Charles Schwab Posts Strong Q2, Tops Estimates as Asset Growth Surges and Borrowing Drops

Charles Schwab (NYSE: SCHW) delivered a strong second-quarter performance that beat Wall Street expectations across key metrics, as the brokerage giant continued to build momentum with retail investors and financial advisors. Schwab reported adjusted earnings per share of $1.14, ahead of the consensus estimate of $1.10, and revenue of $5.85 billion, which topped forecasts for $5.73 billion. GAAP EPS came in at $1.08. The company set quarterly records for both revenue and earnings, thanks to a surge in asset management fees, strong net interest income, and robust account growth. Shares rose 2.2% in premarket trading following the report.

The results reflect a sharp rebound in Schwab’s business as it capitalized on market volatility, client demand for its platform, and progress on managing its balance sheet. Core net new assets totaled $80.3 billion, a 31% increase year over year, pushing total client assets to a record $10.76 trillion. President and CEO Rick Wurster stated, “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.”

Across the board, Schwab posted impressive numbers. Net interest revenue — a key metric for the firm — rose to $2.82 billion from $2.71 billion in Q1 and $2.16 billion in the year-ago quarter. That beat the $2.74 billion estimate, and reflects expanding spreads due to both higher interest rates and lower funding costs. Net interest margin expanded sequentially by 12 basis points to 2.65%, aided by a reduction in expensive bank supplemental funding and a rebound in securities lending.

On the fee side, asset management and administration revenue climbed 14% year over year to $1.57 billion, as strong market performance and organic inflows lifted balances. Trading revenue also rose 23% versus the prior year, thanks to a sharp pickup in client activity. Daily average trading volume hit 7.6 million, up 38% from Q2 2024, as market volatility — especially around tariff-related headlines in April — kept retail and advisor clients engaged.

Client growth remained a bright spot. Schwab opened 1.1 million new brokerage accounts during the quarter, up 11% year over year. Total client accounts now stand at 45.2 million, with 37.5 million classified as active. Managed investing solutions saw a 37% increase in net inflows, pointing to continued strength in Schwab’s advisory and hybrid offerings. According to J.P. Morgan’s Kenneth Worthington, Schwab’s Q2 net new asset growth represents a ~3% annualized rate for the quarter and ~5% for June, keeping the company within its longer-term target range of 5–7% annual growth.

Importantly, the firm continues to improve its balance sheet flexibility. CFO Mike Verdeschi highlighted that “Client transactional sweep cash finished June at $412.1 billion, enabling us to further reduce higher cost bank funding by $10.4 billion to $27.7 billion at quarter-end.” That repayment effort, paired with continued net inflows, has helped Schwab regain some capital efficiency. The company redeemed $2.5 billion in preferred equity and repurchased $351 million in common stock during the quarter, part of a broader effort to return excess capital to shareholders.

Schwab’s expense discipline was also notable. Total expenses, excluding interest, came in at $3.04 billion — down from $3.14 billion in Q1 — and were up just 5% from a year ago when excluding one-time items. This operating leverage allowed the firm to maintain profitability despite higher investments in technology and risk infrastructure.

The macro environment played a key role in the quarter’s results. April was marked by intense equity market volatility driven by shifting U.S. trade policy and tariff rhetoric. While Schwab did experience a short-lived dip in asset flows during tax season and the April selloff, it rebounded strongly by quarter-end. “Retail investors and RIAs continued to turn to Schwab as a trusted partner,” said Wurster, reflecting the firm’s stable reputation during periods of uncertainty.

In the broader context, Schwab’s results are emblematic of strength in retail brokerage and wealth management. Like Interactive Brokers, which also posted higher volumes and client growth, Schwab is benefiting from rising investor engagement, strong financial markets, and a secular shift toward self-directed investing. Schwab’s blend of scale, product diversity, and cost management gives it an edge in capturing flows from both individual investors and professional advisors.

Looking ahead, Schwab is well-positioned to continue growing — particularly if interest rates remain elevated and equity markets hold their ground. Its balance sheet de-leveraging, strong inflow trends, and cost control create a positive backdrop as the company eyes further capital return. After a roller-coaster market environment in Q2, Schwab emerged not only intact but stronger, with both operational and strategic momentum.

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