Charles Schwab (NYSE: SCHW) turned in a quarter that left little room for complaint. Record net revenue of $7.1 billion beat analyst estimates by roughly $176 million, and adjusted diluted EPS of $1.62 came in $0.06 ahead of the consensus $1.56. The headline numbers alone tell a story of a business firing on nearly every cylinder: revenue up 21% year-over-year, adjusted EPS up 42%.
The engine was client activity. Daily average trades hit a record 11.9 million, up 57% from a year ago, with new brokerage account openings totaling 1.4 million. That trading surge drove trading revenue to $1.2 billion, a 28% year-over-year increase. But the real structural story is in asset gathering. Core net new assets in June alone reached $62.7 billion, a record and a 47% jump over last June. For the full quarter, core net new assets totaled $119.8 billion, up 49% year-over-year. Total client assets ended the quarter at $13.08 trillion, up 22%.
Net interest revenue rose 19% to $3.36 billion, and net interest margin expanded 12 basis points sequentially to 3.00%. This NIM expansion is notable because it came as transactional sweep cash balances grew $24.2 billion quarter-over-quarter to $485.7 billion. Schwab is earning more on the cash clients leave with it, even as those balances swell. The bank loan book grew 33% year-over-year to $67.0 billion, and margin loan balances surged 30% sequentially to $165.1 billion, reflecting both market conditions and the long/short strategy activity among RIA clients that Schwab now carves out of its core interest-earning asset calculation.
Asset management and administration fees grew 16% to $1.8 billion, powered by organic growth and increased utilization of wealth management solutions. Managed investing solutions net flows grew 53% year-over-year. This fee revenue is becoming a larger, more predictable component of the revenue mix, which matters for valuation as it is less rate-sensitive than net interest income.
Expenses grew 12% year-over-year on a GAAP basis, or 11% on an adjusted basis excluding $170 million in acquisition and integration-related costs and amortization of acquired intangibles. Compensation and benefits rose 17%, the largest driver, reflecting hiring and incentive accruals tied to the revenue growth. The adjusted pre-tax profit margin expanded to 54.3% from 50.1% a year ago, a 420bp improvement that shows operating leverage is working in Schwab's favor.
Capital return was aggressive. Schwab repurchased 11.2 million shares for $1.0 billion during the quarter, and it redeemed $2.1 billion of Series I Preferred Stock while issuing $1.5 billion of Series L Preferred. The net effect is a modest reduction in preferred dividends and a continued reduction in the diluted share count, which was down 5% year-over-year. The buyback pace, at roughly $1 billion per quarter, is meaningful relative to a market cap of $174 billion and signals management's confidence in the earnings trajectory.
The quarter also included the launch of Schwab Crypto, offering direct Bitcoin and Ethereum trading to retail clients, and Portfolio Insights, a generative AI feature for portfolio commentary. These product launches are small in immediate revenue terms but signal Schwab's intent to keep its platform sticky for a younger, more digitally native client base.
The forward read is straightforward. Schwab is benefiting from elevated client engagement that shows no signs of abating — June daily average trades hit 13.6 million, up 15% from May. The organic growth rate, measured by June's annualized core net new assets of 5.8%, is strong for a firm of this scale. A market downturn could reverse both trading activity and asset-based fees, but Schwab's diversified revenue model — net interest, asset management fees, and trading revenue each contributed over $1 billion — provides more cushion than a pure-play broker. The question is whether management will raise its medium-term targets at the Summer Business Update, given that the current trajectory is outpacing the expectations embedded in its guidance framework. For now, this is a beat that looks durable, not lucky.