Thursday morning, Charles Schwab is expected to report strong profit growth for the third quarter. Analysts expect Schwab to post adjusted earnings per share of $1.65, according to FactSet. For the same period a year ago, the company's adjusted EPS was $1.31. Analysts anticipate Schwab's revenue will come in at $7.18 billion, according to FactSet. Revenue was $6.13 billion for the same period last year.
Beyond bottom- and top-line numbers, investors will be scrutinizing Schwab's asset-gathering for signs that the financial services company is continuing to attract new clients and drum up additional business with existing customers. This year, Schwab has reaped the benefits of rising equity markets, robust trading activity, and customers adding more funds to their investment accounts.
The company hauled in $64.8 billion in core net new assets for August, a record for that month, according to Schwab's monthly activity report. The figure was up 46% year over year. Margin loan balances and trading volume were also up in August.
J.P. Morgan Securities analyst Kenneth Worthington anticipates Schwab's net new assets could total $160 billion for the third quarter and expects asset growth to accelerate into the seasonally favorable fourth quarter. Worthington rates Schwab's stock Overweight in an Oct. 9 research note.
Other companies with substantial brokerage and wealth management businesses have already reported upticks in customer activity in the third quarter, thanks in part to tailwinds from robust IPO activity this year. Morgan Stanley's earnings report, issued Wednesday, showed that its wealth management unit hauled in net new assets of $232 billion for the third quarter, with half those flows related to IPOs. The figure is up from $81 billion for the same period a year ago.
Schwab has been expanding its lending capabilities for clients, seeing it as a way to do more business with existing customers by serving needs beyond investments. Analysts will parse Schwab's results for signs that lending is growing.
Analysts will also likely quiz Schwab's senior leadership about how the company is using artificial intelligence to accelerate growth and how it may defend its business from potential AI threats. In September, investors sold shares of bank and brokerage firms on concerns that AI cash optimization tools could help customers automatically move money from low-paying sweep accounts to higher-paying alternatives elsewhere. That could put pressure on net interest income, which is the difference between what banks earn on interest-bearing assets such as loans, and what banks pay in interest on deposits.
Of Schwab's total net revenue of $7.1 billion for the second quarter, net interest revenue represented $3.4 billion.
AI concerns have weighed on Schwab and other financial services stocks. Schwab shares ended Wednesday up 1.3% but are down 2.8% this year. The benchmark S&P 500 fell 1.1% Wednesday. The index has risen 12.7% this year.
Schwab has been launching new AI capabilities for its employees and customers. The company recently announced that it is joining with Anthropic to offer registered investment advisor clients a suite of AI-powered tools that can boost efficiency.
Schwab is the nation's largest RIA custodian, providing advisors with a trading platform and safeguarding client assets on their behalf. The Westlake, Texas-based company had more than $13 trillion in total client assets as of month-end August.