisfaction scores, and progress towards closing the growth gap with legacy Schwab clients.

Q: Brian Bedell from Deutsche Bank asked about 2025 guidance.

A: Michael Verdeschi provided insights on earnings lift, revenue and expense components, net interest margin expectations, and balanced approach to financial management.

Q: William Katz from TD Cowen asked about balance sheet growth and capital return.

A: Michael Verdeschi discussed interest-earning asset growth, client borrowing needs, and flexibility in capital return.

Q: Kyle Voigt from KBW asked about Pledged Asset Line growth.

A: Richard Wurster spoke about strong PAL growth, penetration potential, and hedging to manage interest rate risk.

Q: Devin Ryan from Citizens asked about retail investor engagement.

A: Richard Wurster discussed elevated client engagement, structural elements, and market environment impact.

Q: Michael Cyprys from Morgan Stanley asked about tokenization.

A: Richard Wurster talked about Schwab's readiness for tokenization, potential in certain asset classes, and implications for economics.

Q: David Smith from Truist Securities asked about crypto launch constraints.

A: Richard Wurster stated no regulatory barriers, but development takes time for proper build-out and testing.