Charles Schwab Corporation (The)

and welcome to Schwab's 2026 Summer Business Update. This is Jeff Edwards and I'm joined this morning by our President and CEO, Rick Wurster, as well as our CFO, Mike Verdeschi. Hopefully you all had an opportunity to review our second quarter earnings release that crossed the wire earlier today. Similar to La Roja on the pitch this past Sunday, I don't think it's a stretch to frame Schwab's strong results as trophy worthy. Slides for today's business update will be posted to the Iowa website at the conclusion of today's prepared remarks. As always, we ask that you please adhere to the one question and no follow-up policy during the Q&A portion of the program, and do not hesitate to reach out to the IR team with any questions following today's update. Lastly, a fan favorite on every deck, the forward-looking statements page, reminding us all that outcomes may differ from expectations, so please stay up-to-date with our disclosures. And with that, I'll turn it over to Rick.

Thank you, Jeff, and good morning. Thank you for joining our summer business update. We'll spend our time this morning sharing detail on our record performance and diving into the reasons Schwab is incredibly well positioned to deliver for stockholders and clients well into the future. The financial services landscape is becoming increasingly driven by investing. We occupy the trusted center of the investing ecosystem. We're both leading today and uniquely positioned to win in the future. There are several reasons for our confidence. First, our record results speak for themselves. Our true client-side strategy continues to fuel growth on all fronts. Second, Schwab is the trusted industry leader today. Our no-trade-offs value proposition is unmatched in the industry. As people increasingly consolidate their financial lives in one place and become even more engaged in investing, our unique combination of strengths puts us in the center of clients' financial lives. Third, we are winning today, and our best days are still ahead of us. We have a clear strategy, and we are innovating for clients at a rapid pace. We are continuing to attract new clients, deepen client relationships, diversify our revenue, lower our cost to serve, and reinvest in our growth. I'll share more today about the opportunities ahead of us. Finally, our diversified financial model supports durable earnings growth across market cycles, and Mike will dive into this along with our outlook for the year. In the second quarter of 2026, we delivered record results and growth on all fronts. We're attracting new clients and assets with 1.4 million new brokerage accounts and $120 billion in core net new assets, up nearly 50% over last year. We're continuing to deepen relationships. Managed investing net flows increased 53% over last year. Bank lending balances reached $67 billion, up 33%. All of this translated to record financial results. We delivered $7.1 billion in total revenue and adjusted earnings per share of $1.62, up 42% over the last year. We are increasing our pace of innovation and adding to our breadth of capabilities as clients want to manage more of their financial life at Schwab. We've continued to expand our branch footprint and hire financial consultants, wealth advisors, and relationship managers for our RIA clients while advancing our AI capabilities. Our clients are happier, achieve better outcomes, and engage more with our combination of people and technology. AI is expanding our client capabilities and enabling us to serve our clients more efficiently. We're delivering new products and solutions across our platform at a rapid pace. There are several examples on the page, and I'll call out a few. Our Schwab crypto rollout is going as planned, and we are on track to start piloting our crypto transfers capability by the end of this month. We believe this capability creates an attractive NNA opportunity over time. We closed the Forge deal and are making progress on bringing their private market capabilities to our clients. When complete, we will be a premier destination for clients interested in investing in private markets, whether via a leading private manager, an index strategy, or investing directly in private companies. The scale of Schwab will allow us to become the destination of choice for private companies and venture capital firms seeking liquidity options. We've made lots of progress in serving our clients' wealth and banking needs. We've added the ability to complete tax filings for clients through our third-party tax prep introduction program, and we've added to our banking capabilities, including the ability for clients to leverage private assets. With Wealth.com, we'll expand our tax capabilities and introduce tax planning in addition to the insights we already provide today on client trusts. and we've made an investment in Paxos, a firm that is supporting the delivery of Schwab crypto. These efforts continue to delight clients and earn industry recognition. Client promoter scores are at all-time highs in both investor services and advisor services, all of which solidifies our role as a trusted platform of choice for investors and RIAs. We are the trusted platform where investors, traders, and RIAs continue to turn. We are number one in total client assets, RIA custodial assets, and daily average trades. Focusing on trading, we are the undisputed leader. We have the most activity in our platform and are growing faster than our peers. We're number one in daily average trades by a wide margin. We execute one-third of retail brokerage trades in the industry. and we're number one in options contracts. Our clients remain highly engaged and we're continuing to invest to maintain our edge as the destination for traders. Leadership at this scale creates advantages that compound over time. As we look to the future, there is a convergence of forces reshaping our industry and we are uniquely positioned to lead. I discussed these trends at our Investor Day, and we continue to see them play out. As we go through today's discussion, I will share how these forces are creating opportunity. The bull market for convenience is driving investors to increasingly consolidate their financial lives. 61% of affluent clients ages 25 to 44 say they prefer to consolidate their wealth and banking relationships. Households with $1 to $5 million in assets using only one financial services firm jumped 11 percentage points year over year to 22%. And we expect this to grow as more investors seek the convenience of one-stop shopping in all aspects of their life. This consolidation is happening at a time when investing has never played a more important role in the broader financial ecosystem. As recently as a decade ago, investing skewed towards higher income, older, college educated households. Today, stock ownership is at the highest levels we've seen in nearly 20 years. People are investing earlier in their life, and we're seeing engagement across a broader income and education spectrum. Investing is playing an increasingly central role in people's financial lives, and we believe this trend has a long way to go. In a world where clients want to do more with one firm and investing is more important than ever, we are uniquely positioned at the center of the investing ecosystem with the ability to support the breadth of clients' needs in the channel of their choice and in the form they prefer. With our wealth offer, clients can access financial planning, full service advice, tax, trust, and estate services, tax-aware strategies, and more. With our bank, Retail investors can manage their day-to-day financial lives with checking, savings, and bill pay while also turning to us for lending needs. The RIAs we serve value our bank because they don't have to introduce another relationship to their clients. We're the best trading platform in the industry, supported by industry-leading service as well as research, education, and coaching for traders of all sophistication levels. We offer our clients choice with third-party and proprietary products. We continue to build out a compelling alternatives offer. We've launched crypto and are adding capabilities throughout the year. Clients are turning to us because we simplify their financial life and help them achieve great outcomes across their investing, trading, wealth, banking, and lending needs. Legacy Ameritrade clients continue to engage in our wealth and lending capabilities, and 27% of all Thinkorswim users are now Legacy Schwab clients. These capabilities are delivered in the ways our clients want to interact as they manage their financial lives. At different times in their lives and for different activities, clients engage with us in person, on the phone, web, mobile, or via AI. Our clients value that flexibility. And in every interaction across every channel, we are bringing them an experience that combines the best of people and the power of AI by using our scale to deliver exceptional value. Finally, we are building towards a technology platform that will support the industry well into the future, whether that looks like it does today or if the industry moves more towards a digital markets infrastructure and blockchain technology. While there are clearly pros and cons to tokenized securities, and it is unclear how much this market will take off, we are actively building the infrastructure to support client activity on the technology of client's choice. With our product and capability breadth, combination of people and AI, and scale, we have a unique platform advantage that positions us to be the financial services provider of choice, now and in the future, a position that is difficult for any competitor to match. All of this translates to delivering for stockholders. We are tackling our growth opportunities head on. We have two equally important growth levers, serving more clients and deepening relationships. We're continuing to attract new clients to Schwab, with 2.7 million new brokerage accounts opened in the first half of the year and $260 billion in core net new assets, representing year-over-year growth of nearly 20%. We're continuing to make investments that will support this growth in the future with more branches in local communities, more financial consultants, strategic marketing and advertising, including adapting our marketing to the increased influence of LLMs, the build-out of an RIA support ecosystem, and investments in bringing the breadth of Schwab to our workplace clients. At the same time, we are deepening relationships with clients, meeting more of their needs while diversifying our revenue streams. We'll discuss the opportunities we have ahead in wealth and banking. There is a bull market for advice. We benefit from that in two ways. First, our RIA business continues to grow at a record pace as more investors seek advice and guidance. Second, more of our retail clients are seeking holistic financial advice delivered seamlessly on their terms through a combination of people and increasingly AI-enabled technology. We see consistently strong growth in net flows to both our Schwab Advisor Network and flagship proprietary wealth offer Schwab Wealth Advisory. We're continuing to invest heavily in our Schwab Wealth Advisory offer, including in our tax, trust, and estate capabilities to make sure we can meet the needs of retail clients that want more help and guidance in their life. And it is working. The Client Promoter Score for Schwab Wealth Advisory is the highest of any offer we have. While we have grown significantly, we've barely scratched the surface on our opportunity and advice. The U.S. retail market is $37 trillion and growing, and we have just 2% market share. At the same time, just 5% of Schwab retail households are on a fee-based advice solution. 31% of Schwab clients say they are willing to pay for advice. Our opportunity to close this gap is a win-win for clients and Schwab. We're helping clients conduct more of their financial lives in one place, and clients in our Schwab Wealth Advisory Offer generate three times the ROCA of our retail clients. The combination of the investments we're making in our wealth business plus the sheer size of our self-directed investor base creates an unmatched conversion funnel into advice that will delight clients, continue to fuel our growth and diversify our economics over the long term. A bank is an important differentiator for us. Our ability to offer checking, payments, and lending makes it easy for clients to consolidate their financial lives with us. For our AAS clients, this represents an opportunity to help the RIAs in our platform meet more of their clients' financial needs in one place. We've been focused on meeting both the asset and liability needs of our clients. Our lending balances have increased 33% year-over-year, driven in large part by adoption of our digital pledged asset line offer. Our digital PAL offer delights clients with consistently strong client promoter scores. We're continuing to make investments to enhance our lending offers, including the addition of structured asset lending, which allows clients to leverage their private investments and private shares. The growth opportunity in bank lending is meaningful. Today at Schwab, 0.5% of clients use one of our lending products versus 4% on average across the industry. With an average spread to securities north of 100 basis points on PALS as an example, narrowing the lending penetration gap as more investors consolidate their financial lives at Schwab is a win for clients and a win for our economics. Let's turn now to scale and efficiency. Our ability to execute at scale continues to drive efficiencies that allow us to reinvest in growth. Our cost per account continues to decrease, and our expense on client assets is the lowest in the industry. These efficiencies unlock dollars. We are investing in enhancing our AI experience, our global capability center, and our growth initiatives. In other words, our scale powers our reinvestment capacity and durable earnings power. We've talked about AI as part of our omnichannel experience, and it is becoming more embedded in all we do, accelerating our strategy and amplifying our competitive advantages by personalizing client experiences, enhancing productivity, and driving scalable growth. Importantly, we believe our greatest advantage comes from combining people with AI-powered capabilities to create deeper relationships that scale with our clients' needs. AI will help us attract new clients, deliver new capabilities to them, personalize more journeys, and create more opportunities to deepen relationships over time. We are making tangible progress here with a rollout of portfolio insights in May, and the employee pilot for the first iteration of Schwab Assistant that launched earlier this month. With our combination of technology and people, our client easy scores are at or near all-time highs. AI is also driving efficiencies. As an example, over the past year, developer team productivity has improved by 15% to 20%. And with that, I'll turn it over to Mike to share our financial picture.

Thank you, Rick, and good morning, everyone. During my time today, I'll discuss how we converted our sustained business momentum into another quarter of record financial results. In addition, I'll cover how our approach to managing the balance sheet and financial resources enables us to support robust engagement as we seek to meet the evolving needs of our clients across different environments. I will also share an updated perspective on the full year 2026 financial scenario. And finally, as we continue to do more for our clients across our platform, including incorporating emerging technologies such as AI, Schwab's model becomes increasingly diversified and scalable, helping to further enhance our financial durability through the cycle. In doing so, We remain positioned to continue providing individual investors and RIAs with an industry-leading value proposition. 2Q is yet another strong quarter for Schwab, where the combination of our continued business momentum, client engagement, and diversified model enable us to deliver strong outcomes well beyond the second quarter scenario we shared with you at Investor Day in May. This outperformance was the result of a number of factors, including a further acceleration in client trading activity through the end of the quarter. Total revenue grew 21% year over year to $7.1 billion. including a 19% increase in net interest revenue versus the prior year period due to increased utilization of our lending solutions by clients, the reduction of high-cost borrowings at the banks, and demand for long-short strategies. Momentum within the technology sector helped lift equity markets to their best quarterly performance since early 2020. which in combination with robust asset gathering and client interest in Schwab's wealth and asset management offerings drove 16% year-over-year growth in asset management and administration fees to $1.8 billion. Schwab's industry-leading retail trading platform supported continued client engagement with daily average trades of $11.9 million. Moving on to expenses. Adjusted expenses for the second quarter grew 11% year-over-year, reflecting strong client engagement across our trading, wealth, and banking solutions in the first full quarter of Forge, while underlying expenses remain in line with our initial expectations. We also continue to make investments in key strategic initiatives to support organic growth, new products, client experience, Scale and Efficiency, as well as Artificial Intelligence. Record quarterly revenue combined with balanced expense management delivered adjusted pre-tax profit margin of 54.3%, as second quarter adjusted earnings per share reached a record $1.62, a year-over-year increase of 42%. Moving to the balance sheet. Demand for our secured lending solutions remained strong. Total margin balances ended the quarter at $165.1 billion, including continued growth in long-short-related activity. Led by new pledged asset line originations, total bank loan balances grew to $67 billion, up 33% from 2Q25 and 16% versus the prior year end. while investment securities remain relatively flat as we continue to support client lending needs. Increased lending activity helps further deepen relationships with clients and drives relative improvements to vote Schwab's revenue growth and mix as we earn an incremental spread to the security we'd otherwise purchase. Fine cash follow typical seasonal trends including tax payments in April. And while strong equity markets lifted sentiment and supported elevated trading activity, transactional sweep cash increased by $24.2 billion in 2Q, largely driven by demand for long-short strategies as well as organic asset gathering. Beyond the growth related to long-short, client cash trends remain strong, with year-to-date underlying cash performing better than our initial expectations coming into the year. At the same time, we continue to optimize our funding mix to efficiently meet the client demand for our lending solutions. Looking ahead, we'll keep prioritizing flexibility in managing the balance sheet to remain well positioned for different macroeconomic environments. Capital levels remain strong with our adjusted Tier 1 leverage ratio finishing the quarter within the 6.75% to 7% range. Our adjusted ratio of 6.8% reflects our support of business growth and client engagement, as well as the net redemption of preferred equity and the repurchase of $1 billion worth of common shares. Looking ahead, we will continue to apply our consistent capital management framework, including prioritizing our resources to support client activity and the growth of our franchise. The second quarter further demonstrated the strength of Schwab's model, positioning the firm to continue supporting clients while delivering strong financial outcomes over time. Now pivoting to the full year 2026 scenario, let's take a moment to review how certain key assumptions have evolved over the first six months of the year. At the Investor Day back in May, we spoke to a scenario that reflected flat sub-funds for the year, stronger equity markets, and increased client trading activity. We also incorporated Forge's revenue and expenses following the acquisition's close in 1Q. And while the impact of that acquisition is not material to the 2026 scenario, it does influence the revenue and expense year-over-year growth rate. In terms of where we are today, market expectations for interest rates continue to evolve, with the forward curve pricing in 125 basis point rate hike before the end of the year. Given the strong year-to-date equity market returns, we are now assuming approximately 13% full-year market appreciation, and our asset-gathering momentum reinforces our confidence in the 5% organic growth rate We outlined for 2026. Following another quarter of strong trading volumes, we have taken full year daily average trades up to 10.6 million. 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. Therefore, we would anticipate revenue per trade to increase modestly from two Q26 levels as rate and volume tend to be inversely correlated. Finally, today's updated scenario includes Forge, but excludes the impact from any opportunistic share repurchases during the second half of 2026. Using these updates, We would expect total revenue growth of 17.5% to 18.5% in 2026. With full year net interest margin expanding to a range of 3% to 3.10, an average 4Q 2026 net interest margin expected to finish in the 3.25% to 3.30 range as the timing of the potential Fed rate hike late in the year Thank you all very much. We shared at the January winter business update. The higher expense view is driven by a couple of factors. First, volume-related expenses as we support a client engagement where this increase is more than offset by stronger revenue. And second, the inclusion of FORGE, which contributes approximately 100 basis points to the year-over-year growth rate. Putting it all together, today's scenario implies stronger positive operating leverage and expanded adjusted pre-tax margin levels versus our prior scenarios. Similar to past business updates, when we share a financial scenario, we have included a set of high-level static revenue sensitivities. Today's sensitivities are as of June 30. and are intended to complement the updated scenario we just walked through, helping you refine your estimates and shape your own perspective around the remainder of 2026. So to wrap up, I wanted to revisit the financial formula slide from our investor day. Schwab's strong momentum and success over the past five decades has been driven by our focus on clients. And as Rick noted up front, we remain extremely well positioned for the future with an expanding set of wealth and investing solutions to help clients meet their financial goals. And in continuing to do more for our clients, we can drive long-term organic growth while further diversifying our revenue streams, which when combined with Schwab's leading scale, as well as our disciplined approach to expense and balance sheet management, helps to reinforce our confidence in delivering mid-teens earnings growth through the cycle. And with that, let's move on to Q&A. Jeff?