Charles Schwab Corporation 10-Qquarter ended 2026-09-30

Executive Summary

Charles Schwab provides brokerage, investing and banking services to individual investors and independent investment advisers, earning interest, asset-management fees and trading revenue. It is expanding lending and managed investing while adding private-company investments through Forge and bitcoin and ether trading through Schwab Crypto. Q3 revenue rose 17% to $7.17B, with client inflows, lending and trading activity helping earnings grow faster than expenses. The opportunity is to earn more from growing client relationships; the main tension is that lending is expanding faster than deposits, increasing reliance on costlier funding.

What's Happening in the Business

Client growth continued across Schwab’s retail and adviser businesses. Q3 core net new assets reached $190B, up 38%, accelerating from 27% growth over 9M. Assets receiving ongoing advisory services rose 17% to $6.79T, supporting recurring management fees. New brokerage-account growth slowed to 9% in Q3 vs 15% over 9M, however, so stronger asset gathering did not reflect uniformly accelerating customer acquisition.

Lending became a larger earnings engine. Brokerage-client receivables rose 22% from year-end to $128B, while net bank loans increased 25% to $72.3B. Pledged-asset lines accounted for most bank-loan growth. This expands interest-earning assets, but deposits did not keep pace, creating a funding trade-off.

Schwab began its phased crypto rollout in May and is integrating Forge’s private-company investment capabilities. These broaden its investment offering, but Forge remains small and loss-making: Q3 revenue was $15M, with a $13M net loss.

Investment spending also increased. Reported 9M capital expenditures of $1.3B included a $633M software-license agreement recorded with a long-term-debt liability; cash capital expenditures were $639M, up 64%. Management expects full-year expenses excluding interest to increase ≈10%–11%, making continued revenue growth important to preserving margin gains.

Key Financial Highlights

• Lending contribution: Q3 interest on brokerage-client receivables rose 23% to $1.79B; bank-loan interest rose 39% to $775M. These outweighed a $205M decline in interest on segregated cash and investments.
• Asset-based fees: Q3 asset-management and administration fees rose 14% to $1.91B as average client assets increased 19% and managed investing grew.
• Trading monetization: Q3 trading revenue rose 16% to $1.16B, but daily average trades increased 44% to 10.7M while revenue per trade fell 20% to $1.69. Activity growth substantially exceeded revenue growth because of trading mix.
• Segment profitability: Advisor Services grew faster, with Q3 expenses rising 8% vs 9% at Investor Services; its pretax growth nevertheless slowed from 48% over 9M.
• Funding and capital returns: Bank deposits fell 4.6% from year-end to $244B, while other short-term borrowings reached $14.2B from $6.91B. Schwab repurchased $3.9B over 9M, helping reduce shares outstanding 1.9% net of issuance; common dividends declared totaled $1.68B.

Risk Assessment

• Funding mismatch: Lending growth and declining deposits increase dependence on wholesale borrowing, whose higher cost can erode lending returns.
• Rates and securities values: Schwab models a 3.5% reduction in 12-month net interest revenue after a 100 bp rate decline; unrealized securities losses also expose equity to market-rate changes without immediately affecting net income.
• Crypto custody: Schwab relies on a sub-custodian, and client crypto lacks federal deposit and securities-investor protection; theft, insolvency or private-key loss could leave recoveries inadequate and expose Schwab to liability.
• Credit expansion: Past-due and nonaccrual loans rose to $149M from $92M as lending expanded, increasing the importance of collateral quality and underwriting.

A 10-Q does not have to restate the risk factors in the annual report. Full list: the company's 10-Ks on SEC.

What to Watch

• Client relationships: Core asset inflows accelerated, but account-opening growth slowed. Continued advisory-asset growth would support recurring fees; weaker inflows would increase dependence on market appreciation.
• Lending economics: Loan growth currently exceeds deposit growth. Lending succeeds financially if net interest revenue expands without funding costs consuming the benefit; rising wholesale dependence would weaken that outcome.
• New investment capabilities: Crypto is rolling out and Forge remains loss-making. Broader availability and improving Forge revenue and losses would demonstrate progress; custody incidents or persistent losses would challenge the expansion.