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SCHWAB CHARLES CORP (SCHW)·Q2 2025 Earnings Summary

Executive Summary

  • Record quarter: revenue $5.85B (+25% y/y) and adjusted diluted EPS $1.14 (+56% y/y), with GAAP EPS $1.08; pre-tax margin expanded to 50.1% adjusted (47.9% GAAP) . Trading, asset management fees, and reduced high‑cost bank funding drove upside .
  • Beat vs Street: Q2 revenue $5.85B vs S&P Global consensus $5.74B*; adjusted/Primary EPS $1.14 vs $1.10*, reflecting NIM expansion to 2.65% and robust DATs of 7.6M (+38% y/y) .
  • Balance sheet momentum: bank supplemental funding cut another $10.4B to $27.7B; sweep cash rose to $412.1B; consolidated Tier 1 leverage 9.8% (adjusted 7.2%) .
  • Guidance raised/quantified at Summer Business Update: 2025 revenue growth 18.5–19.5%, NIM 2.65–2.75%, expenses +4.75–5.25%, pre‑tax margin “very high 40s,” adjusted EPS scenario $4.55–$4.65 (ex buybacks) .
  • Capital return catalyst: Board authorized up to $20B in share repurchases and declared $0.27 quarterly dividend; YTD preferred redemption of $2.5B and ~$1.85B buybacks executed .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based revenue strength: NIR +31% y/y; asset management fees +14% y/y to $1.57B; trading revenue +23% y/y on robust volumes .
    • NIM tailwinds and funding progress: net interest margin rose 12 bps q/q to 2.65% as high‑cost liabilities fell and securities lending improved .
    • Client growth and engagement: Core NNA $80.3B (+31% y/y); 1.10M new brokerage accounts; DATs 7.6M (+38% y/y) .
    • Strategic momentum and confidence: “Schwab delivered growth on all fronts… quarterly records for both revenue and earnings per share.” — CEO Rick Wurster .
    • 2025 outlook tightened higher: revenue +18.5–19.5%, NIM 2.65–2.75%, expenses +4.75–5.25%, adj EPS $4.55–$4.65 (scenario) .

  • What Went Wrong

    • Expense drift still positive: GAAP opex +4% y/y; adjusted opex +5% y/y on growth investments and activity-related costs .
    • Sweep cash seasonality and cautious sentiment: April tax outflows offset by client net equity selling; cash trends normalized but remain sensitive to macro .
    • Balance sheet still carries residual higher-cost funding: $27.7B remains, though down >70% from peak; management won’t drive it to zero .
    • SEC fee changes slightly mixed: Zeroing of SEC 31 fee in mid‑May is P&L neutral but shifts revenue/expense lines .
    • No formal Q2 “earnings call transcript” published; instead, the Summer Business Update served as the primary call with Q&A –.

Financial Results

Headline P&L and Margins (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Revenue ($B)5.329 5.599 5.851
Diluted EPS (GAAP, $)0.94 0.99 1.08
Adjusted Diluted EPS ($)1.01 1.04 1.14
Pre‑tax Margin (GAAP, %)43.3% 43.8% 47.9%
Pre‑tax Margin (Adj, %)46.6% 46.2% 50.1%
Net Interest Margin (%, NIM)2.33% 2.53% 2.65%

Revenue Mix (oldest → newest)

Line Item ($B)Q4 2024Q1 2025Q2 2025
Net Interest Revenue2.531 2.706 2.822
Asset Mgmt & Admin Fees1.509 1.530 1.570
Trading Revenue0.873 0.908 0.952
Bank Deposit Account Fees0.241 0.245 0.247
Other0.175 0.210 0.260
Total Net Revenues5.329 5.599 5.851

KPIs and Balance Sheet (oldest → newest)

KPIQ4 2024Q1 2025Q2 2025
DATs (thousands)6,312 7,391 7,571
Margin Balances (end, $B)83.8 83.6 83.4
Core Net New Assets ($B)108.4 132.4 73.6
New Brokerage Accts (k)1,119 1,183 1,098
Total Client Assets ($T)10.101 9.930 10.757
Client Sweep Cash ($B)418.6 407.8 412.1
Bank Supplemental Funding ($B)49.9 38.1 27.7
Tier 1 Leverage (GAAP, %)9.9% 9.9% 9.8%
Adjusted Tier 1 Leverage (%)6.8% 7.1% 7.2%

Actuals vs S&P Global Consensus (Q2 2025)

MetricConsensusActualResult
Revenue ($B)5.735*5.851 Beat
Primary/Adjusted EPS ($)1.10*1.14 Beat
# of Estimates (Rev / EPS)11* / 18*——

Values marked with * are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance/ColorCurrent GuidanceChange
Total Revenue GrowthFY 2025Not quantified; initial Jan scenario assumed one 25 bp cut, 6.5% annualized equity return, and DATs ≈ Q2’24 levels 18.5%–19.5% growth Quantified upward scenario
Net Interest MarginFY 2025Not quantified 2.65%–2.75%; Q2 average NIM “well into the 280 bps range” implied in scenario Quantified
Total ExpensesFY 2025Mid‑single‑digit zone +4.75%–5.25% Tightened range
Pre‑tax MarginFY 2025Not provided“Very high 40s” Introduced
Adjusted EPSFY 2025Not provided$4.55–$4.65 scenario (ex incremental H2 buybacks) Introduced
Capital ReturnOngoing$6.9B remaining under prior program at 6/30; Q1 dividend raised to $0.27 New $20B authorization; $0.27 quarterly dividend declared Significantly increased buyback capacity

Earnings Call Themes & Trends

TopicQ4 2024 (two quarters ago)Q1 2025 (prior quarter)Q2 2025 (current)Trend
AI/Technology initiativesNot highlightedNot highlighted40 AI use cases to boost rep productivity and efficiency Increasing focus
Macro/trading activityTrading +14% y/y; revenue +20% y/y; NIM +25 bps q/q to 2.33% DATs +17% q/q; revenue +18% y/y DATs 7.6M (+38% y/y); trading revenue +23% y/y Strengthening
Balance sheet/fundingSupplemental funding −$14.9B to $49.9B −$11.8B to $38.1B −$10.4B to $27.7B; won’t take to zero Improving
Managed investingRecord $1.5B quarterly fees Net inflows +15% y/y Net inflows +37% y/y; record 1H flows Accelerating
Digital assets/crypto——Plan to add spot BTC/ETH trading; stablecoin under evaluation; $25B client crypto ETPs (~20% share) New growth vector
Regulatory/legalTax/legal resolution aided EPS by $0.03 —SEC 31 fee cut to zero (P&L neutral) Neutral
RIA/Advisor ServicesStrong promoter scores post-integration —Launched Advisor ProDirect; strong RIA support Expanding

Management Commentary

  • “Schwab delivered growth on all fronts during the second quarter. The firm’s diversified revenue model, coupled with our best-in-class scale and efficiency, produced quarterly records for both revenue and earnings per share.” — President & CEO Rick Wurster .
  • “Net interest margin expanded sequentially by 12 basis points to 2.65% due primarily to the further reduction of higher cost liabilities and a rebound in securities lending activity.” — CFO Mike Verdeschi .
  • “We would expect total revenue growth of 18.5%–19.5% for the full year 2025… Full‑year NIM of 2.65%–2.75%… expenses +4.75%–5.25%… pre‑tax margins in the very high 40s… adjusted earnings $4.55–$4.65 (ex incremental buybacks).” — CFO Mike Verdeschi .
  • “As we build out our digital assets offer, which will include spot trading on Bitcoin and Ethereum… we are also focused on helping educate and support our millions of clients.” — President & CEO Rick Wurster .

Q&A Highlights

  • Competitive positioning vs disruptors and crypto: Wurster emphasized Schwab’s breadth (platforms, advice, 400+ locations) and trust, with plans to offer spot BTC/ETH and eventually a stablecoin; clients already hold ~$25B in crypto ETPs on Schwab (~20% market share) .
  • Sustainability of growth and cash trends: Management sees continued acceleration in retail NNA and improving Ameritrade client contribution; cash trends normalized with some client net selling helping sweep balances in Q2 .
  • Balance sheet and capital: As cash builds, company will resume measured securities purchases while maintaining borrower support; organic capital build supports sustained buybacks under the new $20B program .
  • Interest-rate hedging: New swap programs reduce downside earnings sensitivity to cuts (~one-third of short‑rate exposure addressed) by swapping fixed liabilities to float and fixing portions of floating assets .
  • Off‑balance sheet sweep optionality: Capability exists but viewed as tactical; on‑balance sheet cash remains accretive except in very low‑rate regimes .
  • Ameritrade cross‑sell: Legacy Ameritrade NNA up >100% y/y; rising adoption in wealth and lending (PAL originations up >100%) as processes were digitized .

Estimates Context

  • Q2 2025 results vs S&P Global consensus: Revenue $5.851B vs $5.735B*; Primary/Adjusted EPS $1.14 vs $1.10*; 11 and 18 estimates, respectively*.
  • Implications: Management’s updated 2025 scenario (revenue +18.5–19.5%, NIM 2.65–2.75%, expenses +4.75–5.25%, adj EPS $4.55–$4.65) points to upward pressure on full‑year Street models if trading strength and funding paydowns persist .

Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Strong beat-and-raise quarter: Revenue, margins, and adjusted EPS set records; NIM expansion and funding relief underpin earnings power .
  • Mix resilient across cycles: Trading volumes and asset management fees both accelerated, indicating diversified revenue drivers .
  • Balance sheet de‑risking continues: Supplemental funding fell to $27.7B with more progress planned; leverage ratios remain strong .
  • 2025 outlook more constructive: Management quantified higher revenue growth, tighter expense growth, and elevated margins/EPS potential .
  • Capital return accelerates: New $20B buyback authorization plus steady dividend supports TSR; YTD repurchases and preferred redemption already meaningful .
  • Strategic growth vectors: Managed investing flows at record pace; crypto spot trading roadmap and AI productivity investments add optionality .
  • Watch items: Macro-sensitive client cash behavior and rate cuts; expense discipline vs. growth investments; pace of further funding paydowns and securities deployment .

Additional references:

  • Q2 press release and 8‑K: record results and detailed tables – –.
  • Q1 2025 and Q4 2024 for trend context – – –.
  • Capital return announcements and CCAR/stress test context .