Charles Schwab Corp (SCHW)

“we are on track to start piloting our crypto transfers capability by the end of this month.”

“This trading assumption does include a pullback from recent monthly levels, reflecting an expected moderation in activity, in part due to the seasonal slowdown during the summer.”

“We think we are well positioned to see that continued margin expansion through the rest of the year and beyond.”

“No, we feel good about the net interest margin expansion that we've seen so far. If rates resume a hiking pattern you'll see even more expansion.”

“all of that is leading towards a more sustained period of high levels of trading from our perspective.”

“We believe that the trading engagement you've seen is sustainable, and it's supported by broad client participation.”

“We remain positive about hitting 5% or higher and feel good about each of our three client-facing businesses in that regard.”

“I still believe 5% or higher is the right long-term expectation, we remain bullish on NNA.”

“helps reinforce our confidence in delivering mid-teen earnings growth through the cycle.”

“Our asset gathering momentum reinforces our confidence in the 5% organic growth rate we outlined for 2026.”

“Given where rates are and where they're projected to be we would expect to continue to see a lift in that yield as more of the securities are rolled over and reinvested.”

“When we started the year in our financial scenario, that operating leverage in that first scenario was 400 basis points. The updated scenario has operating leverage of 800 basis points.”

“Of course, we'll have to see where interest rates go from here. In the scenario we assume that one hike, but that's very late in the year, that's December. It doesn't impact the financials for 2026 if that hike occurred. You would see further expansion in 2027.”

“In terms of the securities lending activity, we're not expecting much there from SpaceX. That's been somewhat of a subdued set of activities in that space this year. Not expecting much to come from that.”

“again, our expectation is NNA growth should be 5% or higher.”

“I expect that to drive more than 5% NNA growth, just as it has for the last several quarters.”

“Putting it all together, today's scenario implies stronger positive operating leverage and expanded adjusted pre-tax margin levels versus our prior scenarios.”

“Given our sustained business momentum, we now anticipate annual expense growth to range from 9.5%-10.5%.”

“Full-year 2026 interest earning assets are expected to expand modestly year-over-year.”

“With full-year net interest margin expanding to a range of 3%-310%, an average 4Q 2026 net interest margin expected to finish in the 3.25%-330% range as the timing of the potential Fed rate hike late in the year limits the impact in 2026.”

“Using these updates, we would expect total revenue growth of 17.5%-18.5% in 2026.”

“Therefore, we would anticipate revenue per trade to increase modestly from 2Q26 levels as rate and volume tend to be inversely correlated.”

“Given the strong year-to-date equity market returns, we are now assuming approximately 13% full-year market appreciation.”

“Of course, if you see variations in IPO markets and more hard-to-borrow activity, that could be upside for us, but not contributing meaningfully to net interest margin in the back half of the year.”

“In terms of an agentic capability, we are launching an agentic capability this summer. It will have basic agentic capabilities to start with and take on a few tests.”

“Starting over the summer, we will introduce the first of several AI assistants that will enable our clients to interact with chat and voice to address their most frequent service and support needs.”

“And I feel good about the NIM growth, both what we had laid out in that scenario, but also perhaps some upside to that when we come back in July with a refresh of our financial scenario, we'll provide more details.”

“We have strong momentum as we head into the second quarter, and we're well positioned to deliver earnings growth through the cycle.”

“And similar to past years, we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives such as money market funds.”

“For the second quarter, we still anticipate the typical drawdown in client cash due to tax payments in April.”

“we expect the phased client rollout will begin in the coming weeks”

“So we feel really good about by the end of the year, having an ETF monetization strategy in place and live. And that's our current plan. I think timing can always shift, but we're taking all the steps to make that happen.”

“Given our strong performance in 1Q and based on what we see today in terms of the expected path of rates and strong client engagement, we are tracking higher than the $5.70 to $5.80 EPS range implied by the scenario we shared back at the winter business update in January, which excluded the impact of buybacks and Forge.”

“We will also be launching a generative search capability for clients looking for information on schwab.com. The first iteration will launch this year.”

“So we think over the course of the year, certainly favorable, where the lack of rate cuts perhaps as well as the strong client engagement, both bringing us new assets in cash with that but also on the asset side as lending has remained robust, that will provide continued upward momentum.”

“We plan to add additional cryptocurrencies to the platform over time as well as transfer capabilities for both deposits and withdrawals, allowing clients with existing digital assets that bring them to Schwab alongside their other investments.”

“We remain on track to launch spot trading on Bitcoin and Ethereum in the first half of this year.”

“In terms of that second part, 6.75% to 7% for the adjusted Tier 1 ratio, that is still our objective.”

“I still believe 5% or higher is the right long-term expectation. In the near term, we're focused on 5%.”

“I think that number will go higher.”

“So in the coming years, I do expect to see retail and our Investor Services NNA accelerate.”

“But this is something that we still see is likely to grow in 2026.”

“So I think the growth of lending will continue.”

“Therefore, if you were to assume the Fed funds rate moves much lower than the current market expectations, perhaps approaching the 2% level, we would still anticipate delivering year-over-year earnings growth of at least 10%, probably a bit better, holding all else equal.”

“So putting all the pieces together, the combination of strong top line growth and balanced expense management implies meaningful operating leverage within this scenario with further pretax margin expansion into the low 50s.”

“Full year 2026 interest-earning assets are expected to expand modestly year-over-year following the paydown of supplemental borrowings at the bank.”

“Full year net interest margin expands to a range of 2.85% to 2.95% with average 4Q 2026 NIM expected to finish above 2.9% despite assuming the Fed funds rate comes down by another 50 basis points.”

“On the business side, we expect to sustain our momentum from 2025 into the new year with strong new account formation and full year organic asset growth of around 5%.”

“We'd expect normal cash behavior to continue in 2026 with cash levels generally growing in proportion with the franchise, with history suggesting we could pick up some modest amounts of incremental cash if interest rates move lower from current levels.”

“From here, we could see greater margin expansion. But again, there is no arbitrary target on that or ceiling on that per se.”

“I think that number could be far higher as it's such a convenient, easy way to borrow.”

“I'm confident in the coming months that we'll continue to make progress in closing that.”

“Through the cycle, we remain confident in our ability to grow at levels consistent with our historic range.”

“We anticipate year-over-year revenue and earnings expansion to finish 2025.”

“As I said earlier, we'll probably pay down a little bit more there. You're likely to see us in the lower end of that supplemental borrowing range that I provided earlier.”

“This year, yes, as we have talked about with the paydown of supplemental borrowings, interest-earning assets, probably coming down modestly.”

“We expect to still be into the 2.80s for net interest margin to close out the fourth quarter.”

“While outstanding balances may come down further and move around this range over time, we'll continue to support client loan needs and begin to focus more on new security purchases versus paydown activities.”

“We remain on track to launch spot crypto in the first half of 2026, starting with Bitcoin and Ethereum.”

“Yes, we've seen good momentum in PAL. As we've talked about before, we've made that experience very easy for clients to engage in that product, we've seen a good lift. We expect continued engagement in that product.”

“So even in that lower rate environment despite the asset sensitivity, I expect some meaningful offset to the impact of lower rates and the impact it would have on NIM.”

“So we think that will be supportive of continued strong earnings as we go into next year and conduct activity throughout the year.”

“From here, the path of rates, if you look at the forwards is, of course, rates heading lower. We tend to pick up cash in that environment, how much remains to be seen.”

“With the majority of this benefit realized in 3Q '25, we expect our corporate tax rate to remain around the 23% to 24% zone in future periods.”

“Again, I think that would be reasonably modest growth of interest-earning assets.”

“Over the course of next year, I think it will be more about the growth of our client borrowing needs. So we've seen good momentum in lending in the range of environments, we would expect that to continue.”

“Assuming this engagement persists, we could see a lift in earnings of around 2% or a bit better relative to the upper end of the financial scenario range we shared back at the July business update.”

“And we're confident that we'll continue through the back -- the second half of the year and that we will demonstrate that progress that we talked about at the beginning of the year.”

“We're on track to open more than 10 retail branches this year and to hire hundreds of FCs and wealth consultants to be there for our clients and connect them with the capabilities and solutions they need to meet their goals.”

“But the next wave of earnings growth after that is going to be more of an asset side story, both bonds maturing and being able to invest at higher rates and also the growth of our lending.”

“If you go back over the past few years, I think we did the largest, I think, most consequential integration in the history of our industry -- and we went from a period of losing assets with Ameritrade clients to pretty stable last year and now we're seeing growth and expect that will accelerate over time and become an even more meaningful part of our NNA.”

“And in our scenario, we're still expecting that for the back half.”

“I think more broadly, it's important to think about our growth as a firm in sort of two prongs. The first one is our net new asset growth and we continue to think that 5% to 7% is the right assumption over the long term with 3% to 5% of it coming from existing clients and 1% to 2% of it coming from new-to-firm clients just as we've done consistently historically.”

“When those launch, I expect those to be a meaningful -- a meaningful growth driver.”

“In this scenario, average 4Q NIM is expected to expand well into the 280 basis point range, and full year average interest-earning assets is still expected to decline slightly in 2025 versus 2024.”

“Full year net interest margin of 2.65% to 2.75%, which is up slightly from the January scenario due to the pace of paydowns, year-to-date transactional sweep cash trends and a recent pickup in securities lending activity.”

“Assuming these updated factors and keeping in mind the current macro backdrop, we would expect total revenue growth of 18.5% to 19.5% for the full year 2025.”

“From a trading mix perspective, we expect first half trends to generally persist, though macro factors and client preference will inform the ultimate mix.”

“Though we still anticipate full year 2025 daily average trading volume to finish significantly higher than the 4Q '24 levels used for the initial financial scenario discussed back in January.”

“As previously mentioned, we are not planning to reduce bank wholesale funding levels to 0. However, as we move into the back half of the year, we expect to make additional progress each quarter until these higher-cost bank liabilities are in a range more consistent with our long-term diversified funding profile.”

“And we expect to continue opportunistic excess capital return as we move forward.”

“We continue to anticipate strong revenue and earnings growth in 2025, which Mike will elaborate on in just a few minutes.”

“I mean that is typical seasonality. Keep in mind that some of that cost also is higher volumes and higher volume related costs. But that is contemplated -- this kind of spend in the first quarter is contemplated in that full year range that we provided of 4.5% to 5.5% of expense growth.”

“So when you look at just the beginning of April, it continues to give us confidence about that earnings range that I provided, certainly the upper end of that range.”

“And while the drivers of earnings are evolving with stronger cash levels and higher trading volumes versus lower equity markets and additional future rate cuts, the combination of our strong 1Q '25 results and diversified model has us currently tracking around the upper end of the full year scenario outlined at the winter business update in January, which implied earnings per share in the $4.10 to $4.20 range, excluding any impacts from buybacks.”

“But putting that all together, we still feel very good about the ability to expand net interest margin over the course of the year and importantly, continue to grow earnings and we're growing them organically and building capital.”

“Regarding NIM, we still feel good about the ability to expand NIM.”

“And of course, the yield on that portfolio today is sub-2%. And so at least based on where the rates are today that would be accretive. So all those things continue to point to good earnings growth and the organic growth of capital.”

“And so we expect to grow roughly 250 new financial and wealth consultants during the year and we believe that will have a meaningful impact on our ability over the long term to grow net new assets.”

“helps position us to further enhance stockholder value through the increased return of excess capital in 2025 and beyond.”

“Of course, our capabilities are also supported by our enhanced approach to the balance sheet where we expect incremental tailwinds moving forward.”

“Moving beyond the decision regarding the preferred, we expect to apply our familiar capital management framework as we prioritize maintaining capital to support the needs of our clients and the growth of our franchise while at the same time, making progress on reducing the amount of higher cost funding at the bank and returning capital in multiple forms as part of our through the cycle financial growth story.”

“However, as we move forward, we still expect to make additional progress each quarter until the supplemental funding at the banks is reduced to a level consistent with our diversified long term funding profile.”

“As previously mentioned, we would not necessarily expect to reduce funding levels by the same magnitude every quarter.”

“And similar to past years, we expect this activity to impact both transactional sweep cash as well as other liquid cash alternatives, such as purchase money market funds.”

“We continue to track well to the financial scenario we outlined at the beginning of the year as Mike will expand upon shortly.”

“Traders were a key part of the story in the first quarter and will remain so with volatility at higher levels.”

“And after recent capital actions we're poised for additional capital return over the course of the year.”

“As we shared in January and continue to believe, we expect strong revenue and earnings expansion in 2025.”

“I fully I expect that we'll close the entire gap and at some point, possibly even see Ameritrade clients grow at a level above the Schwab rate, because we're consolidating their assets and growing our share of wallet with Ameritrade clients.”

“And it's not -- this is not just a 2025 story. You'll continue to see us invest in this in '26 and '27, because we think relationships are critical to our clients' success and critical to supporting our 5% to 7% organic growth rate.”

“As we move past the integration, we remain confident in our ability to progress back into our long-term 5% to 7% growth range.”

“So, we're going to grow client loans, we're going to meet those needs.”

“And when we do, we expect to launch not long after.”

“Given our attractive value proposition and leadership position within the two fastest-growing segments of the U.S. wealth market, we expect to generate healthy organic account and asset growth as we serve an increasing number of investors with our suite of modern wealth management solutions across advice, lending, trading and asset management.”

“To the extent we continue to make the expected progress on our key financial objectives, it is reasonable to believe we will commence various forms of capital return over the course of 2025.”

“Also, full year 2025 interest-earning assets are expected to decline slightly year-over-year as we prioritize the continued paydown of higher cost supplemental funding at the banks.”

“client trading activity and mix remaining generally in-line with 4Q '24 levels”

“We'll continue to invest in our industry-leading trader offer, including expanding 24/5 trading, launching spot crypto trading when and if regulations make it permissible, and continuing to invest in our trading, education and coaching, which is a key differentiator.”

“In 2025, we'll make even more investments to deepen and expand relationships. We will hire hundreds of new financial consultants, and expand our physical branch network in a meaningful and thoughtful way in the year ahead.”

“And we're poised for greater capital return during 2025.”

“We expect strong growth for both revenue and earnings as we project our supplemental borrowing to diminish significantly in 2025 and our investments in deepening client relationships to continue to pay off.”

“We are also confident that over the long run, 5% to 7% remains the right number.”

“we remain quite confident in our plans to build our way back to our historical ranges.”

“more and more clients are keeping their lending business with us and we expect that as rates fall, we’ll see that accelerate.”

“what we’re talking about for fourth quarter is NIM into the well into the 220s and importantly, further meaningful expansion in 2025 as well.”

“we expect to continue to expand net interest margin in 2025.”

“We expect our Ameritrade clients to continue to grow their net new assets at the firm as they’ve done the last 2 quarters.”

“While NIM should continue to expand even in a lower rate environment, the ultimate level will be influenced by a range of factors, including the path of rates, which is now much lower than back in July.”

“As noted, we anticipate coming into 2025 with good momentum and expect it to further build in the year ahead with of course the usual considerations for shifts in the macroeconomic backdrop, interest rates, market sentiment, seasonality too.”

“Adjusted expense growth for full-year 2024 is still expected to be approximately 2%, inclusive of certain non-controllable items outlined earlier in the year.”

“Despite the recent backup in rates to start the fourth quarter, we still expect to finish 2024 above the lower bound of the objective range.”

“Over the near-term, continuing to reduce the amount of supplemental funding outstanding is a key driver in achieving normalized earnings power and we expect to show continued progress from here.”

“we anticipate making further progress over time, ultimately resulting in cash balances growing in proportion with client accounts and assets.”

“we expect if rates fall, the amount drawn on the PAL will increase.”

“we’ve captured 95% of our Ameritrade run rate expense synergies and expect to capture the rest by the end of the year.”

“our expectation is that you’ll see over the long-term our growth in the range that you’ve seen it at Schwab.”

“And by the end of this year, we'll realize the remaining 10% of run rate expense synergies from the acquisition.”

“The 3% -- approaching -- NIM approaching 3% by the end of 2025, the primary driver of that is, again, the moderation of the client transactional cash realignment activity and the paydown of the supplemental borrowing.”

“And we'd also expect that, on the margin, that rate cuts would, over time, bring about higher levels of clients' transactional cash as the incentive for them to utilize alternative solutions like purchase money funds and CDs become somewhat less.”

“Despite long-term rates moving a little bit higher during the quarter, our capital levels are climbing steadily, and we continue to expect our consolidated adjusted Tier 1 leverage ratio to approach our slightly updated operating objective of 6.75% to 7% on a consolidated basis by the end of 2024, at which point it becomes more of a live conversation regarding whether and how we want to do further capital return, our number one priority for capital is always to support business growth.”

“We're expecting flattish earnings from Q2 to Q3, but assuming the Fed cuts rates in September as is widely expected, we could see our NIM reach the mid-2.20s in Q4 on its way to approaching 3% by the end of 2025, which we believe will support adjusted earnings per share in the middle of the $0.80 to $0.90 range we outlined at the beginning of the year, with our earnings power building in 2025 and beyond.”

“We believe we're nearing the point where aggregate transactional cash balances should flatten and then ultimately resume growing again.”

“And all of that sets the stage for what we expect will be more of a return to normal, the unlocking of our core earnings power and, frankly, a much simpler financial story in the quarters and years ahead, but one featuring strong growth in revenue and earnings in the back half of 2024 and over the next several years.”

“Over the longer term, we expect we'll continue to see 5% to 7% annualized NNA growth from existing and new clients, bolstered by delivering on our four strategic focus areas.”

“Net, these various actions should lead, again, over time to a bank that is somewhat smaller than our bank has been in recent years, while retaining the ability to meet our clients' banking needs, lower our capital intensity and, importantly, protect the economics we are able to generate from owning a bank.”

“From the standpoint of the investments we make at the bank for deposits in excess of those needed for lending to our clients, over time, and by that, I mean, years, not months or quarters, we would envision some shortening of our overall balance sheet investment portfolio duration.”

“Clearly, this illustrates that we're reaching an inflection point as attrition continues to abate and we rebuild back to firm-wide net new asset levels in our targeted 5% to 7% range.”

“In terms of the long term, to your question long term, we would expect in a stable environment that client transactional cash grows with the growth in accounts and the growth in total assets.”

“So, I would say it's not something we, by any means, rule out altogether, but it's also not something we're looking to do in the near term.”

“In terms of deposit betas, I wouldn't necessarily assume that deposit betas are symmetrical. If you look historically, deposit betas tend to be a bit higher on the -- in the easing cycle than they are in a tightening cycle. And so, while we certainly haven't made any decisions exactly about what we'll do with deposit rates, I think that's a reasonable expectation.”

“We believe we are well positioned to meet the evolving needs of clients and deliver organic growth in line with our historical levels.”

“So we're targeting flattish expense growth.”

“Over the course of this year, we'll continue to capture some of the remaining expense synergies related to the Ameritrade integration with the expectation that we'll have fully captured those on a run rate basis by the end of this year.”

“Our baseline forecast anticipates that our capital level is growing inclusive of AOCI growing to the levels that we had excluding AOCI previously. And at that point, we expect to be in a position to at least consider, as I mentioned, returning more capital to our stockholders.”

“we continue to expect our consolidated adjusted Tier 1 leverage ratio to reach the upper 6% range by the end of 2024, at which point we'll be in a position to at least consider potential options for resuming further capital return.”

“we continue to expect strong growth revenue and earnings through the year with an exit velocity in the fourth quarter substantially higher than where we are today and the potential for continued sequential growth in 2025 and beyond.”

“we continue to maintain spending discipline with the objective of flattish expenses year-over-year.”

“we expect our net interest margin to expand through 2024 and 2025 and approached 3% by the end of 2025, driven mostly by the pay down supplemental borrowing.”

“What I'd say is if interest -- our expectation is if interest rates fall modestly under 100 basis points or something like that you'd see a -- over time, you'd see a little bit of a shift in the proportion of cash that's sitting in those transactional cash solutions like bank sweep and the broker-dealer cash solution versus money funds.”

“So I don't see anything on the horizon that would tell me that long-term you're going to see some form of extended softening in NNA.”

“We don't see any reason to believe that net new assets are likely to be constrained over a longer period of time relative to historic levels.”

“I expect us to make steady progress in both client flows and financial performance throughout this upcoming year, and then I fully expect us to deliver outstanding results over the following years.”

“I recognize that 2024 is going to be a transition year from a financial standpoint, albeit one with steadily improving financial results throughout the year and a very strong exit into 2025.”

“In terms of the pace of interest-earning assets, our priority is to pay off the supplemental borrowing. And so as we continue to prioritize that, it's reasonable to expect that our interest-earning assets would decline.”

“And we'd expect our consolidated adjusted Tier 1 leverage ratio to reach the upper 6% range by the end of 2024, at which point we'll be in a position to at least consider resuming opportunistic buybacks.”

“approaching 3% by the end of 2025”

“we continue to see a path towards a net interest margin in the 2.20% to 2.50% range by the end of this year and approaching 3% by the end of 2025 even if rates fall roughly 200 basis points from where they are today, as the dot plots would indicate, with a potential for it to expand further moving forward as we reinvest our securities portfolio at higher market rates than what we currently earn.”

“And with increasing momentum as we progress through 2025 as well.”

“We're planning, as we've shared previously, to keep adjusted expenses flat year-over-year.”

“And we believe the win-win monetization opportunities I've spoken about represent a 3.5 billion to 4 billion wealth management and bank lending revenue opportunity.”

“The remaining $400 million in Ameritrade expense synergies will be realized in the second-half of 2024 following the completion of the integration.”

“And we'll convert the balance in May of this year.”

“One that is powered by our position as the premier asset gatherer, producing consistent 5% to 7% organic growth through the cycle with industry-leading client loyalty and a leadership position in the two fastest growing segments within wealth management.”

“But we certainly still expect, as we've seen throughout history, that over time, as we add accounts, as we add assets, again over a longer arc of history, that those transactional cash balances grow with the growth in accounts and the growth in assets.”

“So I think it's reasonable to think that the betas could be a bit higher on the way down than they were on the way up.”

“it all reinforces our conviction that we’re very close to the end of this cycle.”

“We continue to manage expenses with discipline with $1 billion or more of remaining expense synergies and other efficiency opportunities.”

“Putting it all together, with our through clients’ eyes strategy, we are well positioned to consistently generate 5% to 7% organic growth from both existing and new clients.”

“And finally, we’d expect to continue to grow both our regulatory capital ratios and our adjusted Tier 1 leverage ratio, boosting that lateral ratio back above 6.5%, several years before it becomes a formal requirement.”

“On the expense side, we still expect our 2023 adjusted expense growth to be somewhere in the 6-ish percent range, inclusive of the $160 million onetime FDIC charge that, of course, was not contemplated when we set out our initial spending plan at the beginning of the year, meaning that our other spending is tracking at least 300 basis points below the range we communicated back in January, as we adjust and optimize our expense base consistent with Rick’s earlier comments.”

“As client cash allocation activity continues to abate, we still expect to see a return of transactional cash growth later this year.”

“Despite rising interest rates, our adjusted Tier 1 leverage ratio at the banks and for the consolidated corporation rose roughly 40 basis points during the quarter, approaching the level to be considered well capitalized several years before that measure is slated to become our regulatory ratio. And we’d expect those ratios to continue to increase due to continued strong capital formation, the accretion of the unrealized marks back to equity and a reduction of our balance sheet as we pay off the remaining supplemental borrowings, bringing back the potential for opportunistic capital return over time.”

“Speaking of net interest margin, assuming rates followed the dot plot, we still anticipate it building through 2024 and approaching 3% by the end of 2025.”

“we’d expect this level of temporary borrowing to drop substantially over the next handful of quarters, paving the way for us to resume reinvestment activity in 2025, which, assuming rates follow expectations, will provide a meaningful boost to our net interest margin.”

“As we previously shared, these actions are expected to result in a non-GAAP expense charge of $400 million to $500 million, a portion of which you saw in our results this morning, with the remainder to follow either later this year or in 2024.”

“Another $500 million plus in annual savings will come from streamlining our operating model, which includes eliminating positions from predominantly non-client-facing areas and reducing our real estate footprint.”

“one component of our expense savings will come from capturing $500 million in remaining Ameritrade expense synergies.”

“We shared with you in July that we are taking steps to enhance our flexibility and efficiency with an annual run rate expense savings target of $1 billion plus.”

“So what that could mean is that we could be seeing deposits grow, transactional cash grow even as interest-earning assets are declining because our focus is really on paying down those supplemental borrowings.”

“assuming the markets continue to be constructive, we will likely issue a bit more debt primarily to build up extra liquidity ahead of some debt maturities we have early next year.”

“So we have the opportunities that I mentioned, and then we have the opportunity after multiple years of allowing spending to grow relatively quickly to do a step back and evaluate it overall. And our early work gives us the confidence to say that it is meaningfully higher than the remaining synergies, but I don't think we're ready to quantify it yet.”

“And as Walt mentioned earlier, we are on track to achieve $1.8 billion to $2 billion in run rate expense synergies by the end of 2024.”

“As Walt said earlier, we feel very confident about our ability to deliver over $500 million of expense synergies by the end of 2024, as we complete the integration of Ameritrade.”

“At this point, if this scenario does play out and a reasonable time frame is afforded to build the capital to support this change, we feel confident today in our ability to build the necessary capital organically, given our strong profit margins.”

“And as we progress through this conversion and beyond, we will ultimately realize substantial expense savings, well beyond the remaining $500 million to $600 million we originally committed to as part of the Ameritrade integration synergies.”

“Thanks, Rich, for your question. So yes, we still do think that 8% to 12% decline in interest-earning assets is the right way to think about it.”

“We also believe we can accelerate the growth of our wealth business, both at Schwab and by introducing it to Ameritrade clients.”

“In the winter business update, I described how well Schwab is positioned to sustain our organic growth rate of 5% to 7% over the long term through a combination of growth from existing clients, attracting new clients and growth from our strategic initiatives.”

“And obviously, more if rates fall as the market is expecting.”

“And I note that, again, even if rates remain flat, we'd expect those mark-to-market losses to decrease by a further $7 billion between now and the end of 2024.”

“We now expect Q2 revenue to be down a mid- to upper single-digit percent versus the second quarter of 2022.”

“This temporary -- emphasis temporary mix shift toward higher cost of funds is expected to pressure the next few quarters of revenue at which point the impact should start to decrease, reverse.”

“It's well understood that the temporary cost of higher funding from CDs and FHLB loans will impact our near-term revenue growth and earnings. Hopefully, it is also well understood that, as these borrowings are paid off, that will be an accelerant to our medium-term earnings.”

“By several measures we study, we believe that this cash realigning process is now slowing and getting closer to its endpoint, which should then likely reverse to a stage where bank balance sheet cash begins to grow as a result of our organic net new asset growth as well as new accounts that we attract.”

“And so absolutely, we could see this roll off very, very quickly, even as we start to see a resumption of deposit growth over the course of latter part of '23 and then into 2024.”

“we’re certainly benefiting from higher rates and are poised to benefit even more in the quarters and years ahead, even as we take steps to manage through some of the speed bumps that those higher rates present.”

“we remain on track to convert 98% to 99% of our clients in 2023, deliver on the expense synergies we committed to at the very outset, and do so with a total integration budget only modestly above our early 2021 estimates.”

“And given our expectations that the client cash balances on the balance sheet trough at some point in 2023, that would be the period where we’d be at the peak level.”

“We’d expect, by the end of this year, we’ll probably have achieved, on a run rate basis, roughly 60%, 65% of those expense synergies.”

“So I guess, in summary, I would say I would not expect the integration to have an impact on breakaways, but I do think you have to watch the equity markets because, over time, it can be more difficult for someone to break away when they’re asking their clients to follow them after a period in which the equity markets have suffered as much as they have of late.”

“And this NIM expansion would be additive to the through-the-cycle financial formula we have delivered over the years and expect to continue moving forward.”

“So any potential asset sales we do are likely to be very limited and opportunistic.”

“as we said in our recent CFO commentary, we believe we’re now in the middle innings of this process.”

“Looking ahead to 2023, we continue to see no reason that the magnitude of client cash sorting will be dramatically different than the last rising rate cycle, suggesting balances trough at some point next year.”

“We have taken steps to limit expense growth, and we now expect full year expense growth to be on the lower end of the 7% to 8% range we communicated a few months ago.”

“That reflects continued expansion of our net interest margin to the mid-210s in Q4, a roughly 10% to 12% decline in average interest-earning assets from December 2021 to December 2022, and net interest revenue higher than Q3 despite continued client cash allocations decisions and some limited and temporary borrowing from the FHLB to fund some of those outflows.”

“Assuming the Fed funds rate exits 2022 at 4.5%, we’d expect to produce an 11% to 13% year-over-year increase in revenue, consistent with the scenario we shared earlier.”

“In the third quarter, we expanded the rollout of the ultra-high net worth senior lending team model to 6 more retail regions in preparation for full retail rollout by the end of the year.”

“We expect it will grow more rapidly as clients continue to learn about it.”

“In addition to the pandemic-related issues, which we’re all familiar with, 2 additional issues are likely to push our total integration spend about 10% higher than we anticipated 18 months ago.”

“And none of what is happening should interfere with our ability to grow our revenue and our net interest margin, and none of it should impact our ability to deliver earnings growth consistent with our financial formula over the coming quarters and years.”

“We continue to feel very confident in our ability to hit the expense synergy numbers that we have shared previously.”

“We are nearing the point at which we can accelerate capital return.”

“The next big unlock on those expense synergies will be as we complete the client conversions and can eliminate the duplicate systems and so forth that you should see a more meaningful portion of the expenses -- expense synergies materialize at that point in time.”

“You'll see in the appendix an assumption that the balance sheet contracts by a similar aggregate level as what we saw in the first half of the year.”

“To the extent that cash balances decrease, it frees up capital, enabling us to buy back stock and drive EPS growth one way or the other.”

“So in the scenario that we shared, if you do the math, as an example, you'll see that we'd expect to generate roughly $500 million more in net interest revenue in the fourth quarter than we did in the second quarter despite allowing for some continuation of the client cash sorting.”

“I want to reiterate that our expectation is that the level of sorting won't be higher than the last rising rate cycle, and it actually could be somewhat lower given the fact that we're not going through the bulk transfer process that we're doing in the last rising rate cycle, that we have an influx of smaller accounts who tend to do less sorting.”

“Controlling for an increase in the pass-through fee that boosts both revenue and expense and which we do not control, our full year expense outlook remains the same as what we shared back in February.”

“Deposit betas that we expect to continue to run a bit lower than the last rising rate cycle and a continuation of clients moving some of their investment cash off our balance sheet in search of higher yields.”

“Assuming the Fed follows through as the market predicts with a Fed funds rate exiting 2022 at 3.5%, we'd expect to produce an 11% to 13% year-over-year increase in revenue despite the market downturn.”

“Expanding pretax margins through scale and expense discipline, which creates low double-digit earnings growth, which plus some amount of capital return creates mid-teens EPS growth.”

“One thing we remain very confident about is our outlook through the cycle. Confident in our long-term financial formula, which, those of you who followed the company for a while, recall as high single-digit to low double-digit client asset growth, including 5% to 7% organic growth, leading to a similar level of revenue growth.”

“The other point is that AOCI goes down with lower rates. And it also amortizes steadily over time, about 15% or closer to 20% per year over the next 4 to 5 years.”

“In terms of of loan growth, we do -- despite the rising rate environment, we do think there's a lot of opportunity for growth.”

“we can see another similar-sized reduction between Q1 and Q2 and probably between Q1 and Q4, somewhere on the order of 10 basis points, plus or minus improvement in the premium -- the level of premium amortization.”

“I would expect that, that level of cash will come down over time through some of the purchase activity that we outlined in one of those pages there.”

“While we are close to that level today, the client cash sorting that should accompany higher rates will mean a slowing or even reversal of balance sheet growth, which means we may not hit that trigger for some time.”

“As we look to the future, we would expect deposit betas to be no higher than they were during the last rising rate cycle.”

“Now with higher rates, we'd also expect paydowns to slow.”

“our Through Clients' Eyes strategy is working and our business model is working, producing strong financial performance with the potential for an acceleration of revenue growth in the quarters ahead should the Fed follow through on their tightening cycle.”

“I wouldn't expect us to do a lot more on the IDA migrations this year.”

“At this point, I'm not sure I would expect a lot more additional migrations out of the BDA or the IDA onto our balance sheet in 2022.”

“I think that it's certainly conceivable that we could cross within the next couple of quarters.”

“Now assuming the Fed follows through as expected, we would expect that process to return. The 2015 to 2019 period is a reasonable reference point for our expectations this cycle, but there are a number of different dynamics this time around that could influence that behavior.”