SCHWAB CHARLES CORP Q3 FY2026 earnings call

• Strategic Positioning: Schwab is executing on a 'through client size' strategy, winning market share as clients consolidate their financial lives on the platform. It holds #1 positions in total client assets, RIA custodial assets, and daily average trades.
• Client Growth & Engagement: Clients opened 1.2 million brokerage accounts in Q3. Core net new assets reached $190 billion (up 38% YoY), with an annualized organic growth rate of nearly 6%. Managed investing net flows hit a record $24 billion, and bank lending reached $72 billion (up 35% YoY).
• AI Integration: AI is being deployed safely via 'Charlie,' an AI assistant using third-party LLMs combined with Schwab's secure data. Schwab blocks unauthorized agent logins but allows clients to connect their own LLMs to MCP servers for trading/research under controlled authentication. Internal developer productivity has increased by 25%.
• Advisor Business: Serves 16,000+ firms ($5.8 trillion in assets). More than 1,100 advisory firms added Schwab as a custodian last year. The firm emphasizes that relationships (Financial Consultants) drive higher NNA and flow retention.
• Product Innovation: Launched single stock futures, binary options, and crypto access. Rolling out crypto transfers and three new coins. Collaborating with Anthropic for RIA tools (Quad for Financial Advisors).
• Efficiency & Scale: Focus on simplifying workflows and automating tasks to maintain a structural cost advantage while reinvesting savings into growth initiatives.

The transcript does not provide a breakdown of revenue by specific product segment (e.g., Trading vs. Wealth) with absolute dollar figures or percentage contributions for each distinct line item in the requested format. However, it provides aggregate financial performance: Total Net Revenues were $7.2 billion (up 17% YoY). Key revenue drivers included Net Interest Revenue of ~$3.5 billion (up 14%), Asset Management/Admin Fees of $1.9 billion (up 14%), and Trading Revenue of $1.2 billion (up 16%). Adjusted Expenses were approximately $3.2 billion (up 9%). Adjusted Earnings Per Share was $1.69 (up 29% YoY). The adjusted pre-tax profit margin expanded to 54.8%.

• Q4 2026 Revenue: Expected to grow toward the lower end of the ranges provided at the Summer Business Update.
• Q4 2026 Expenses: Expected to come in at the low end of the range, reflecting efficiency gains while maintaining strategic investments.
• Full Year 2026 Operating Leverage: Expecting approximately 800 basis points of positive operating leverage, roughly double the initial expectation.
• Net Interest Margin (NIM): Expects NIM expansion in Q4 2026 (roughly 25-30 bps YoY improvement from Q4 2025) and continued expansion into 2027 due to asset sensitivity and favorable loan spreads.
• 2027 Outlook: Entering 2027 with strong business momentum; detailed financial scenario to be provided at the Winter Business Update in January.

• Operational Capacity: The rapid growth of the long-short program required throttling growth in mid-September to ensure operational and capacity sustainability.
• Security & Authentication Risks: Schwab actively blocks unauthorized agents attempting to log in on behalf of clients, citing security risks associated with uncontrolled API access.
• Market Volatility: Interest rate volatility impacts yield curves and cash deployment strategies, though the firm remains asset-sensitive.
• Regulatory/Compliance: While not explicitly detailed as a failure, the cautious rollout of prediction markets and binary options indicates adherence to regulatory scrutiny regarding novel financial products.

Q: Ken Worthington asked about AI revenue opportunities and whether allowing LLM connections enables trading execution. / A: Rick Wurster stated AI is already driving revenue by increasing engagement and fueling wealth growth through tax/estate insights. Regarding LLM connections, Schwab controls authentication and prevents money movement for safety, but allows trading capabilities. AI also boosts internal efficiency (25% dev productivity) and reduces call center volume.

Q: Alex Blaustein asked about deposit trends declining despite NNA growth and Q4 NIM outlook. / A: Mike Verdeschi explained Q3 cash declines were due to sentiment-driven market entry and IPO activity, with seasonal inflows expected in Q4. He expects NIM expansion of 25-30 bps in Q4 versus Q4 2025, driven by asset sensitivity, favorable loan spreads, and the roll-down of sub-2% securities portfolios into higher-yielding lending.

Q: Bill Katz asked about capital return pace given limited earning asset growth and high ROE. / A: Mike Verdeschi emphasized that capital first supports client growth and lending engagement. However, strong earnings and top-tier Tier 1 leverage ratios provide flexibility to opportunistically return capital to shareholders through buybacks and dividends alongside franchise growth.

Q: Stephen Chubak asked how further Fed rate hikes impact cash growth, deposit betas, and funding mix. / A: Mike Verdeschi noted that clients have already allocated cash based on current rates, so further hikes have limited marginal impact on cash sorting. The firm maintains flexibility via wholesale programs like margin lending to meet dynamic needs and generate returns, expecting a favorable environment overall.

Q: Michael Cypress asked about the timeline and scope of prediction markets (financial events/KPIs vs. sports). / A: Rick Wurster confirmed plans to expand binary options on financial events and company KPIs over the next 12-18 months, excluding sports gambling. The goal is to offer responsible tools for traders to hedge or accentuate portfolio views, leveraging Schwab’s position as the #1 trading firm.