The company said it has had to rely on more expensive funding sources, like borrowing from the Federal Home Loan Bank, to supplement its cash flow as its seeks to navigate an uncertain environment caused by the Federal Reserve's fastest rate hike cycle in decades.
The majority of these borrowings could be repaid before the end of 2024, Schwab said.
The Texas-based company, however, reassured investors with its monthly activity report, which showed total client assets at the end of May were $7.65 trillion, up 5% from a year earlier and flat compared to April.
Schwab has seen fewer clients move funds away from their accounts at the company to other high-yield products for four consecutive months.
That trend continued in June and could help reduce Schwab's reliance on expensive funding sources, the company said.
Analysts have warned of a compression in net interest margins for financial firms, as the Fed's rate hikes drain excessive liquidity.
After a relentless quantitative tightening campaign, the Fed is widely expected to pause further increases in interest rates.
