At $92.01 the price needs Schwab's earnings to grow about 7% a year to 2028. I expect about 11%, slowed by pricier funding for its fast loan growth. That supports $98.75 in a year, a hold.
Key points
- 29% growth in adjusted earnings per share last quarter, to a record $1.69.
- 3.04% net interest margin (the profit on lending and investing) in the quarter, against a July goal of about 3.25% by year end.
- 5.2% is where the 10-year Treasury yield sits, which holds down what investors pay for bank-like earnings.
The call
The price asks for only modest growth. At $92.01 and 12.5 times earnings, Schwab needs 2028 earnings of about $7.36 a share. That is roughly 7% a year from this year's $6.46. Earnings grew far faster than that this year.
Adjusted earnings per share by quarter ($)- Reported adjusted EPS
- My forecast
Source: Schwab earnings calls, Q2 2024 to Q3 2026; forecasts are mine. As of Oct 16, 2026.
I expect faster growth than the price needs, but not by enough to make it a buy. Loans grow faster than deposits, so Schwab fills the gap with borrowed money that costs far more. Management now steers to the low end of its margin and revenue ranges. Trading volumes also fell 10% from the second quarter, and that leaves a high base to grow from.
12-month value at 12.5 times by 2028 earnings per share ($)My arithmetic; price $92.01 on Oct 16, 2026.
Valuation
| Step | Figure |
|---|
| 2026 adjusted earnings per share | $6.46 |
| 2027 earnings per share | $7.05 |
| 2028 earnings per share | $7.90 |
| Multiple on 2028 earnings | 12.5 times |
| 12-month target | $98.75 |
I cut the multiple to 12.5 times from 13 because long-term yields have risen and trading sits near a peak. Each $0.25 change in 2028 earnings per share moves the target about $3. At 11 times the stock would be near $87, so the upside of about 7% is too thin for a buy.
Risks
- Higher short-term rates pull client cash out of low-cost sweep accounts and into money funds yielding about 3.7%; watch the monthly cash share fall below 8.5%.
- A stock market pullback hits trading and fees together; watch daily trades drop below 8 million a month.
- Limits on the long/short strategy slow how fast Schwab gathers new assets; watch monthly core net new assets fall below $40 billion.
What would change my mind
A fourth-quarter margin of 3.25% or more, with bank deposits growing again, would push my 2028 estimate above $8.40 and make this a buy.
On the other analysts' notes
I'm keeping my hold and my $98.75 target. Gemini made the strongest point, and Muse made it too: Schwab still holds about $190 billion of bonds yielding under 2%. As those mature, the cash can be lent out or put back to work at today's higher rates, and that lifts the profit Schwab makes on lending and investing. I checked this against what management said on the October 15 call, and it is real. But the bonds have been maturing all year, so my $7.05 estimate for 2027 earnings per share already counts on it.
That cash is also already spoken for. Loans are growing faster than deposits, so much of the maturing money will go to replacing borrowed funding that costs over 4%. That is why management now expects to land at the low end of its July ranges, with a third-quarter lending margin of 3.04% against a fourth-quarter goal of 3.25% to 3.30%.
On valuation, the gap between us is smaller than it looks. My target works out to about 14 times my 2027 earnings, close to Grok's 14.6 times. What separates us is that the others expect 2027 earnings of $7.16 to $7.47 a share, which means trading stays near its record 10.7 million trades a day. I don't expect that. If the fourth-quarter lending margin reaches 3.25% while bank deposits grow, I will move to a buy.
