Schwab Reports Fourth Quarter and Full Year Results

Record 2007 Results Reflect Focused Business Model and Stronger Client Relationships

Wednesday, January 16, 2008 5:45 am PST



Public Company Information:


SAN FRANCISCO--(BUSINESS WIRE)--The Charles Schwab Corporation announced today that its income from continuing operations (which excludes the impact of U.S. Trust) was $305 million for the fourth quarter of 2007, up 36% from the fourth quarter of 2006. For the year ended December 31, 2007, the companys income from continuing operations was a record $1.1 billion, up 26% from 2006.




Three Months Ended


Twelve Months Ended


--December 31,--


--December 31,--


Financial Highlights   2007     2006     Change   2007     2006     Change

Net revenues (in millions)(1)

$ 1,345   $ 1,096 23 % $ 4,994   $ 4,309 16 %
Net income (in millions) $ 308 $ 467 (34 %) $ 2,407 $ 1,227 96 %
Diluted earnings per share $ .26 $ .37 (30 %) $ 1.97 $ .95 107 %

Pre-tax profit margin(1)

39.1 % 33.9 % 37.1 % 34.3 %
Return on stockholders' equity 35 % 39 % 55 % 26 %
Results from continuing operations:

Income (in millions)

$ 305 $ 224 36 % $ 1,120 $ 891 26 %
Diluted earnings per share $ .26 $ .18 44 % $ .92 $ .69 33 %

(1) Amounts have been adjusted to summarize the impact of the sale of U.S. Trust, which was completed on July 1, 2007, in income from discontinued operations.

Chairman and CEO Charles Schwab commented, In 2007, we grew revenues 16% and set new records for income and earnings per share from continuing operations. These results reflected our focus on earning our clients loyalty and helping them achieve better financial outcomes, while continuing to improve our own financial performance. Net new assets rose 92% in 2007 to $160 billion, including $23 billion relating to the acquisition of The 401(k) Company, and total client assets rose 17% to $1.4 trillion at year-end. Clients opened 809,000 brokerage accounts during the year, up 24%, and total brokerage accounts rose 5% to 7.0 million by the end of December. In addition, by year-end 2007 we were serving 262,000 bank accounts and 1.2 million retirement plan participants, up from 147,000 and 542,000, respectively, at year-end 2006. Im particularly proud of our achievements in a year that proved so challenging for the financial services industry.

CFO Joe Martinetto said, Schwabs financial objectives for 2007 included revenue growth of at least 12% and pre-tax profit margin expansion of about 200 basis points, to 36%. With revenues driven by our success with clients and careful expense management helping achieve a 37% margin, weve once again delivered on our ongoing commitment to combine solid growth with improved profitability. We also completed a major capital restructuring during 2007, which incorporated a $1.2 billion special cash dividend, a $2.1 billion stock tender offer, and the issuance of $550 million of new debt capital. Including the restructuring, regular dividends and share repurchases, we returned $4.2 billion of equity to stockholders during 2007. Weve established a leaner, lower-cost capital structure while maintaining ample liquidity. Schwab retains a strong, flexible balance sheet to serve its growing client base.

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

Schwab Investor Services Business (SIS)


Client assets enrolled in Schwab advisory solutions = $56.7 billion, up 14% year-over-year.


Schwab Managed PortfoliosTM reached $4.5 billion at December 31, up 10% from the prior quarter.


Further enhanced StreetSmart Pro®, Schwab's platform for active traders, by adding intraday unrealized gain/loss tracking capabilities.


Consolidated active investor services into a single Schwab offering, allowing the company to better focus its product and technology resources on one platform.

Schwab Institutional® Business (SI)


Introduced two trust services to help advisors sustain relationships across generations - the Personal Trust Reporting Service to assist advisors in managing assets when an individual is serving as trustee on an irrevocable trust, and a new Administrative Trustee Service for advisors who wish to work with Schwab as a corporate or directed trustee.


Introduced a new relationship with human resource outsourcing company TriNet to provide healthcare and benefit services for independent investment advisors and their employees.


Launched a new set of resources to help advisors manage their human capital needs, including a website with tools and information, online services to assist in finding new talent as well as retain and reward existing employees, and two new compensation-related white papers.

Schwab Corporate and Retirement Services Business (SCRS)


Launched the Schwab Equiview(TM) stock plan recordkeeping and reporting system for all Stock Plan Services corporate clients, which provides significantly enhanced administrative efficiency and flexibility.


Reintroduced employee stock purchase plan (ESPP) administration for Stock Plan Services clients.


Compiled and released data demonstrating the benefits of advice and professionally managed portfolios for 401(k) plan participants.
Products and Infrastructure


For Charles Schwab Bank:


Balance sheet assets = $14.8 billion, up 34% year-over-year.


Outstanding mortgage and home equity loans = $3.3 billion, up 44% year-over-year.


First mortgage originations during the quarter = $574 million.


Expanded Laudus Funds® through a sub-advisory relationship with Mondrian Investment Partners Limited, the London-based international investment house. The first funds in the newly created Laudus® Mondrian offering include the Laudus Mondrian Emerging Markets Fund and the Laudus Mondrian International Fixed Income Fund.


Launched the Schwab® Premier Income Fund, which is designed to produce attractive yields and provide increased monthly income over a number of years to investors in retirement with at least $250,000 in assets who are willing to accept an increased level of risk.

About Charles Schwab

The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider of financial services, with more than 300 offices and 7.0 million client brokerage accounts, 1.2 million corporate retirement plan participants, 262,000 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
Greg Gable, 415-636-5847
Rich Fowler, 415-636-9869

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