Schwab Reports Quarterly Results

Strong Client Relationships and Financial Discipline Yield 35% Increase in EPS From Continuing Operations.

Wednesday, July 16, 2008 5:45 am PDT



Public Company Information:


SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its income from continuing operations (which excludes U.S. Trust) was $313 million for the second quarter of 2008, up 22% from the second quarter of 2007. For the six months ended June 30, 2008, the companys income from continuing operations was $618 million, up 26% from the first half of 2007.

  Three Months Ended     Six Months Ended  
--June 30,-- % --June 30,-- %

Financial Highlights

  2008   2007   Change   2008   2007   Change

Net revenues (in millions) (1)

$ 1,308 $ 1,205 9 % $ 2,615 $ 2,358 11 %
Net income (in millions) $ 295 $ 292 1 % $ 600 $ 565 6 %
Diluted earnings per share $ .26 $ .23 13 % $ .52 $ .45 16 %

Pre-tax profit margin (1)

39.3 % 35.2 % 39.1 % 34.6 %
Return on stockholders' equity 32 % 23 % 31 % 22 %

Results from continuing operations:

Income (in millions) $ 313 $ 256 22 % $ 618 $ 492 26 %
Diluted earnings per share $ .27 $ .20 35 % $ .53 $ .39 36 %
(1) Prior period amounts are presented on a continuing operations basis to exclude U.S. Trust, which was sold on July 1, 2007.

Chairman and CEO Charles Schwab said, Im very pleased with how our business model continued to deliver great service and consistent financial results in the second quarter. Clients brought $26 billion in net new assets to the company and total client assets ended June at $1.4 trillion, up 1% from June 2007. Active brokerage accounts and retirement plan participants were up 5% and 13% over the year-earlier levels, and banking accounts more than doubled to 355,000. Even in a tough market environment, our business showed standout growth and profitability.

CFO Joe Martinetto commented, With strong asset inflows from clients during the second quarter, we achieved 9% year-over-year growth in net revenue despite headwinds from lower short term interest rates and flat to down equity markets. Our ongoing financial discipline helped limit overall expense growth to just 2% and fueled a 39.3% pre-tax profit margin, a 35% increase in earnings per share from continuing operations, and a 32% return on equity. Our financial discipline is also reflected in a strong balance sheet that includes a high-quality loan portfolio mortgage delinquencies at Schwab Bank were 0.33% of outstanding balances as of month-end June, a fraction of the national average, and loan charge-offs totaled just $0.8 million for the quarter.

Business highlights for the second quarter (data as of quarter-end unless otherwise noted):

Schwab Investor Services Business (SIS)

  • Client assets enrolled in Schwab advice offers = $52.8 billion, down 4% year-over-year. Accounts enrolled = 211,000, up 1% year-over-year.
  • Unveiled a website, geared towards providing 25-to-40 year olds with relevant financial information via articles, calculators, charts and glossaries, as well as a peer comparison tool.

Schwab Institutional® Business (SI)

  • Announced a comprehensive platform, Schwab Business Start-up Solutions, to support registered investment advisors transitioning to independence, including start-up financing, technology, marketing, and back office support.
  • Enhanced outsourcing capabilities for registered investment advisors through Schwab Performance Technologies PortfolioServicesTM, a full-service performance reporting solution based on Schwabs PortfolioCenter® data management software, and the outsourcing service experience of recently acquired Etelligent Consulting, Inc.

Schwab Corporate and Retirement Services Business (SCRS)

  • Expanded Charles Schwab Trust Companys offering of target-date collective trust funds to include the Schwab Indexed Retirement Trust FundsTM, designed specifically for defined contribution plan participants.
  • Introduced Schwab Retirement SolutionsTM, in partnership with Schwab Investor Services, to provide business owners with retirement plan consulting and administration services for plans of all types and sizes.
  • Enhanced Schwab Personal Choice Retirement Account® (PCRA) capabilities, enabling participants to open multiple self-directed brokerage accounts within a retirement plan account to hold investments for both Traditional and Roth contributions as well as managed account programs.

Products and Infrastructure

  • For Charles Schwab Bank:



Balance sheet assets = $21.6 billion, up 72% year-over-year.


Outstanding mortgage and home equity loans = $4.7 billion, up 76% year-over-year.


First mortgage originations during the quarter = $1.1 billion.

  • Schwab Banks High Yield Investor CheckingTM celebrated its first anniversary, ending the second quarter with 239,000 accounts and $2.6 billion in balances.
  • Schwab and Texas Tech announced the inaugural Schwab Research Scholar, who will study the competencies sought by financial services institutions as they hire new generations of employees. The new Schwab Technology Complex at Texas Tech was also unveiled, with an expected opening date of fall 2008. These activities are funded by a grant from the Charles Schwab Foundation.
  • Expanded the Laudus Mondrian Funds line-up by introducing a series of funds that will invest primarily in global, international, and emerging market equities.
  • Schwab announced the winners of the inaugural National Financial Literacy Challenge, a test of personal finance understanding for U.S. high school students. The ten highest-performing students received a $2,500 college scholarship, and a $1,000 contribution was made to the program that provided their personal finance education.

Supporting schedules are either attached or located at:

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.3 million client brokerage accounts, 1.3 million corporate retirement plan participants, 355,000 banking accounts, and $1.4 trillion in client assets. Through its operating subsidiaries, the company provides a full range of securities brokerage, banking, money management and financial advisory services to individual investors and independent investment advisors. Its broker-dealer subsidiary, Charles Schwab & Co., Inc. (member SIPC,, and affiliates offer a complete range of investment services and products including an extensive selection of mutual funds; financial planning and investment advice; retirement plan and equity compensation plan services; referrals to independent fee-based investment advisors; and custodial, operational and trading support for independent, fee-based investment advisors through its Schwab Institutional division. The Charles Schwab Bank (member FDIC) provides banking and mortgage services and products. More information is available at


Charles Schwab
Alison Wertheim, 415-636-5812 (Media)
Rich Fowler, 415-636-9869 (Investors/Analysts)

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