Michael Verdeschi
Chief Financial Officer at Charles Schwab
Thank you, Peter, and congratulations on your well-deserved retirement. I've certainly enjoyed working with you and the broader management team to get up to speed these past few months. You've been an outstanding leader for the firm with many contributions over the years, which have had a positive and lasting impact on our clients and employees. As I mentioned back in May at Investor Day, there are so many exciting things happening around Schwab. So I feel very fortunate to be stepping into this role right now. And I look-forward to working with Rick and the rest of our teams as we continue to serve the needs of our growing client base.
Let's pick it up with a summary of key balance sheet highlights for the quarter. Importantly, we continue to support our clients with both margin and bank loans to clients up sequentially. As Peter alluded to earlier, we saw a healthy rebound in transactional sweep cash during the quarter, including $17 billion of net inflows in September. This positive development in cash enabled us to reduce high-cost supplemental funding at the banks by $9 billion. At the same time, we also continued to take proactive steps at the broker-dealer to both support sustained client activity in areas such as margin lending and further diversify our funding profile.
Those actions included transferring $4 billion of client cash sweep balance to the broker-dealer, bringing the total year-to-date transfers to $14 billion. This allows us to align funding where it's needed to support the large and growing activity of our former Ameritrade clients. We also activated some efficient client-related wholesale funding at the broker-dealer to again serve the needs of our growing client base, especially those that tend to trade and utilize margin loans more frequently.
This wholesale funding has very little impact on our net interest revenue because the funds we take on are deployed into cash, which earns a fairly similar rate. The net result of these actions is increased flexibility to meet the evolving needs of clients while continuing to achieve our financial objectives such as paying down supplemental borrowings at the bank and ensuring growth in earnings. Finally, our capital levels continue to build towards our adjusted Tier-1 leverage objectives, driven by a few factors. First, quarterly earnings; then the accretion of unrealized marks[Phonetic], which occurs at a pace of around $1 billion per quarter regardless of changes in interest rates and lastly, an incremental tailwind in Q3 from the move lower in interest rates.
Of course, this rate-related impact will vary over-time based on fluctuations in interest rates across the curve. Turning to client cash trends. The trends in transactional sweep were quite encouraging for the third-quarter with total sweep cash balances growing $9 billion, including a $17 billion net inflow during the month of September. This result reflects the continued slowdown of rate related realignment activity. Cash trends during September also benefited from anticipated seasonal trends as well. Moving forward, it's important to keep in mind that while cash trends do not move in a straight line month over month, we anticipate making further progress over time, ultimately resulting in cash balances growing in proportion with client accounts and assets.
So while we will continue to monitor factors that can influence the trajectory of cash such as interest rates, investor engagement as well as seasonality, these encouraging trends help support our strategy and momentum into the end-of-the year. The cash trends also positioned us to make incremental progress on reducing the amount of outstanding supplemental funding at the banks. We reduced the balances by $9 billion from the June 30, 2024 level to just under $65 billion at the end of the third-quarter.
Supplemental funding balances are now down over 30% from peak levels back in May 2023. Further paydown progress remains a priority as cash as well as principal and interest proceeds from the bank securities portfolio continue to be key drivers in paying down borrowings. The exact timing for achieving our paydown goal will also be influenced by some of the same factors that we see in our transactional cash trends. Over the near-term, continuing to reduce the amount of supplemental funding outstanding is a key driver in achieving normalized earnings power and we expect to show continued progress from here.
Turning our attention to capital. Lower rates supported our pace of capital build during the quarter with our adjusted Tier-1 leverage ratio expanding by over 70 basis-points to 6.7%. We are quickly approaching our 6.75% to 7% operating objective. Despite the recent backup in rates to start the fourth-quarter, we still expect to finish 2024 above the lower bound of the objective range. As we begin 2025, we will start to pivot from what has been a focus on building our capital ratios, inclusive of AOCI to looking across our capital framework.
As always, our number-one priority for capital is to support business growth. To the extent we have excess capital beyond our business needs, we have sought throughout our history to return it to stockholders through a variety of means, including our common dividend, which historically has risen alongside GAAP earnings, preferred security redemptions, considering costs and an optimized equity funding mix, as well as opportunistic stock buybacks. But as we have previously noted, in the near term there is an added consideration relating to our progress on reducing the high cost supplemental funding at the banks.
While this action is not a return of capital per se, liquidity, which otherwise could support capital buybacks, may instead be used to pay down supplemental borrowings. Following our third quarter results, we now anticipate full year 2024 revenue to increase by 2% to 3% versus 2023. This is slightly above the range that was communicated back in July due to a higher starting balance for transactional cash balances and reduced supplemental funding balances at the bank. Adjusted expense growth for full year 2024 is still expected to be approximately 2%, inclusive of certain noncontrollable items outlined earlier in the year.
Combining this refreshed perspective on top line growth with an expense trajectory that reflects the benefits of our scale and ongoing efficiency initiatives implies earnings expanding further into the upper eighties range for the fourth quarter, a bit above the level we communicated back in July. Before we wrap up, let's spend a moment on 2025. We are right in the middle of our planning cycle, so we won't get too far ahead of ourselves, especially with the upcoming presidential election and two FOMC meetings where the rate path remains uncertain. However, we thought it might be helpful to briefly touch on a few items that are helping inform our thinking heading into next year.
As noted, we anticipate coming into 2025 with good momentum and expect it to further build in the year ahead, with, of course, the usual considerations for shifts in the macroeconomic backdrop, interest rates, market sentiment, seasonality too. While NIM should continue to expand even in a lower rate environment, the ultimate level will be influenced by a range of factors, including the path of rates, which is now much lower than back in July.
On the expense front, consistent with the company's historical approach, we will balance making investments to support sustainable long term growth while also delivering on the firm's near term financial objectives. Keeping that balanced approach in mind year over year expense growth in the mid single digits still feels like a reasonable starting point for now. While acknowledging that changes in the broader environment, client activity, typical seasonality and other key factors will undoubtedly shape our 2025 expenses. Plenty of opportunity to discuss these topics a few months from now.
As we approach the end of 2024, it is hard not to be excited about the opportunity in front of us. Momentum with clients continues to strengthen while our 3Q financial results put us in a position to deliver meaningful earnings power expansion as the combination of our diversified revenue model and a balanced approach to expense management yields profitable growth, which we believe will be amplified by our capital efficiency through the cycle. And with that, it's time for some Q and A. Jeff, back to you.
