SCHW
Charles Schwab
Investment Bank
★ Quality 54/100Price today
$109.29
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What this business is made of
The business
Schwab doesn't charge for trading: it makes money on its clients' idle cash.
A brokerage and bank that custodies $11.9 trillion in client assets. It charges little or nothing for trading, but earns the interest spread on the cash sitting in accounts, plus fund management fees. 2025 revenue: $23.9B, with net income of $8.9B.
Scale is the edge: it moves so much volume that it can offer zero commissions and still profit. The assets are sticky because moving an account with investments, retirement, and payrolls is a headache. It also custodies the money of thousands of independent financial advisors, who don't leave easily.
Revenue history
From $18.5B to $23.9B in 4 years. The business grows steadily.
Where each $100 of sales goes
Revenue $23.9B · FY2025
Of every $100 in sales, $63 goes to costs and operations; $37 is left as net profit (37% margin).
Catalysts and risks
Cryptocurrency trading launch planned for 2026.
Normalization of 'cash sorting' (clients moving cash to higher-yielding accounts) eases pressure on margins.
21% ROE with share buyback capacity.
Very sensitive to interest rates: a big chunk of profit comes from the spread on cash.
If clients keep shifting their cash to higher-yielding instruments, interest income erodes.
Zero-commission war: Fidelity and Vanguard squeeze the same without being publicly traded.
Charlie's note
“Solid business, 21% ROE, but no impenetrable moat. Paying nearly 4x book value for that leaves little room for error; at 15% growth, patience is cheaper than regret.”
Analysis · July 2026
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