Schwab Reports Quarterly Results, Net New Assets Total $16.1 Billion SAN FRANCISCO, April 15 /PRNewswire-FirstCall/ -- The Charles Schwab Corporation announced today that its net income for the quarter ended March 31, 2005 was $145 million. In comparison, the Company reported net income of $53 million for the fourth quarter of 2004 and net income of $161 million for the first quarter of 2004. Excluding $19 million in after-tax charges relating to its ongoing cost reduction effort and its exit from the capital markets business, the Company's first quarter 2005 adjusted operating income was $164 million -- the same as the prior quarter, and up 3% from the year-ago quarter's $159 million. A table that reconciles net income to adjusted operating income is attached. Three Months Ended -- March 31, -- % Financial Highlights 2005 2004 Change Reported Results: Revenues (in millions) $1,059 $1,108 (4)% Net income (in millions) $145 $161 (10)% Diluted earnings per share $.11 $.12 (8)% Pre-tax profit margin(1) 23.2% 22.0% After-tax profit margin 13.7% 14.5% Return on stockholders' equity 13% 14% Adjusted Operating Results(2): Revenues (in millions) $1,059 $1,108 (4)% Income (in millions) $164 $159 3% Diluted earnings per share $.12 $.12 0% Pre-tax profit margin 25.2% 22.0% After-tax profit margin 15.5% 14.4% (1) From continuing operations. (2) Non-GAAP income measures which exclude gains or losses from discontinued operations and restructuring charges. In reviewing the first quarter, Chairman and CEO Charles Schwab commented, "We remain intensely focused on delivering what Schwab stands for -- value, performance and service. In recent months, we've completed a series of price reductions and enhanced our personal service capabilities by expanding our relationship-based investment help. With these moves, I believe we have dramatically improved our value proposition and created a new connection with our clients. Our progress with investors is reflected in both our revenue picture and client asset and account flows. Even as we have reduced the average amount our clients pay for a trade by over 45%, revenues declined by just 4% versus a year ago due to our continued success in building non-trading revenues. Clients brought a total of $16.1 billion in net new assets to the Company in the first quarter, with 65% of these net new assets going into accounts with an ongoing advisory component. In addition, clients opened nearly 58,000 new accounts in March, up 30% from February and our strongest showing since last April. We ended the quarter with $1.077 trillion in client assets, up 8% from a year ago." CFO Christopher Dodds noted, "Even against a backdrop of rising interest rates, continuing concerns about energy prices, and flat to down securities markets, client activity picked up in the first quarter -- daily average revenue trades rose by 8% over fourth quarter levels to 191,000, the highest quarterly level in four years. While our reduced commission rates resulted in a 5% sequential drop in trading revenues, the higher rate environment and continued strength in client inflows yielded our eighth consecutive quarterly increase in non-trading revenues, which totaled a record $852 million in the first quarter, up 1% from the prior quarter. Although our total revenues were essentially unchanged from the fourth quarter, sharply lower levels of charges associated with our ongoing cost reduction efforts and our exit from the capital markets business enabled us to report net income of $145 million for the first quarter, up from $53 million in the prior period. Our work on improving our margins continues -- on an adjusted operating basis, our 25.2% pre-tax profit margin for the first quarter was up 70 basis points from the 24.5% level we achieved in the fourth quarter. We are also continuing to carefully manage our capital base -- capital expenditures were just $23 million during the quarter, and we repurchased $234 million of common stock in the first three months of 2005." Mr. Dodds added, "Consistent with recent market volumes and the advent of earnings season, client trading activity has slowed thus far in April -- daily average revenue trades for the first 9 trading days of the month totaled 171,000." Business highlights for the first quarter (data as of quarter-end unless otherwise noted): Advised Investing -- For accounts at the Company with an ongoing advice component (includes accounts enrolled in Schwab Private Client(TM) and Schwab Advised Investing(TM), accounts managed by independent investment advisors (IAs), and U.S. Trust(R) accounts): * Net new client assets during the quarter = $11 billion. * Total assets = a record $518 billion, up 14% year-over-year. * Total number of accounts = 1.5 million. Individual Investor Business -- Number of clients enrolled in Schwab Private Client and Schwab Advised Investing = 48,500, up 12% from the prior quarter. -- Lowered online equity commissions to $12.95 per trade for domestic retail investors with household assets between $50,000 and $1 million, or for Active Traders that trade between 36 to 119 times a year. -- Announced reduced options pricing to $9.95 plus $0.95 per options contract (previously $1.40 per contract) for clients who place 30 or more trades per quarter, or with over $1 million in household assets at Schwab. -- Eliminated account service fees on brokerage, educational, custodial and college saver accounts for clients with at least $25,000 in household assets at Schwab. These fees are also waived for clients with $10,000 to $24,999 in household assets who have either a mortgage or home equity loan from Schwab Bank. -- Broadened our efforts to help clients achieve better investing outcomes by offering Schwab Equity Ratings(R) (SER) to all retail clients; also reinstated 24-by-7 customer service. Schwab Institutional(R) Business -- Total client assets associated with Schwab Institutional = $352 billion, up 16% year-over-year. -- Client assets new to the Schwab Advisor Network(R) program during the quarter = $1.7 billion, up 5% year-over-year. -- Client assets at Schwab associated with IA referral programs = $26 billion, up 22% year-over-year. -- Announced Managed Account Affiliates(TM), a new bundled managed account offering that provides IAs access to affiliated investment managers such as U.S. Trust. -- Launched Business Consulting Services, a new program that combines Schwab and third-party industry expertise to deliver a comprehensive suite of consulting resources including industry best practices, benchmarks and one-on-one consulting services. Corporate Services Business -- Net new assets during the quarter = $1.7 billion. -- Total client assets in employer-sponsored retirement plans at Schwab = $129 billion, up 10% year-over-year. -- Introduced the Schwab Managed Retirement Trust Fund-Income, a fund designed for 401(k) participants in or near retirement that offers stability and income, along with a growth component. This is the fifth in a series of targeted retirement funds developed specifically for 401(k) participants. U.S. Trust Business -- Total referrals from Schwab to U.S. Trust were over 310, compared with over 280 in the prior quarter. -- Client assets at U.S. Trust associated with the referral program = $4.9 billion, up 40% year-over-year and up $147 million during the quarter. -- Total client assets at U.S. Trust = $139 billion, up 2% year-over-year. Products -- Total client assets held in third-party Mutual Fund OneSource(R) funds = $122 billion, up 6% year-over-year. -- Total client assets held in proprietary funds (Schwab Funds(R), Excelsior(R) and other) = $158 billion, up 3%, year-over year. -- Total client assets held in fixed income securities = $142 billion, up 7% year-over-year. -- For Charles Schwab Bank, N.A.: * Balance sheet assets = $4.7 billion, up 7% from the prior quarter. * Outstanding mortgage and home equity loans = $1.4 billion. * First mortgage originations during the quarter = $211 million. -- Launched the Schwab Premier Equity Fund(TM), a fund that invests in a portfolio of higher-rated stocks chosen using SER. This was the most successful new fund in Schwab Funds'(R) history, with $334 million in assets raised during the subscription period. -- Debuted Investor Checking, an integrated, interest-earning checking account with features such as overdraft protection, online check images, unlimited check writing and real-time funds transfer. -- Introduced the dual-employee program, a new initiative that will enable more than 1,500 client-facing brokerage employees to be able to educate and offer clients information about the full suite of banking products offered through Schwab Bank. -- Achieved first place for our SER-based model portfolio in Barron's annual stock selection competition (3-year category). -- Awarded top honors by Corporate Insight for Schwab.com's research platform and news tools. The Charles Schwab Corporation (NYSE / Nasdaq: SCH), through its operating subsidiaries, provides securities brokerage and financial services to individual investors and the independent investment advisors who work with them. With over 7 million individual investor accounts and more than $1 trillion in client assets, The Charles Schwab Corporation is one of the nation's largest financial services firms. Its subsidiary Charles Schwab & Co., Inc. (member SIPC) provides a complete range of investment services and products, including an extensive selection of mutual funds; financial planning and investment advice; retirement plans; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent fee-based investment advisors. Its subsidiary Charles Schwab Bank, N.A. (member FDIC) provides banking and mortgage services and products. The corporation's other operating subsidiaries include U.S. Trust Corporation (member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web sites can be reached at http://www.schwab.com/, http://www.schwabbank.com/, http://www.ustrust.com/, and http://www.cybertrader.com/. DATASOURCE: Charles Schwab CONTACT: media, Glen Mathison, +1-415-636-5448, or investors/analysts, Rich Fowler, +1-415-636-9869, both of Charles Schwab Web site: http://www.schwab.com/

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