The Charles Schwab Corporation (SCHW) 4Q25 Earnings Review
EPS Inline with Street Despite Revenue / Expense Miss as SCHW Repurchased $2.7B in Shares in 4Q; 2026 Financial Scenario Implies EPS Between $5.70 and $5.80
EPS Inline With Street Despite Revenue Miss, Elevated Expenses
SCHW reported earnings prior to market open today. Total net revenue came in at a record $6,336M, up 3% Q/Q and up 19% Y/Y. The sequential increase in revenue was driven by an increase in net interest income (NII), which rose 4% Q/Q and was up 25% Y/Y to $3,172M. Meanwhile, trading revenue increased by 7% Q/Q (+22% Y/Y) to $1,066M, asset management fees increased 4% Q/Q (+15% Y/Y) to $1,733M, BDA fees were down 4% Q/Q (-1% Y/Y) to $238M and other revenue decreased 25% Q/Q (-27% Y/Y) to $127M. On the expense side, total adjusted operating expenses came in at $3,029M, which was up 1% sequentially (+6% Y/Y) and drove pre-tax margins to 52.2% (up 90bps Q/Q and up 560bps Y/Y). Adjusted diluted EPS came in at a record $1.39, up 6% Q/Q (+38% Y/Y).
Relative to consensus estimates, revenue came in 1% below the consensus forecast of $6,372M. Meanwhile, expenses came in a bit heavy, 2% above street forecasts, while adjusted EPS came in inline with the consensus as SCHW used $2.7B to repurchase 29M shares during the quarter.
In terms of key operating metrics, average interest-earning assets for the quarter were up 3% sequentially (+1% Y/Y) while the net interest margin (NIM) rose 2 bps Q/Q (+57bps Y/Y) to 2.90%. Total asset management client assets were up 4% Q/Q (16% Y/Y) to $4.3T. Client accounts at quarter end increased 2% from the end of 3Q (+6% Y/Y) while total client assets rose 3% Q/Q (+18% Y/Y) to a record $11.9T. For the quarter, core net new assets (NNA) amounted to $164B which translates into an annualized growth rate of 5.7%, up from the 5.1% annualized growth rate posted in 3Q25 and 4.6% in the year ago period. Total customer daily average trades (DATs) for the quarter were 8,274k (+11% Q/Q, +31% Y/Y) and the average commission per trade came in at $2.05 (-3% Q/Q, -7% Y/Y).
SCHW Earnings Summary and Key Operating Metrics
Source: company data and Tikr.com
Highlights from SCHW Earnings Call, Presentation and Press Release
In terms of the outlook going forward, SCHW 0.00%↑ management touched on several details during the earnings call that are worth highlighting:
Below I lay out SCHW’s financial outlook for 2026 (as well as detail other highlights from today’s call). Please see the bottom of this section for a brief financial model using the below data as well as a table on revenue sensitivities from SCHW’s 4Q25 earnings slide deck.
Macro Inputs for 2026 Financial Outlook – Interest rates follow forward curve with Fed Funds rate ending 2026 in a range of 3.00% - 3.25% (two 25 bps cuts). Equity market returns 6.5%, inline with longer term averages. NNA growth around 5%. Trading activity resembles 1Q25, around 7.4M daily average trades for the full year.
Revenue Outlook – Given the above scenarios, anticipate 2026 revenue growth would likely come in at 9.5% to 10.5%, implying 2026 revenue between $26.2B and $26.4B
Expense Outlook – Assuming revenue growth in a range of 9.5% - 10.5% anticipate expenses grow between 5.5% and 6.5% for the full year, implying total expenses of $12.6 - $12.7B. Spending plans include deepening relationships with individuals and RIAs, expanding suite of offerings, expanding digital assets to include spot crypto and incorporating more AI across the firm
Other Outlook Items – Under above scenarios, pre-tax margin likely expands into low 50% range (my math suggests 51.9% - see chart below). Full year scenario implies adjusted EPS of $5.70 - $5.80 (consensus coming into today was at $5.74). EPS outlook does not assume further share repurchase activity from here
NIM and Balance Sheet Outlook – Average interest earning assets expand modestly following paydown of supplemental borrowings at the bank which was completed in 4Q25. Full year NIM expands to a range of 2.85% - 2.95% with 4Q26 NIM expected to finish above 2.90% even as Fed Funds rate comes down another 50 bps
Interest Rate Sensitivity – Throughout 2025 stood up a hedge program to reduce rate sensitivity by 1/3rd. Have put in place a modest amount of income hedges against margin loan book. If you were to assume Fed Funds rate is cut materially further than current forward expectations, say to 2%, SCHW still anticipates revenue would grow at least 10% in 2026
Capital Priorities – Continue to target Tier 1 leverage ratio in a range of 6.75% - 7.00% (ended 4Q25 at 7.1%). Capital allocation continues to be geared toward supporting client and business growth, maintaining dividend payout ratio at 20-30% of GAAP earnings, then returning excess capital to shareholders via share repurchases and / or preferred security repurchases
NNA – Longer term continue to believe 5-7% is the right target. In near term believe 5% is proper goal for 2026. AMTD NNA has moved from negative to meaningfully positive to inline with what SCHW expects and what SCHW sees from its legacy clients
Pledged Asset Lines (PAL) – Focus for SCHW is continuing to support client growth via lending. Pledged asset line originations grew 85% in 2025. However, PAL penetration remains low with only 9% of ultra-high net worth clients in Investor Services having originated a PAL and in Advisor Services, only 23% have a PAL. SCHW thinks both of these numbers could be far higher
Other Balance Sheet Dynamics – Now that supplemental funding has been paid down could see reinvestment in securities portfolio in tandem with lending growth. Securities likely to be highly liquid (treasuries) and towards the shorter end of the curve (likely near the 2 year duration)
Client Profile – Average client age is now in their 40s which is down about 10 years over the past decade. Average age of new to firm retail clients is in their 30s. Gen Z investors comprise nearly 1/3rd of new retail client account openings
Trading Volumes – SCHW is number 1 firm by daily average trades. SCHW handled about 10% of total U.S. notional trading volume in 2025 at $206 trillion
Forge and Qapita Acquisitions – Creating an ecosystem where SCHW can administer private stock plans, provide access to liquidity for private company employees and investors, and create a pre-IPO pipeline of future stock plan services clients for SCHW. Will be able to provide retail and RIA clients with alternatives from leading managers, passive exposure via funds as well as direct investing in private companies. For a more in depth look at the rationale behind the Forge acquisition please see my note from November 6, 2025 available here
Prediction Markets – Contracts related to macro environment or specific stocks are all related to building an investment portfolio. If there is client demand for these types of contracts, SCHW will certainly make these available. However, in working with SCHW’s active traders, prediction contracts are not high on the list of things most important to those clients right now (clients are asking to keep pushing on the mobile app, expanding research capabilities, and offering different options and futures capabilities). With respect to sports prediction contracts, SCHW believes these types of contracts are contradictory to helping its clients grow, protect and manage their wealth (citing research suggesting less than 5% of clients that put money into gambling apps leave with more money than they started with). SCHW would rather leave the “sports gambling contracts” to the “sports betting houses like DraftKings (DKNG 0.00%↑), Robinhood (HOOD 0.00%↑) and FanDuel (FLUT 0.00%↑)”.
SCHW 2026 Financial Scenario and Implied EPS
Source: company documents and my estimates
SCHW Revenue Sensitivities
Source: SCHW 4Q25 Earnings Slide Deck
Key Financial Highlights
SCHW showed solid revenue growth of 19% Y/Y, posting record revenue of $6,336M. Meanwhile, operating expense growth remained more subdued with total expenses growing 6% Y/Y in the quarter to $3,029M. This allowed operating margins to expand to 52.2%, up 560bps Y/Y.
SCHW Revenue, Expenses and Margins
Source: company documents
Solid revenue performance came as key client metrics performed well with total client assets ending the period at $11.9 trillion and net new asset annualized growth rising to 5.7%, the highest pace of asset gathering since 1Q23.
SCHW Total Client Assets and NNA Annualized Growth Rate
Source: company documents
Additionally, client accounts were up 6% Y/Y to 46.5M and average client assets per account increased 11% Y/Y to $256k at the end of 2025.
EOP Accounts and Average Client Assets Per Account
Source: company documents
Within 4Q25 revenue results, NII rose 4% sequentially as the NIM expanded 2bps Q/Q and average interest earning assets (AIEAs) rose 3%.
AIEAs and NIM
Source: company documents
Annualized revenue per average FTE increased 3% sequentially to $772k as revenue growth outpaced the 1% Q/Q increase in total FTEs at quarter end.
EOP FTEs and Annualized Revenue per Average FTE
Source: company documents
Broad Thoughts / Outlook
I thought the quarter itself was a bit underwhelming given the revenue and expense misses. While it was encouraging to see NNA growth accelerate in 4Q, this is a seasonally strong quarter for SCHW so I would expect NNA growth to moderate from these levels in 1H26. I do find it encouraging that SCHW’s NIM is set to remain flattish with 4Q25 levels in 2026. While this should have been expected given SCHW’s balance sheet mix shifts and higher cost supplemental funding coming down throughout 2025 I think optically it will be viewed positively relative to eBroker peers whose NIM’s are likely to come under pressure as the Fed reduces rates further from here.