Executive Summary
Schwab delivered strong financial results in 2025, with net income rising 49% to $8.9 billion and diluted EPS up 56% to $4.65. Client assets reached $11.90 trillion (up 18%), supported by core net new assets of $519.4 billion. Net interest revenue jumped 28% driven by reduced wholesale funding costs and robust margin/bank lending growth, while total expenses increased just 5%.
What happened
Schwab's 2025 results reflected equity market gains (S&P 500 up 16%), strong asset gathering, sustained client engagement, and operational improvements from completing the Ameritrade integration. Total client assets reached $11.90 trillion at year-end, up 18%, while core net new assets totaled $519.4 billion, representing a 5.1% annualized organic growth rate. Clients opened 4.7 million new brokerage accounts (up 13%), and active accounts reached 38.5 million (up 6%). Daily average trades surged 31% to 7.7 million for the full year, reflecting heightened market engagement. Net interest revenue grew 28% to $11.8 billion, driven primarily by lower interest expense from bank supplemental funding reduction and lower funding rates, coupled with growth in margin lending and bank loans. The Federal Reserve reduced the target rate by 75 basis points across two cuts in the second half of 2025. Asset management fees increased 14% to $6.5 billion on higher client asset balances from market appreciation, asset gathering, and growth in managed investing solutions. Trading revenue rose 20% to $3.9 billion on higher volume. Bank deposit account fee revenue increased 34% to $977 million due to higher net yields, partially offset by lower average balances. Client cash behavior normalized in 2025, with bank sweep deposits and payables to brokerage clients increasing by a combined $36.6 billion, or 12%. Principal and interest from investment securities, along with transfers of $6.7 billion of bank deposit account balances to the balance sheet, supported a $44.8 billion (90%) reduction in bank supplemental funding to $5.1 billion—within the Company's diversified funding strategy range. Margin loans ended the year at $112.3 billion (up 34%), and bank loans totaled $58.0 billion (up 28%). Total expenses excluding interest increased 5% to $12.5 billion, reflecting investments to support business growth and higher incentive compensation tied to financial performance, partially offset by lower FDIC assessments. The Company completed the Ameritrade integration as of December 31, 2024, having converted approximately $1.9 trillion in client assets across 17 million accounts and realized approximately $2.0 billion in annualized cost synergies plus $500 million in incremental savings from restructuring.
Why it matters for investors
The results demonstrate Schwab's ability to translate improved funding dynamics and strong client engagement into substantial earnings growth. The 28% increase in net interest revenue, achieved while growing the balance sheet by only 2%, reflects meaningful margin expansion from reduced reliance on costly wholesale funding. Net interest margin improved to 2.74% from 2.12%, indicating a more favorable funding mix. The near-elimination of bank supplemental funding—down 90% to $5.1 billion—positions the Company to generate higher profitability from incremental asset growth. Simultaneously supporting 34% margin loan growth and 28% bank loan growth while normalizing funding demonstrates both strong client demand and improved operational leverage. The 5% expense growth against 22% revenue growth produced 49% net income growth, translating to a 47.9% pre-tax margin (up from 39.2%) and 21% return on average common equity (up from 15%). The adjusted Tier 1 Leverage Ratio improved to 7.1% from 6.8%, within the Company's 6.75%-7.00% long-term objective, even after returning $9.8 billion to shareholders. The structural improvements from completing the Ameritrade integration—realized cost synergies of $2.0 billion plus incremental savings of $500 million—provide ongoing operational leverage. Asset management fee growth of 14% reflects successful monetization of client assets through managed solutions and money market funds. The 5.1% annualized organic growth rate (core net new assets of $519.4 billion) indicates sustained business momentum. Trading revenue growth of 20% on 31% higher volume demonstrates continued client engagement. The balance sheet composition shifted favorably: lower-yielding investment securities declined while higher-yielding margin and bank loans grew, improving asset mix. Client cash allocation behavior stabilized with bank deposits and brokerage payables growing 12%, reducing the need for wholesale funding. The Company's diversified funding sources—including FHLB capacity of $74.2 billion and Federal Reserve discount window capacity of $29.3 billion—provide ample liquidity headroom.
Bullish points
Net income increased 49% to $8.9 billion and diluted EPS rose 56% to $4.65, reflecting strong operational leverage as 22% revenue growth combined with just 5% expense growth; return on average common equity improved to 21% from 15%, and return on tangible common equity reached 38% from 35%.
Net interest margin expanded 62 basis points to 2.74% from 2.12%, as the Company reduced bank supplemental funding by $44.8 billion (90%) to $5.1 billion—reaching levels within its diversified funding strategy—while maintaining balance sheet growth and supporting strong lending activity.
Margin loans grew 34% to $112.3 billion (up 16% in Q4 alone) and bank loans increased 28% to $58.0 billion, demonstrating strong client demand and successful monetization of client engagement, with growth in higher-yielding assets improving asset mix.
Core net new assets totaled $519.4 billion (up 42% from 2024), representing a 5.1% annualized organic growth rate; total client assets reached $11.90 trillion (up 18%), and assets receiving ongoing advisory services grew 19% to $6.02 trillion, reflecting sustained business momentum.
The Company returned $9.8 billion to shareholders through $7.3 billion in stock repurchases and a $2.5 billion preferred redemption, while maintaining an adjusted Tier 1 Leverage Ratio of 7.1% (within the 6.75%-7.00% long-term objective) and increasing the quarterly dividend 8% to $0.27, then 19% to $0.32 in January 2026.
Bearish points
The consolidated Tier 1 Leverage Ratio declined to 9.3% from 9.9% due to capital returns and asset growth, and if CSC's average total assets reach $700 billion or cross-jurisdictional activity reaches $75 billion, the Company will face more stringent Category II requirements including inability to opt out of AOCI inclusion in regulatory capital.
Net interest revenue sensitivity remains asymmetric: simulations indicate revenue would decline 4.4% from a 100 basis point rate decrease versus a 4.1% increase from a 100 basis point rate rise, and declining rates could compress margins more than funding cost reductions can offset.
Total balance sheet assets remained relatively flat (up only 2% to $491.0 billion despite strong loan growth) as investment securities declined, and average interest-earning assets for 2025 were slightly lower than 2024, limiting revenue growth potential from balance sheet expansion.
Capital expenditures are expected to increase to 3%-5% of total net revenues in 2026 (from 2.5% in 2025) to support continued technology investments, and total expenses excluding interest are expected to rise 5.5%-6.5% in 2026 before considering costs from the planned Forge acquisition.
Client cash as a percentage of total assets remains sensitive to rate changes at 9.7%, and the Liquidity Coverage Ratio declined to 131% from 134%, indicating tighter liquidity positioning; rapid client cash reallocation could require increased reliance on wholesale funding or asset sales.
Key highlights
Schwab's 2025 performance demonstrates the earnings power of its integrated business model following completion of the Ameritrade integration. The Company successfully pivoted from a period of elevated wholesale funding reliance to a normalized funding structure, reducing bank supplemental funding by 90% to $5.1 billion while simultaneously supporting strong client-driven loan growth. This transition drove substantial net interest margin expansion from 2.12% to 2.74%. Client engagement metrics were robust across the board: daily average trades increased 31% to 7.7 million (8.3 million in Q4), new accounts rose 13% to 4.7 million, and active accounts reached 38.5 million. The 5.1% annualized organic growth rate (core net new assets of $519.4 billion) exceeded the prior year's 4.3% rate, with Q4 2024 core flows of $114.8 billion up 51% year-over-year indicating accelerating momentum post-integration. The revenue mix improved qualitatively: net interest revenue represented 49% of total revenues (up from 47%), asset management fees contributed 27% (relatively stable), and trading revenue accounted for 17%. Bank deposit account fee revenue grew 34% to $977 million despite lower average balances, as net yields improved from changes in the fixed/floating rate allocation mix under the 2023 IDA agreement. Profitability metrics showed substantial improvement: pre-tax margin expanded to 47.9% from 39.2%, and the adjusted diluted EPS of $4.87 (up 50% from $3.25) excluded integration costs that substantially concluded in 2024. Adjusted total expenses of $12.0 billion grew just 6%, indicating operating leverage from the $2.5 billion in total synergies and efficiencies realized through integration and restructuring. Capital management reflected both strength and strategic intent: the Company returned $9.8 billion to shareholders (including the $2.5 billion Series G preferred redemption), yet maintained an adjusted Tier 1 Leverage Ratio of 7.1% within its 6.75%-7.00% long-term objective. The improvement in AOCI (unrealized losses on investment securities declined) contributed to ratio improvement despite capital distributions. Management announced a new $20 billion share repurchase authorization in July 2025, with $14.5 billion remaining at year-end. The balance sheet composition shifted toward higher-yielding assets: margin loans grew 34% to $112.3 billion, PALs and First Mortgages drove bank loan growth of 28% to $58.0 billion, while AFS and HTM securities declined as cash flows were redeployed. Client sweep cash (bank deposits plus brokerage payables) increased 12%, or $36.6 billion, indicating normalized cash allocation behavior. Transfer of $6.7 billion of IDA balances to the balance sheet provided additional funding flexibility. Looking forward, the Company announced plans to acquire Forge for approximately $660 million (expected to close March 2026), expanding capabilities in private market securities. Management expects 2026 total expenses excluding interest to increase 5.5%-6.5% before Forge integration costs, with capital expenditures returning to the 3%-5% of revenue range. The completion of major integration activities positions the business for more normalized growth and efficiency in future periods.
Management commentary
Management highlighted the successful completion of the Ameritrade integration, stating that over five client transition groups in 2023 and 2024, the Company converted approximately $1.9 trillion in client assets across more than 17 million accounts, including 7,000 RIAs. Management noted that client attrition was below initial estimates at the time of acquisition announcement. The integration resulted in total acquisition and integration-related costs and capital expenditures of approximately $2.5 billion, while delivering annualized run-rate cost synergies of approximately $2.0 billion. Management emphasized that incremental restructuring actions beyond direct integration activities generated approximately $500 million in additional run-rate cost savings. Regarding capital management, management maintained its long-term operating objective for the consolidated adjusted Tier 1 Leverage Ratio of 6.75%-7.00%, incorporating the effects of AOCI. Management noted that the Company's capital management for consolidated CSC and banking subsidiaries now incorporates measures that are inclusive of AOCI, reflecting potential future regulatory requirements. Management stated it currently targets the common stock cash dividend at approximately 20%-30% of net income and returned meaningful excess capital through $7.3 billion in common stock repurchases and the $2.5 billion Series G preferred stock redemption. On funding and liquidity, management indicated that with bank supplemental funding paydowns during 2025, the outstanding balance of $5.1 billion at year-end is within a range generally consistent with the Company's diversified funding strategy. Management noted that pursuant to the 2023 IDA agreement, after September 10, 2025, Schwab has broader discretion to withdraw balances, subject to certain constraints, and that transfers of IDA balances to Schwab's balance sheet provide a source of funding to invest in interest-earning assets or reduce borrowings. Management expects total expenses excluding interest in full-year 2026 to increase approximately 5.5%-6.5% from 2025, with costs related to the Forge acquisition operations and integration in addition to this expected growth. Management anticipates capital expenditures for 2026 to be within the longer-term expectation of 3%-5% of total net revenues, compared to 2.5% in 2025. Management noted that the Forge transaction, valued at approximately $660 million, is expected to close in March 2026 subject to customary closing conditions and regulatory approvals.
What to watch next
Investors should monitor:
Monitor the Federal Reserve's monetary policy decisions and their impact on net interest revenue, as simulations show asymmetric sensitivity with greater downside risk from rate decreases (4.4% revenue decline from 100 bps down versus 4.1% increase from 100 bps up).
Track client cash allocation behavior and bank sweep deposit trends, as stabilization of these balances supports reduced reliance on wholesale funding; management has broader discretion to withdraw IDA balances after September 2025 under the 2023 agreement.
Watch for updates on regulatory capital requirements, particularly proposed rules that would require inclusion of AOCI in regulatory capital and potential Category II designation if total assets reach $700 billion or cross-jurisdictional activity reaches $75 billion.
Follow progress on the Forge acquisition expected to close in March 2026 for approximately $660 million, including integration costs and the contribution of private markets capabilities to client offerings and future revenue growth.
Monitor 2026 expense growth relative to management's 5.5%-6.5% guidance (excluding Forge costs) and capital expenditures relative to the 3%-5% of revenue target, as sustained operational leverage is critical to maintaining profitability momentum.
This summary is based solely on excerpts from the company's Form 10-K filing.