Schwab Reports Quarterly Results; Net New Assets Total $23 Billion, Revenues Rise 14%
October 17 2005 - 8:45AM
PR Newswire (US)
SAN FRANCISCO, Oct. 17 /PRNewswire-FirstCall/ -- The Charles Schwab
Corporation announced today that its net income for the quarter
ended September 30, 2005 was $207 million. In comparison, the
Company reported a net loss of $41 million for the third quarter of
2004 and net income of $186 million for the second quarter of 2005.
For the nine months ended September 30, 2005, the Company's net
income was $538 million, compared with net income of $233 million
during the same period in 2004. Three Months Ended Nine Months
Ended September 30, % September 30, % 2005 2004 Change 2005 2004
Change Financial Highlights Revenues (in millions) $1,138 $1,000
14% $3,284 $3,142 5% Net income (loss) (in millions) $207 $(41) n/m
$538 $233 131% Diluted earnings per share $.16 $(.03) n/m $.41 $.17
141% Pre-tax profit margin(1) 28.9% 7.2% 26.7% 15.4% Return on
stockholders' equity 19% (3)% 16% 7% (1) From continuing
operations. n/m - not meaningful Note: The three and nine month
periods ended September 30, 2004 reflect after-tax restructuring
charges of $70 million and $71 million, respectively, and after-tax
losses from discontinued operations of $87 million and $79 million,
respectively. See Reconciliation of Net Income to Adjusted
Operating Income for additional information. Chairman and CEO
Charles Schwab commented, "Over the last fifteen months, our
primary focus has been restoring our value proposition and
reconnecting with our clients. Our success in this effort is
reflected in Schwab's business momentum -- September marked our
fourth consecutive month of net new assets in excess of $6 billion
and our net new assets of $23.4 billion for the third quarter of
2005 were 80% higher than last year's third quarter. Total client
assets set a new record of $1.166 trillion at month-end September,
up 16% from September 2004. Our total revenues increased by 14%
versus a year ago and our net income rose to $207 million for the
quarter, the second- highest level in our history." "To build on
this foundation, Schwab is now focused on forging a new era of
profitable growth by developing stronger relationships with our
clients and helping them achieve better financial outcomes," Mr.
Schwab continued. "Our commitment to driving profitable growth is
reflected in our recent announcements regarding a new national
advertising campaign, eliminating account service and order
handling fees, and the expanded availability of managed accounts to
all of our retail brokerage clients." CFO Christopher Dodds said,
"Schwab has now achieved ten consecutive quarterly increases in its
non-trading revenues, as the Company continues to benefit from its
strength in attracting client assets and the rising interest rate
environment. Non-trading revenues accounted for 84% of Schwab's
total third quarter revenues. Our revenue growth, combined with our
ongoing focus on expense discipline, yielded a 29% pre-tax margin
for the third quarter of 2005 and a year-to-date pre-tax margin of
27%. Capital management remains a priority -- we limited our
capital expenditures to $25 million and repurchased $190 million of
common stock during the third quarter, which helped the Company
achieve a 19% return on equity, the highest quarterly level since
the first quarter of 2000." Mr. Dodds added, "Client engagement
continues to be strong thus far in October -- daily average revenue
trades for the first nine trading days of the month totaled
229,000." Business highlights for the third 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): o Net new client assets during
the quarter = $16.4 billion. o Total assets = a record $568
billion, up 20% year-over-year. o Total number of accounts = 1.6
million. Individual Investor Business * Number of clients enrolled
in Schwab Private Client and Schwab Advised Investing = 55,600, up
7% from the prior quarter. * Eliminated account service fees on
U.S. individual brokerage accounts(1) and the $3.00 order handling
fee on equity trades. * Enhanced operating efficiency and client
service by automating the archival of forms and electronic
signatures. Schwab Institutional(R) Business * Total client assets
associated with Schwab Institutional (SI) = $388 billion, up 23%
year-over-year. * Client assets new to the Schwab Advisor
Network(R) program during the quarter = $1.7 billion, up 17%
year-over-year. * Client assets at Schwab associated with IA
referral programs = $28.5 billion, up 25% year-over-year. *
Announced enhancements to the PortfolioCenter(R) portfolio
management system, with the addition of Export Wizard and
PortfolioCenter Relationship Manager(R), which help IAs identify
the difference between a portfolio's investment holdings and its
target allocation, and enable them to more efficiently prepare and
transmit trade instructions. * Hosted the IMPACT(R) 2005
Conference, drawing a record number of more than 2,000 IAs,
exhibitors and strategic partners, and featuring more than 30
educational sessions, forums and workshops. Corporate Services
Business * Net new assets during the quarter = $2.3 billion. *
Total client assets in employer-sponsored retirement plans at
Schwab = $143 billion, up 17% year-over-year. U.S. Trust Business *
Total referrals from Schwab to U.S. Trust were over 350, compared
with over 360 in the prior quarter. * Client assets at U.S. Trust
associated with the referral program = $5.6 billion, up 33%
year-over-year and up $586 million from the prior quarter. * Total
client assets at U.S. Trust = $146.9 billion, up 7% year-over-
year. Products * Total client assets held in third-party Mutual
Fund OneSource(R) funds = $131 billion, up 14% year-over-year. *
Total client assets held in proprietary funds (Schwab Funds(R),
Excelsior(R) and other) = $161 billion, up 6% year-over-year. *
Total client assets held in fixed income securities = $151 billion,
up 11% year-over-year. * For Charles Schwab Bank, N.A.: o Balance
sheet assets = $5.9 billion, up 14% from the prior quarter. o
Outstanding mortgage and home equity loans = $1.8 billion. o First
mortgage originations during the quarter = $423 million. * Launched
the Schwab Large-Cap Growth Fund(TM), a new fund that seeks
long-term capital growth and will use Schwab Equity Ratings(R) to
help identify stocks with excellent performance potential. *
Debuted Schwab's ETF Center, offering clients access to exchange
traded funds (ETF) through a single location that integrates
research, selection, ratings, analysis and trading. * Commenced
offering a number of Schwab mutual funds, including most of
Schwab's active equity funds, all 10 fixed income funds and the
Laudus MarketMasters Funds(TM), through third-party distributors to
non-Schwab clients. (1) Account service fees are periodic fees
automatically charged to accounts that fail to meet asset, trading,
or other published thresholds. Other fees still apply. Accounts
exempt from account service fees are subject to a minimum balance
charge of $30 per quarter for brokerage accounts or $50 per year
for IRAs if, after receipt of notice and a notice period, their
assets remain below account opening minimums of $2,500 for
brokerage accounts or $2,000 for IRAs. The minimum balance charge
is waived for accounts of households with balances of at least
$10,000 or at least eight equity and/or options trades in the
preceding 12 months. Excludes QRP, CRA, individual 401(k),
403(b)(7), SIMPLE IRA -- plan level accounts, and all accounts held
by clients who reside outside the U.S., its territories or
possessions. 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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