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August 9, 2025 • 3 min read
Financial services giant Charles Schwab (SCHW) recently released its financial results for the second quarter of 2025, and a deep dive into its quarterly 10-Q filing reveals a company firing on all cylinders. The report showcases robust growth in both revenue and profit, driven by impressive interest margin expansion and continued success in attracting client assets.
Let's break down the key takeaways from their income statement.
Schwab's headline numbers for the quarter ending June 30, 2025, are striking. The company posted total net revenues of $5.85 billion, a solid 25% increase from the $4.69 billion reported in the same quarter last year. This strong top-line growth translated into even more impressive bottom-line results.
Net income available to common stockholders soared 63% to $1.98 billion, or $1.08 per diluted share, up from $1.21 billion, or $0.66 per share, in Q2 2024. This substantial jump in profitability was achieved through a powerful combination of revenue growth and disciplined expense management.
The following flow diagram illustrates how Schwab generated its revenue and managed its costs to arrive at its net income for the quarter.
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The primary driver behind Schwab's outstanding performance was a significant boost in its Net Interest Revenue (NIR). This metric, which represents the difference between the interest earned on assets like loans and securities and the interest paid on liabilities like client deposits, jumped 31% to $2.82 billion.
What's particularly interesting is how this happened. While interest revenue was nearly flat compared to last year, interest expense plummeted 42% from $1.66 billion to just $965 million. The average rate Schwab paid on its interest-bearing liabilities fell from 1.71% to 1.00%. This demonstrates highly effective management of funding costs, which directly padded the company's margins. With nearly half of its total net revenue coming from NIR, this operational strength had an outsized impact on the quarter's results.
Schwab's other revenue streams also showed healthy growth:
Schwab’s growth engine continues to attract new business. The company added 1.1 million new brokerage accounts and brought in $80.3 billion in core net new client assets during the quarter. Total client assets reached a staggering $10.76 trillion at quarter-end, up 14% from a year ago.
On the other side of the ledger, Schwab kept a tight lid on costs. Total expenses (excluding interest) rose by a modest 4% to $3.05 billion. When revenue grows at a much faster pace than expenses, profitability expands significantly. This operating leverage pushed Schwab’s pre-tax profit margin to an impressive 47.9%, a substantial improvement from 37.2% in the prior year.
Schwab’s Q2 2025 results paint a picture of a company skillfully navigating the financial landscape. Its ability to grow its client base, expand its net interest margin, and control costs has produced exceptional returns.
However, the company's reliance on net interest revenue also makes it sensitive to changes in the broader interest rate environment. As noted in the filing, a hypothetical 100-basis-point decline in rates could reduce its annual net interest revenue by approximately 4.0%. For now, though, Schwab’s performance demonstrates a powerful and efficient business model that continues to reward investors and attract clients in a competitive market.
Last updated: August 9, 2025