← SCHW forward model

SCHW · Forward model · Net interest revenue · Bull case

What has to happen in Net interest revenue

Model as of

This page changes Net interest revenue inside the complete SCHW model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

SCHW forward model
Horizon
Consolidated fair value $137.50 all other verticals held in this portfolio case
Final-quarter revenue $5.62B 55% of company revenue
Explicit segment contribution $37.54B EBITDA less segment capex, before corporate items

Management's own algorithm is granted. Client engagement holds rather than reverting - the guided pullback in daily average trades does not arrive - the lending and advice penetration gaps start closing, the mix shift out of a $131.1B held-to-maturity book yielding 1.73% keeps lifting the margin past the guided exit, and operating leverage stays at the roughly 800bp implied for 2026 rather than the 400bp assumed in January. Implemented as a +0.6% sequential growth tilt, a +1.5 point margin delta, a 20x P/E exit (15.263x on pre-tax) and an 8.75% cost of equity. WHAT THIS CASE DOES NOT REACH is a permanent 44% return on a growing tangible book: it gets Schwab to 9.754x reported tangible book, which is 6.80x on the AOCI-adjusted basis - a high multiple on a franchise earning today's returns, not a re-rating onto a different business. Result: $137.50 a share, +27.25%.

Net interest revenue

Basis quarter$3.36B
Final quarter$5.62B
Implied CAGR+11%
Final revenue mix55%

Interest revenue less interest expense across the whole balance sheet: $444,982M of average interest-earning assets yielding 3.96% against funding costing 0.96%, a 3.00% net interest margin, 47.5% of the basis quarter. The story inside it is a MIX SHIFT, not a rate call. A $131,126M held-to-maturity book yielding 1.73% and a $65,864M available-for-sale book yielding 2.17% are running off into bank loans yielding 4.35% (average balances $48,691M to $63,823M year on year) and brokerage-client receivables yielding 5.68% ($78,732M to $112,136M). That is why management guides the margin UP to 3.25%-3.30% by the fourth quarter of 2026 even with the forward curve ending the year at a 4.00% Fed funds upper bound.

Last four quarters
2025 Q3 $3.05B Reported
2025 Q4 $3.17B Reported
2026 Q1 $3.14B Reported
2026 Q2 $3.36B Reported
Cash and cash equivalentsCash and investments segregatedReceivables from brokerage clients (margin)Available for sale securitiesHeld to maturity securitiesBank loansSecurities lending revenueOther interest revenue
Capacity energised 444982000000 $M of average interest-earning assets at the basis quarter $444,982M average interest-earning assets, printed in the release's Net Interest Revenue Information table.
Capacity added 7000000000 $M of average interest-earning assets/qtr changing 0.0% per quarter $7.0B a quarter, below the +$9.4B average of the last three sequential adds: ~5%/yr falling to ~4%.
Utilisation 100% gliding toward 100% 100%: every interest-earning dollar earns. There is no idle-capacity concept on a balance sheet.
Revenue per $M of average interest-earning assets $0/qtr drifting +5.6% per quarter $3,357M / $444,982M = 0.75441% a quarter, 3.018% annualised, against the reported 3.00% margin.
Net interest revenue

Latest: $5.62B (2031Q2E)

Period Value
2021Q4 $2.14B
2022Q1 $2.18B
2022Q2 $2.54B
2022Q3 $2.93B
2022Q4 $3.03B
2023Q1 $2.77B
2023Q2 $2.29B
2023Q3 $2.24B
2023Q4 $2.13B
2024Q1 $2.23B
2024Q2 $2.16B
2024Q3 $2.22B
2024Q4 $2.53B
2025Q1 $2.71B
2025Q2 $2.82B
2025Q3 $3.05B
2025Q4 $3.17B
2026Q1 $3.14B
2026Q2 $3.36B
2026Q3E $3.62B
2026Q4E $3.81B
2027Q1E $3.96B
2027Q2E $4.08B
2027Q3E $4.19B
2027Q4E $4.29B
2028Q1E $4.38B
2028Q2E $4.48B
2028Q3E $4.57B
2028Q4E $4.66B
2029Q1E $4.75B
2029Q2E $4.84B
2029Q3E $4.94B
2029Q4E $5.03B
2030Q1E $5.13B
2030Q2E $5.23B
2030Q3E $5.32B
2030Q4E $5.42B
2031Q1E $5.52B
2031Q2E $5.62B

Assumptions & reasoning

  • A CAPACITY driver, not a growth one, because both legs are published every quarter in the release's Net Interest Revenue Information table AND the price leg is directly guided. It is the strongest driver in this model.
  • ASEASONAL. Ratio to a CENTRED four-quarter moving average over 2021 Q4-2026 Q2 gives [1.0194, 0.9644, 0.9983, 1.0180], a signal of 0.0550 against a worst window-to-window spread of 0.1219 - a 0.45:1 ratio that fails the gate outright. The apparent Q2 dip is the 2023 deposit-flight quarter (0.927), not a season.
  • Seasonality is deliberately absent rather than merely untested. On a capacity vertical it would DOUBLE-COUNT: the projection engine deseasonalises only the growth driver's base and then multiplies every driver's output by the factor, so a capacity line whose capacity and price are the basis quarter's own seasonal levels would be adjusted twice.
  • The 51.88% margin is the CONSOLIDATED pre-tax income margin, $3,669M on $7,072M. Schwab publishes no segment or per-line profitability, so the same margin sits on all five verticals; the split earns its place through five different REVENUE drivers, not through differentiated economics.
SCHW model map

Explore another vertical