We're almost approaching midway in the latest quarterly earnings season, and mentions of money market funds and "cash" are few and far between. Charles Schwab, which reported its Q2'26 earnings earlier this week, is normally a wealth of comments on sweeps and cash sorting. But not this quarter. On their Summer Business Update, President & CEO Rick Wurster says, "Our bank is an important differentiator for us. Our ability to offer checking, payments, and lending makes it easy for clients to consolidate their financial lives with us. For our ... clients, this represents an opportunity to help the RIAs on our platform meet more of their clients' financial needs in one place." (For more on Q2 earnings calls, see our July 20 Crane Data News: "State Street Q2'26 Earnings Call on Tokenized MMFs, Stablecoin Reserves and our July 16 Link of the Day, "BlackRock Talks Tokenization on Call.")
CFO Michael Verdeschi tells analysts, "Momentum within the technology sector helped lift equity markets to their best quarterly performance since early 2020, which in combination with robust asset gathering and client interest in Schwab's wealth and asset management offerings, drove 16% year-over-year growth in asset management and administration fees to $1.8 billion.... Bank deposit account fees grew 35% year-over-year due to continued improvement in the net yield, other revenue was up 32% versus 2Q 2025, with stronger trading volumes as well as typical second quarter seasonality."
He explains, "Client cash followed typical seasonal trends, including tax payments in April. While strong equity markets lifted sentiment and supported elevated trading activity, transactional sweep cash increased by $24.2 billion in 2Q, largely driven by demand for long-short strategies as well as organic asset gathering. Beyond the growth related to long-short, client cash trends remain strong with year-to-date underlying cash performing better than our initial expectations coming into the year."
Verdeschi comments, "Clients are deepening their relationship with us and obviously it comes with an incremental spread over security. You are seeing the year-over-year NIM expansion. [The] primary driver was that lending activity. Of course, we’ll have to see where interest rates go from here. In the scenario we assume that one hike, but that's very late in the year, that's December. It doesn't impact the financials for 2026 if that hike occurred. You would see further expansion in 2027."
During the Q&A, he responds on rates, "Keep in mind that we'll have to see how the rate path plays out. Right now we were assuming one hike. That hike was for the December meeting so you're not seeing that incremental pickup in 2026. If that hike were to occur it's going to be impacting the financials in 2027. No, we feel good about the net interest margin expansion that we've seen so far. If rates resume a hiking pattern, you'll see even more expansion. Again, that lending activity has been strong. That comes with incremental spread relative to securities. We continue to see cash build organically as well. Again, we've seen growth in the first half of the year despite the seasonality of Q1 and Q2."
Verdeschi answers another question, "When I look at that year-over-year growth in net interest margin the vast majority certainly was driven by that, I'll call it that lending both at margin lending, non-long-short as well as the bank lending which was primarily driven by the Pledged Asset Line. Much of that is coming from that lending activity. Of course, as I mentioned, we've seen deposits perform well despite the first couple of quarters of seasonality. Now, in securities, we haven't grown that portfolio meaningfully. It's been relatively stable because, again, given the demand for lending, we've been happy to meet that client need. Again, I've talked about how it meets the client need, it deepens the relationship, and it comes with better economics."
Northern Trust (NTRS) also reported Q2 earnings, and the company was quieter than usual on all things cash. Chairman & CEO Mike O'Grady says, "Assets under administration across hedge funds, private capital, and semi-liquid structures now exceed $1 trillion.... [W]e continue to progress our digital assets capabilities as institutional clients look for trusted providers to support the evolution of tokenized markets."
He explains, "Our approach remains targeted and disciplined, focused on areas where Northern Trust can bring institutional standards of control, servicing, and risk management to both traditional and digital markets. Overall, asset servicing's performance reflects the continued execution of a focused strategy, deepening relationships with sophisticated clients, scaling high-value capabilities, and investing in the areas where clients' needs are evolving. Turning to asset management, NTAM continued to build momentum in the second quarter, with diversified asset gathering across several priority areas."
O'Grady comments, "Liquidity was also a standout area. We had a record quarter for liquidity flows, extending our streak to 14 consecutive quarters of positive organic liquidity flows while continuing to gain market share across both the U.S. and EMEA. As a top 10 money market fund manager in the U.S., we continue to benefit from the breadth of our global liquidity platform and clients' confidence in our risk discipline and service model."
CFO Dave Fox states, "Average deposits within wealth management were $26.7 billion, up 1% sequentially, while average loans were $35.8 billion, also up 1%. Pre-tax income was $334 million, generating a pre-tax margin of 37%. As discussed in the second quarter of 2025, we reorganized wealth management to better drive growth and client coverage."
He says, "Turning to our balance sheet and net interest income trends.... Our average earning assets were $151 billion, down 2% sequentially, as lower deposits drove a decrease in money market assets. The fixed percentage of the securities portfolio was 52%, consistent with the prior quarter, including the impact of swaps. The duration of the securities portfolio was 1.4 years, and the duration of our total balance sheet remained under one year. Average deposits were $128 billion, down 1% sequentially, reflecting slight normalization following elevated short-term institutional deposits in the first quarter."
Northern's CFO explains, "Within the deposit base, interest-bearing deposits decreased 2% sequentially, while non-interest-bearing deposits increased 4%, representing 15% of the overall mix. Net interest income ... was $683 million, up 3% sequentially and up 11% from a year ago. Sequentially, NII was favorably impacted by an improved deposit mix, higher yields from securities repositioning mentioned earlier, and one additional day in the quarter. Our net interest margin ... was 1.81%, up 6 basis points sequentially, reflecting a favorable deposit mix in the second quarter. The sequential comparison also benefited from the reversal of NIM compression in the first quarter due to the impact of elevated short-term institutional deposits."
Finally, when asked about IPOs, O'Grady responds, "Even aside from wealth management, we see the impacts and the benefits from that. We've talked about liquidity. Broadly speaking, when there is greater capital raising, those dollars need to go somewhere initially. We've seen the specific benefits of that flowing into, whether it's the balance sheet, but also into our money market funds."
