--- title: "SCHW (Trans): NNA +38%, revenue and NIM trending toward the low end of guidance." type: "Topics" locale: "en" url: "https://longbridge.com/en/dolphin/post/44367876.md" description: "Q3 core net new assets reached $190 bn (+38% YoY); bank loans rose 35% YoY, with loan growth outpacing deposits. Full-year revenue and NIM growth are tracking the low end of the summer guidance range, while management is betting on AI (Charlie assistant, MCP integration) and prediction markets; detailed 2027 financial scenarios will be disclosed in Jan." datetime: "2026-10-15T13:59:01.000Z" locales: - [en](https://longbridge.com/en/dolphin/post/44367876.md) - [zh-CN](https://longbridge.com/zh-CN/dolphin/post/44367876.md) - [zh-HK](https://longbridge.com/zh-HK/dolphin/post/44367876.md) author: "[Dolphin Research](https://longbridge.com/en/dolphin.md)" generator: "portal-rs" --- # SCHW (Trans): NNA +38%, revenue and NIM trending toward the low end of guidance. **Compiled by Dolphin Research:** $Charles Schwab(SCHW.US) **Q3 2026 Earnings Call Trans** **I. Core Takeaways** 1\. Shareholder returns and capital.The company raised common dividends through the first three quarters, redeemed preferreds, and repurchased nearly $4bn of common stock. Adj. Tier 1 leverage ended at 7%, at the top end of the 6.75%–7% target range, with capital retained amid rate volatility and a notable rise in yields to support client activity.The capital framework is unchanged. Growth gets priority, with excess capital returned to shareholders through multiple channels as conditions allow. 2\. FY26 outlook.Revenue and full-year NIM growth are expected to land near the low end of the summer update ranges, driven by loan growth outpacing deposits and greater use of diversified funding. Expenses are also expected at the low end, reflecting efficiency gains while maintaining and adding to strategic investments.Operating leverage for the year is about +800bps. This is roughly 2x the expectation at the start of the year. 3\. NIM and 2027 outlook.Q4 2026 NIM is expected to expand by about 25–30bps vs. Q4 2025, with further expansion in 2027. The company expects a strong start to 2027, investing for growth while leveraging scale and AI to drive efficiency, targeting positive operating leverage across environments.Detailed financial scenarios will be disclosed at the Jan. Winter Business Update. Management reiterated the Investor Day framework of mid-teens profit growth through the cycle. 4\. Key quarterly metrics.Totals: revenue $7.2bn (+17% YoY), adj. expenses about $3.2bn (+9% YoY), adj. pre-tax margin 54.8% (+~350bps YoY), and adj. EPS $1.69 (+29% YoY). By line: net interest income nearly $3.5bn (+14% YoY), asset mgmt and admin fees $1.9bn (+14% YoY), trading revenue $1.2bn (+16% YoY) with 10.7mn avg. daily trades.Bank deposit account fees rose about 40% YoY. Balance sheet: margin balances $187.9bn; bank loans $72.3bn (+35% YoY), mainly from pledged asset lines (PAL); transactional sweep cash $492.8bn, up $7.1bn QoQ, driven by long-short strategies and organic growth, partly offset by client reinvestment in markets.Expense attribution: YoY increase was driven mainly by volume-related costs, including performance comp. Underlying core costs improved modestly on efficiency, with part of the savings reinvested. **II. Earnings call details** **2.1 Management highlights** 1\. Client growth.The company opened 1.2mn new brokerage accounts in Q3. Core net new assets were $190bn (+38% YoY), implying a near 6% annualized organic growth rate.Client assets, RIA custody assets, and avg. daily trades all ranked No. 1 in the industry. There were a record 1.8bn client interactions YTD, with an all-firm transfer-in/transfer-out ratio of about 1.8. Clients move nearly $4tn of cash each month through Schwab for investing, trading, payments, and mortgages. This underscores the breadth of client activity across the platform. 2\. Advisor (RIA) business.Schwab serves over 16k advisory firms with $5.8tn in assets, spanning custody, trading, bank lending, and technology. Over 1,100 new firms chose Schwab as custodian last year, more than 3x the No. 2 provider.Momentum remains broad-based across services. Platform depth continues to attract advisor assets. 3\. Retail.Roughly 70% of newly onboarded retail households are Gen Z and Millennials. About 80% of retail assets are held by UHNW/HNW households, with very high retention through generational wealth transfer.Households with a dedicated Financial Consultant see NNA about 3x households without, managed investing net inflows about 5x, and transfer-in/transfer-out ratios about 3x. The firm continues to add branches and frontline staff. 4\. Wealth and trading.Managed investing net inflows were $24bn (+22% YoY), a quarterly record, with Schwab Wealth Advisory net inflows up 55% YoY and an NPS of 84. Schwab accounts for about 2% of the $37tn U.S. advisory market.Only about 5% of retail households currently use advisory services, but 31% say they are willing to pay. The firm has over 1,200 dedicated trading consultants, with trader NPS up 7 points YoY; trader households have NNA about 7x the retail average, generating roughly 2x revenue per asset.Client trading engagement and monetization are rising alongside broader wealth penetration. Platform capabilities continue to deepen. 5\. New products.Single-stock futures and financial event binary options are live. Crypto access is now open to all clients, with position transfers being rolled out and three more coins to be added by year-end.The firm is broadening transaction-driven revenues while keeping a focus on risk controls. Feature velocity remains high into year-end. 6\. AI strategy.Three tracks: block unauthorized agents from logging in on clients' behalf; in-house conversational assistant 'Charlie' orchestrating multiple LLMs, now handling administrative tasks such as address changes and to roll out to all clients in coming months; and allowing client-owned LLMs to connect via MCP, while restricting high-risk actions such as transfers.Schwab became the first RIA custodian to join Claude for Financial Advisors. The thinkorswim AI assistant is in rollout, with trader MCP access piloting via Claude and expansion to more clients and LLMs in coming months.About 77% of U.S. investors use AI, and over 90% still want human involvement. Internal developer productivity is up about 25%. **2.2 Q&A** **Q: Can AI drive revenue opportunities? Are client LLMs connected via MCP for analysis only, or can they execute trades?** A: **AI is already contributing to revenue growth; LLMs can connect and trade, but transfers are not allowed.** Management sees higher client engagement, with an observed correlation between LLM adoption and rising DAT. In wealth, AI delivers tax and trust/estate insights, helping drive growth, and frontline advisors equipped with AI can serve more clients, lifting NNA and lending.On access, agent-based logins are blocked, though attempts are few daily. Clients can connect via Charlie or their own LLMs, with the firm controlling authentication and permissions.Clients trading through LLM/API have doubled over the past six months and hold more cash, counter to the notion that 'AI drains cash.' On efficiency, tech productivity is up about 25% YoY, first-call resolution hit a record, and calls per household fell, enabling reinvestment while keeping core costs down. **Q: NNA is strong but deposits fell for the full year. How to explain? Q3 NIM was 3.04%; where does Q4 land vs. prior 3.25%–3.30% guide?** A: **No quarterly NIM point given; only that Q4 expands about 25–30bps YoY, with further expansion in 2027.** High rates plus asset sensitivity provide a favorable setup, and the key is the timing of expansion.Cash: geopolitics kept cash on the sidelines in Q1 and roughly flat in H1; Q3 saw improved sentiment and more IPOs, bringing cash back into markets. Organic cash build continues, with seasonal inflows from mid-Nov., and the share of on-balance-sheet cash plus money funds in client assets is stable.Assets: loans now exceed the securities portfolio and carry a materially better spread. About $190bn of sub-2% securities remain to mature, and redeploying into loans or new securities will materially lift earnings.Think of NIM as 'Fed funds plus.' **Q: Loan mix is improving but interest-earning assets are capacity-limited, and ROE is high. What about buyback cadence?** A: **No cadence given; capital first supports loan growth, with flexibility to return capital to shareholders.** Loan growth reflects platform-wide engagement across lending, trading, and advisory, with healthy revenue growth and mix.Capital ended the quarter at the top of the range, and momentum in earnings provides capacity to fund growth while returning capital opportunistically. Management will stay balanced between growth and returns. **Q: How sustainable is NNA growth? How much did long-short strategies contribute?** A: **All three businesses and client segments are contributing; after gating long-short in mid-Oct., RIA NNA has not slowed.** Retail strengthened month by month after April tax season, with Q3 retail NNA +39% YoY and a Q3 record, and FC-served segments leading growth.RIA: long-short programs contributed to NNA and consolidation. After raising thresholds and limiting growth in Oct., RIA NNA did not slow, with record-high client advocacy, transfer-in intent, and ease of use.Workplace: the firm launched private-company equity plan administration and has early wins, with retirement-plan momentum improving.Management acknowledges some NNA from long-short, but breadth across businesses should sustain NNA growth. **Q: Cash fell in Sept. despite higher rates. If rates rise further, how will cash, deposit betas, and funding mix evolve?** A: **It was not a cash diversion, but a return to markets on improved sentiment; further hikes have limited impact.** Short rates are similar to last year, and clients have already optimized between on-balance cash and money funds.With rates no longer at 1%–2%, the marginal impact of additional hikes is smaller and overall supportive of financials. NNA should bring organic cash build, with seasonal inflows in Q4, and the wholesale funding plan provides flexibility to meet margin and other lending needs while earning attractive returns. **Q: Where is rate sensitivity now? How long do the early-year hedges take to flow through NIM?** A: **Rate sensitivity remains $250mn–$300mn as disclosed, with no direct answer on lag.** The firm remains asset-sensitive, benefiting from hikes.Loans are floating, whereas historically the firm would buy fixed-rate securities. Today, some floating loans are swapped to fixed to match deposits, improving economics and providing more efficient ALM. **Q: After adjusting long-short thresholds, what changes in client behavior and subsequent growth?** A: **Since gating in mid-Sept., RIA NNA has not decelerated, and the firm will seek multiple sustainable options.** Client tax-saving demand is strong and should persist.A major competitor faced capacity constraints this year, and Schwab growth exceeded expectations, so gating ensured operations and capacity could support demand.RIA NNA is still accelerating, and transfer-in/transfer-out ratios are at historical highs. Management attributes this to combined strengths in bank lending, AI, advisory, and services beyond custody. **Q: What are the opportunities, timing, and regulatory prep for prediction markets?** A: **Over the next 12–18 months, expand beyond S&P binary options to financial events, company KPIs, and political events, but not sports.** Current participation is limited via S&P binary options.Within about a year, the platform aims to offer contracts on outcomes such as earnings beats and quarterly deliveries for automakers, positioned as portfolio-related tools to serve client financial goals rather than pure betting. No specific regulatory commentary was provided. **Q: How is platform monetization progressing? Any change to monetizing transactional cash?** A: **Multiple monetization levers are in place, and the cash strategy is unchanged.** The firm has implemented measures such as ETF monetization and is expanding transaction-driven revenues across crypto and prediction markets, while scaling wealth and lending to deepen asset stickiness.For cash, funds remain liquid and safe until clients specify use, with idle cash and alternatives displayed transparently. The firm will innovate in decision support, with AI playing a role. **Q: Could company KPI contracts launch earlier within the 12–18 month window?** A: **Pushing as fast as possible with Cboe, with thinkorswim launching immediately upon Cboe go-live.** The first batch of designs is complete, and functionality will broaden over the next year.These tools can help clients hedge or amplify exposures. Rollout timing depends on partner and regulatory readiness. **Q: What is demand for 23×5 or even 24×7 trading?** A: **Off-hours trading accounts for only 1%–2%, implying limited demand, but 24×7 can be enabled when clients need it.** Off-hours liquidity is thin and spreads are wide, and the firm has protections in place.Overseas clients and those with daytime jobs have demand, and the technology is already in place. The firm will balance access with client protection. **Q: Will the firm develop internal AI auto-trading solutions for clients?** A: **Highly unlikely for the firm to provide strategies or algorithms; clients can build via LLM/API.** Some clients already build strategies via API and thinkorswim.Management believes if quant models could reliably outperform, capital would have already flooded in, and delivering quant alpha for clients is 'futile and risky.' The firm focuses on education, research, and support from thousands of former traders, and is rolling out AI tools to help clients structure trading plans. **Q: Will you launch proprietary long-short products? What about investment and differentiation?** A: **Expected to launch, as an extension of existing direct indexing capabilities, with timing TBD.** Current direct indexing shows strong after-tax alpha, and a proprietary long-short offering, housed on-balance sheet and operationally, would be more efficient and sustainable, while enabling monetization.No size of investment was disclosed. Launch timing will be updated on future calls. \ **Risk disclosure and statements:**[**Dolphin Research disclaimer and general disclosures**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [SCHW.US](https://longbridge.com/en/quote/SCHW.US.md) - [SCHW-D.US](https://longbridge.com/en/quote/SCHW-D.US.md) - [SCHW-J.US](https://longbridge.com/en/quote/SCHW-J.US.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**