Schwab Charles (SCHW) Q1 FY26 earnings call: guidance and Q&A

How does the evolving rate backdrop (fewer rate cuts than previously expected) and strong Q1 cash growth impact the NIM outlook and IEA growth for the year, given prior guidance?

Mike Verdeschi stated that the current market anticipation of no rate cuts is more favorable for Schwab. He expects continued upward trajectory of cash driven by organic growth and strong client engagement. He feels good about NIM growth, potentially seeing upside to the previously implied scenario, with more details to come in July.

“looking at the forward curve now, perhaps the market is anticipating no cuts. So that is more favorable for us.”

asked by Steven Chubak · answered by Michael Verdeschi

How is Schwab thinking about monetizing its value as an ETF distribution platform, distinguishing between active and passive ETFs?

Richard Wurster confirmed Schwab is actively working on an ETF monetization strategy, aiming to have it in place by year-end after negotiations with asset managers. Monetization will likely be a percentage of ETF fees, offering more economic opportunity from higher-fee active ETFs compared to passive ones.

“We think there is value for us to be earned as it relates to ETFs, and we are actively working on that... by the end of the year, having an ETF monetization strategy in place and live.”

asked by Ken Worthington · answered by Richard Wurster

Are Schwab considering tools similar to JPMorgan's to reduce friction around brokerage cash, and how will technology advances and competitive environment impact monetization if it evolves away from cash sweep?

Richard Wurster emphasized that Schwab believes clients intentionally allocate their cash and makes it easy to do so. He stated Schwab has many monetization levers (trading, wealth, lending, AI-powered fee-based solutions) and is flexible to adapt. He noted that an agentic capability for cash movement would likely be a fee-based advisory offer.

“we do not see this currently as a big risk. We believe our clients have intentionally allocated their cash, and we go out of our way to make it incredibly easy to make sure clients land in the right cash solution for them.”

asked by Brennan Hawken · answered by Richard Wurster

What drove the strong NNA in March, particularly any RIA conversions, and was the deposit build more due to risk-off sentiment or tax payments?

Richard Wurster highlighted March as Schwab's second-highest NNA month ever, with Investor Services reaching an all-time monthly high, surpassing Advisor Services. He attributed NNA growth to Schwab's value proposition and market volatility. Mike Verdeschi explained March's cash pickup was due to a decline in equity markets (risk-off), long-short strategies, and strong net new assets, with tax payments potentially contributing to cash remaining on the sidelines.

“March was an exceptional month of NNA. It was our second highest month of NNA ever behind only December... Investor Services reached an all-time monthly high of net new assets and actually had higher net new assets in March than Advisor Services did.”

asked by Brian Bedell · answered by Richard Wurster

How does Schwab monitor changes in customer behavior regarding cash sweep monetization, and what would future monetization levers look like if it evolves away from cash sweep?

Richard Wurster reiterated confidence in clients' intentional cash allocation. He emphasized Schwab's diverse monetization avenues (trading, wealth, lending, AI-powered fee-based solutions) and its flexibility to adapt, citing past successful transitions from commission-heavy models. He noted that client cash is a small portion of overall relationships, and Schwab helps clients with 100% of their financial life.

“we believe we have many ways to charge clients for the value we add... we've got lots of flexibility in how we monetize at Schwab for the value that we provide.”

asked by Michael Cyprys · answered by Richard Wurster

What is the strategic objective of the digital asset offering (retention, new asset gathering, engagement, ecosystem building), and how can Schwab catalyze clients to consolidate digital assets on its platform?

Richard Wurster stated the crypto launch aligns with client choice, offering spot exposure for clients already investing in crypto. He expects clients to proactively move assets to Schwab due to trust and the desire to consolidate their financial lives. He also noted that building Schwab's own books and records for custody provides optionality for future tokenization of securities.

“we are building our own books and records in our own custody capabilities. That is a prelude to being able to offer clients choice in how they want to hold their equity someday... and we're building optionality through this launch that allows us to support the future of tokenization should that be of interest to clients.”

asked by Mike Brown · answered by Richard Wurster

What factors influenced the lower revenue per trade despite high trading activity, and what informed the pricing strategy for the digital asset offering?

Richard Wurster explained that traders are taking smaller positions for less duration due to market uncertainty, leading to more frequent but smaller trades and thus lower revenue per trade. For crypto pricing, Schwab aims to be competitive (lowest price for first dollar traded among majors) while ensuring a healthy fee to cover launch costs and risks, settling on 75 basis points.

“traders are feeling more uncertain about the geopolitics, about potentially the economy... they are taking smaller positions, holding them for less duration because they have less conviction.”

asked by Dan Fannon · answered by Richard Wurster