Charles Schwab reported record third-quarter results on Thursday, and the stock fell. According to the company's earnings release, net revenue rose 17 per cent to $7.171 billion, GAAP net income rose 23 per cent to $2.906 billion, and GAAP earnings per share rose 29 per cent to $1.62. Adjusted earnings were $1.69 a share, against a consensus of $1.66, while revenue fell just short of the $7.19 billion consensus, Zacks reported. The shares were down more than 4.5 per cent before the open, according to the same account, which put the move down to disappointment over the revenue miss. They closed at $94.16, down 2.7 per cent on the day, and fell another 2.3 per cent on Friday to $91.96, according to Yahoo Finance price data.
The more interesting number is further down the tables. Margin loans, money lent to clients against the securities in their accounts, were $187.9 billion at quarter-end, according to Schwab. A year earlier they were $97.2 billion, so the balance is up 93 per cent, and up 14 per cent from $165.1 billion at the end of June.
What drove the quarter
Net interest revenue, the largest line, rose 14 per cent to $3.476 billion. Schwab's net interest margin widened to 3.04 per cent from 2.88 per cent a year earlier, and average interest-earning assets were $451.5 billion, up 8 per cent. Asset management and administration fees rose 14 per cent to $1.913 billion, and trading revenue rose 16 per cent to $1.158 billion.
Expenses excluding interest rose 9 per cent to $3.394 billion, slower than revenue. The GAAP pre-tax margin widened to 52.7 per cent from 49.2 per cent. Return on tangible common equity was 44 per cent, against 38 per cent. Schwab also repurchased 4.7 million shares for $0.5 billion and declared a dividend of $0.32 a share, up from $0.27 a year earlier.
Lending is doing more of the work
The release shows where the balance sheet is moving. Of the $187.9 billion in margin loans, $60.7 billion is tied to long/short strategies used by registered investment advisers. Schwab reports $63.3 billion of related short credits alongside them and keeps both out of its interest-earning assets. A year earlier those strategies were small: average balances were $2.8 billion in the third quarter of 2025. Leave them out and margin loans would be about $127 billion, by our arithmetic, still well above a year ago. Bank loans rose 35 per cent to $72.3 billion. Pledged asset lines, which let clients borrow against a portfolio, rose 59 per cent to $37.3 billion.
Meanwhile, deposits are shrinking. Total bank deposits were $244.1 billion, up 2 per cent on the year but down 2 per cent from the previous quarter, and Schwab's own quarterly tables show them falling for a third straight quarter, from $255.7 billion at the end of 2025 to $253.0 billion in March, $249.7 billion in June and now $244.1 billion. Bank deposit account balances, a separate cash sweep line, fell 13 per cent on the year to $68.0 billion from $78.5 billion. Transactional sweep cash was $492.8 billion at the end of September, up $7.1 billion from the end of June and 16 per cent on the year. Client cash was 8.9 per cent of client assets, against 9.4 per cent a year earlier.
That is our reading of the mix: clients are holding less of their wealth in cash and borrowing more against their holdings. Neither is a problem in a rising market. Both look different if prices fall.
Busy clients, thinner revenue per trade
Clients placed 10.7 million trades a day on average, up 44 per cent from 7.4 million. Revenue per trade fell to $1.69 from $2.11, a drop of 20 per cent. Trading revenue still rose 16 per cent because volume outran the price decline. Schwab opened 1.24 million new brokerage accounts, up 9 per cent, and had 40.26 million active brokerage accounts.
Core net new assets, the money clients bring in, were a record $190.4 billion, up 38 per cent from a year earlier and an annualised growth rate of 5.8 per cent. Total client assets reached $13.33 trillion, up 15 per cent from a year ago and 2 per cent from the previous quarter. Market gains added $55.9 billion in the quarter, against $702.2 billion a year earlier, so this quarter's growth in client assets came mostly from new money rather than rising prices.
Rick Wurster, Schwab's president and chief executive, said in the release that "our leading value proposition continues to resonate with investors and RIAs." Mike Verdeschi, the chief financial officer, said deeper client engagement was "helping our third quarter revenue increase 17% year-over-year to a record $7.2 billion."
What to watch
Schwab's results landed in the same week as the major banks, and alongside the asset-manager flows BlackRock reported on Tuesday. Friday's selloff, in which the S&P 500 fell 1.1 per cent and the Nasdaq composite 2.1 per cent, according to the Associated Press, is a small reminder of why the margin book matters: borrowed money magnifies falls as well as gains. Schwab's quarterly regulatory filing will add detail on the lending book. Its preliminary consolidated Tier 1 leverage ratio was 8.9 per cent, or 7.0 per cent on an adjusted basis. Robinhood and LPL Financial report on 27 October, according to Zacks.
Sources
- The Charles Schwab Corporation, "Schwab Delivers Record Net New Assets & Earnings," 15 October 2026: https://pressroom.aboutschwab.com/press-releases/press-release/2026/Schwab-Delivers-Record-Net-New-Assets--Earnings/default.aspx
- The Charles Schwab Corporation, Form 8-K, Exhibit 99.1 (third-quarter 2026 release with financial tables and September monthly activity report), filed 15 October 2026: https://www.sec.gov/Archives/edgar/data/316709/000031670926000035/a3q26exhibit991.htm
- The Charles Schwab Corporation, Form 8-K, Exhibit 99.1 (second-quarter 2026 release), filed 21 July 2026: https://www.sec.gov/Archives/edgar/data/0000316709/000031670926000027/a2q26exhibit991.htm
- Zacks Equity Research via Yahoo Finance, write-up of Schwab's third-quarter results, 15 October 2026: https://finance.yahoo.com/markets/stocks/articles/schwab-q3-earnings-beat-higher-135500832.html
- Associated Press via ABC News, closing index levels for Friday, 16 October 2026: https://abcnews.com/Business/wireStory/major-us-stock-indexes-fared-friday-10162026-137331951
Every Schwab figure and executive quote comes from the company's third-quarter 2026 earnings release of 15 October 2026, filed with the SEC as an exhibit to a Form 8-K, including its quarterly tables and its monthly activity report for September. The quarterly bank-deposit history is from the same tables and was checked against the second-quarter release filed on 21 July 2026. The consensus figures ($1.66 adjusted earnings, $7.19 billion revenue) and the pre-market share move come from a Zacks Equity Research write-up published by Yahoo Finance at 9:55 a.m. Eastern on 15 October. Schwab's closing prices on 14, 15 and 16 October are from Yahoo Finance's daily price history. The index closes for 16 October are from the Associated Press. The 93 per cent rise in margin loans, the 20 per cent fall in revenue per trade and the 14 per cent sequential rise in margin loans are Schwab's own figures, and we checked each against the dollar amounts. The margin-loan figure excluding long/short strategies is this publication's arithmetic. The analysis is our own.
