Report Interpretation

Overview

This monthly data update assesses Charles Schwab's August operating metrics. Goldman Sachs views the release as mostly positive: NNA exceeded expectations, client cash excluding long/short activity was stable, and margin balances rose despite lower trading, although new limits on long/short and tax-aware strategies create a near-term growth headwind.

Core views

Goldman Sachs characterizes SCHW's August release as mostly positive, led by $64.7bn of headline net new assets and $64.8bn of core net inflows. Headline NNA equated to approximately 6.0% annualized organic growth, 141bp above the institution's approximately 4.5% forecast. Gross new accounts totaled 424,000, up 11% year over year but slightly below the approximately 433,000 estimate; net additions were 150,000, equivalent to an approximately 4.5% annualized net new signup rate. Active accounts increased 6% year over year. The report sees robust long/short strategy demand as an important contributor, estimating that such strategies have added roughly 50-100bp to annualized organic growth. Client cash trends were constructive after adjusting for long/short activity. Transactional sweep cash increased $6.5bn month over month to $483.3bn, driven largely by long/short short credits, which rose $7.8bn to $55.8bn. As a result, transactional cash excluding long/short balances was broadly stable, declining only $1.3bn month over month to $427.5bn and remaining within year-to-date monthly averages. Total money-market-fund balances increased about 1% month over month to $702.5bn, and total client cash including money-market funds reached $1,185.8bn, up $13.7bn. Cash as a share of client assets declined to 8.8% from 9.0%, down 70bp year over year. Average interest-earning assets rose about 1% month over month to $453.0bn, up 9% year over year. Trading activity weakened, but the report highlights a more favorable mix. Client daily average trades fell around 16% month over month to 9.821m, about 14% below Goldman Sachs' approximately 11.388m estimate and consistent with its retail tracker. However, derivatives represented 24.2% of total trades, up 360bp month over month and 170bp year over year; Goldman Sachs believes this mix shift should be more supportive for retail payment for order flow. Margin balances improved despite softer trading. Reported balances increased approximately 4.5% month over month to $177.6bn, up 92% year over year and 58% from year-end. Long/short-related balances were $53.7bn; excluding them, margin balances were $123.9bn, up approximately $0.2bn month over month. Goldman Sachs emphasizes that ex-long/short balances were flat to slightly higher even as DATs fell, supporting the approximately 1% sequential increase in interest-earning assets. The principal near-term offset is SCHW's tightening of platform requirements for new long/short or tax-aware accounts. The minimum funding requirement rises to $10m from $1m, and SCHW will neither enroll new clients nor accept new funds in portfolio-margin accounts; the policy takes effect September 16 and applies only to new accounts. Goldman Sachs expects this to slow NNA growth and the expansion of long/short-related margin loans and short credits starting in September, with the full-month impact visible in October. It expects the related drag on NNA and net interest income to be modest and potentially offset by higher margin balances and greater volatility that could accelerate transactional-cash build into year-end. SCHW's long/short data also provide a read-across for Affiliated Managers Group and AQR's wealth-channel tax-aware franchise. SCHW long/short margin balances increased from $46.2bn in July to $53.7bn in August, versus $42.1bn in June. After adjusting for market effects, Goldman Sachs estimates roughly $5-6bn of August flows and approximately $10bn quarter-to-date, broadly consistent with 2Q26's $16bn of total inflows. The institution considers this a positive leading indicator for AMG's 3Q26 liquid-alternatives flows, while noting that SCHW's policy change could temporarily moderate AQR wealth-channel flows before other custodians absorb capacity. Goldman Sachs reiterates its Buy rating on SCHW and its unchanged 12-month $128 price target, based on approximately 18x Q5-Q8 EPS.

Analysis framework

Goldman Sachs evaluates SCHW through its monthly operating release, comparing reported NNA, accounts, cash, trading, margin balances and interest-earning assets with prior-month, year-over-year and internal forecast levels. It then connects long/short balances to expected flows at AQR and applies an earnings multiple to support its SCHW price target.

Methodology notes

• Valuation methodsP/E and PEG Valuation

  Price-to-earnings valuation based on Q5-Q8 EPS

  Goldman Sachs bases SCHW's unchanged $128 target price on an approximately 18x multiple of Q5-Q8 EPS.

• Corporate Fundamentals and Finance

  Monthly operating-metrics tracking

  The report tracks flows, account additions, cash, trading, margin balances and interest-earning assets to assess SCHW's operating momentum and possible earnings effects.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Charles Schwab Corp. (SCHW)

  Primary subject; August flow, cash and margin data underpin Goldman Sachs' reiterated Buy view.

  Strengths

  NNA exceeded Goldman Sachs' forecast; ex-long/short transactional cash was stable; margin balances and interest-earning assets increased.

  Weaknesses

  Client DATs declined approximately 16% month over month, and new long/short platform restrictions may slow growth.

  Comparison

  NNA annualized organic growth of approximately 6.0% exceeded Goldman Sachs' approximately 4.5% forecast by 141bp.

  Risks

  Faster-than-expected core deposit outflows, Ameritrade-related attrition, lower retail trading activity and weaker equity markets.

• Affiliated Managers Group (AMG)

  Read-across beneficiary from SCHW long/short balances, which Goldman Sachs uses as an indicator for AQR wealth-channel tax-aware flows.

  Strengths

  Implied AQR flex flows of roughly $5-6bn in August and approximately $10bn quarter-to-date point to continued liquid-alternatives momentum.

  Weaknesses

  SCHW's new-account restrictions could temporarily moderate AQR wealth-channel flows.

  Comparison

  Estimated quarter-to-date flows are broadly in line with the $16bn total inflows recorded in 2Q26.

  Risks

  Deterioration in AMG's long-only equity strategies, equity market declines and M&A execution risks.

Key data

• Headline NNA$64.7bnApproximately 6.0% annualized organic growth, 141bp above Goldman Sachs' approximately 4.5% forecast.
• Transactional sweep cash$483.3bnUp $6.5bn month over month, primarily due to long/short strategy demand.
• Transactional cash excluding long/short$427.5bnDown $1.3bn month over month and within year-to-date monthly averages.
• Average interest-earning assets$453.0bnUp approximately 1% month over month and 9% year over year.
• Reported margin balances$177.6bnUp approximately 4.5% month over month, 92% year over year and 58% from year-end.
• Client DATs9.821mDown approximately 16% month over month and approximately 14% below Goldman Sachs' approximately 11.388m estimate.
• Derivatives share of trades24.2%Up 360bp month over month and 170bp year over year.

Impact & implications

Goldman Sachs believes strong NNA, stable ex-long/short cash and higher margin balances support SCHW's operating outlook despite lower trading. The new-account restrictions for long/short and tax-aware strategies are expected to moderate growth and related net interest income in the near term, but the institution sees possible offsets from margin balances, volatility and transactional-cash accumulation.

Risks

• For SCHW, Goldman Sachs identifies faster-than-expected core deposit outflows, Ameritrade-related attrition, lower retail trading activity and weaker equity markets as downside risks.
• For AMG, Goldman Sachs identifies deterioration in long-only equity strategies, equity-market declines and M&A execution risks.

What to watch

• The September and October effect of SCHW's September 16 restrictions on NNA, long/short-related margin loans and short credits.
• Whether higher margin balances and market volatility support a faster build in transactional cash toward year-end.
• Trading volumes and the derivatives share of trades, given their implications for retail payment for order flow.
• Whether other custodians absorb long/short capacity and allow AQR wealth-channel flows to recover beyond September and into 4Q.