Charles Schwab Earnings: Sluggish Client Cash Recovery Our Only Gripe Amid Another Strong Quarter

Key Morningstar Metrics for Charles Schwab

• Fair Value Estimate: $111.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of Charles Schwab’s Earnings

Charles Schwab SCHW reported fourth-quarter 2025 earnings results, generating outstanding 22% annual revenue growth on the back of expanding net interest margins, 18% annual growth in client assets to $11.90 trillion, and surprisingly strong customer trading activity.

Why it matters: We saw little in quarterly results that would change our constructive thesis for Schwab. The one knock (if a largely exogenous one) is a still-low client cash allocation at 9.6% of average assets, well below the 11.4% average over the past decade. This curbs near-term balance sheet growth prospects at Charles Schwab bank.

• We now expect this dynamic to persist through 2026, with a strong market backdrop and still-high interest rates discouraging investors from sitting on the sidelines, holding cash. This delays but does not undermine our expectation for Schwab to generate low-teens compound annual percentage growth in earning assets (13%-14%) and mid-teens growth in net interest income (14%-15%) over the decade to come.
• Beyond the quarterly results, we’re encouraged by improvements across the gamut of Schwab services, from strong lending growth among wealth clients to swelling interest in Schwab Managed Portfolios (36% annual growth in inflows) to progress toward newer initiatives like spot cryptocurrency trading and expansion of alternative asset access with the pending acquisition of Forge Global.

The bottom line: We’ve raised our fair value estimate for wide-moat Schwab to $111 per share from $109, largely reflective of time value. While slower-than-expected balance sheet growth in 2026 results in guidance for slower revenue growth than we’d expected (still a healthy 9.5% to 10.5%), this is offset by strong expense discipline.

• Our forecasts call for a 10-year compound annual growth rate of 10% in net revenue, 11.3% in operating income, and 14.4% in diluted EPS, attesting to the firm’s strong competitive position in an attractive and growing US wealth management market.