Schwab Reports Quarterly Results Revenues Rise 5%, Net Income Grows 65%
July 18 2005 - 9:45AM
PR Newswire (US)
Schwab Reports Quarterly Results Revenues Rise 5%, Net Income Grows
65% SAN FRANCISCO, July 18 /PRNewswire-FirstCall/ -- The Charles
Schwab Corporation announced today that its net income for the
quarter ended June 30, 2005 was $186 million. In comparison, the
Company reported net income of $113 million for the second quarter
of 2004 and $145 million for the first quarter of 2005. For the
first half of 2005, the Company's net income was $331 million,
compared with $274 million earned during the same period in 2004.
Three Months Ended Six Months Ended Financial --June 30,-- % --June
30,-- % Highlights 2005 2004 Change 2005 2004 Change Revenues (in
millions) $1,087 $1,034 5% $2,146 $2,142 - % Net income (in
millions) $186 $113 65% $331 $274 21% Diluted earnings per share
$.14 $.08 75% $.25 $.20 25% Pre-tax profit margin(1) 27.9% 16.3%
25.6% 19.3% Return on stockholders' equity 17% 10% 15% 12% (1) From
continuing operations Chairman and CEO Charles Schwab commented,
"Over the last year, we have been intensely focused on reconnecting
with our clients and improving our financial performance -- and
this quarter demonstrates that we are succeeding on both fronts.
Total client assets reached a record $1.106 trillion at the end of
June, up 11% from a year ago. Net new client assets totaled $11.2
billion this quarter, with 85% of these assets going into accounts
with an ongoing advice component. Our total revenues grew 5% versus
the second quarter of 2004, even in the face of a 28% drop in our
trading revenues due to a series of price reductions over the past
year. Finally, our net income grew 65% versus a year ago to $186
million, the third-highest level of net income in our Company's
30-year history. I am tremendously grateful for the efforts of
Schwab's employees in turning around our Company, and I am excited
about working with them as we move the Company forward and deliver
the value, performance and service that Schwab stands for." CFO
Christopher Dodds noted, "The second quarter of 2005 marked the
ninth consecutive quarterly increase in our non-trading revenues,
as we continued to benefit from our strength in attracting client
assets and the rising interest rate environment. These revenues
reached a record $900 million, up 16% from the same period in 2004
-- an increase that more than offset the drop in our trading
revenues. Our ongoing focus on streamlining and simplifying the
Company led to a 9% reduction in expenses versus a year ago,
enabling us to post a 28% pre-tax profit margin for the quarter,
the second-highest level in Schwab's history. For the first half of
2005, our pre-tax margin totaled 26%, dramatically ahead of the 19%
margin we reported for the year earlier period. We also continued
our focus on capital management during the second quarter --
limiting our capital expenditures to $29 million and repurchasing
$149 million of common stock -- which helped us to achieve a 17%
return on equity, the highest quarterly level since the first
quarter of 2000." Business highlights for the second 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 = $9.5 billion. - Total assets = a record $535 billion,
up 15% year-over-year. - Total number of accounts = 1.5 million. *
Introduced Schwab Portfolios(TM), which are diversified portfolios
developed by Schwab. These portfolios, which include mutual funds
or stocks and exchange traded funds, are designed for investors who
have between $10,000 and $200,000 to invest and are looking for
convenient, easy-to-implement investment advice, including access
to ongoing guidance from a financial consultant. Individual
Investor Business * Number of clients enrolled in Schwab Private
Client and Schwab Advised Investing = 51,900, up 7% from the prior
quarter. * Announced lower online option pricing of $9.95 per trade
plus $0.75 per contract (previously $0.95 per contract) for clients
who place 30 or more combined equity and option trades per quarter,
or with over $1 million in household assets at Schwab. * Improved
the StreetSmart Pro(R) trading platform to include more advanced
options functionality, such as multi-leg options, Top 10 Lists,
Real-Time Option Chains and Pricing Models. * Unveiled the
CyberTrader Strategy Center(TM), which provides active traders with
the ability to back-test customized trading strategies and scan the
market for stocks that fit their objectives. Schwab
Institutional(R) Business * Total client assets associated with
Schwab Institutional (SI) = $365 billion, up 18% year-over-year. *
Client assets new to the Schwab Advisor Network(R) program during
the quarter = $1.7 billion, up 9% year-over-year. * Client assets
at Schwab associated with IA referral programs = $26.8 billion, up
21% year-over-year. * Introduced $12.95 online equity pricing for
the clients of IAs who enroll in electronic delivery of trade
confirmations and account statements. This service, called
eDelivery, helps to drive down costs and simplify business
processes for both Schwab and IAs. * Introduced pledged asset lines
of credit from Schwab Bank for IAs and their clients. Eligible
securities can be used as collateral for these lines, allowing
current investment strategies to remain in place. * Formed the
National Business Development Team, which is focused on marketing
SI services to advisors with smaller practices. Corporate Services
Business * Net new assets during the quarter = $885 million. *
Initiated the conversion process to bring an additional $3.2
billion in retirement and other benefit plan assets to Schwab. *
Total client assets in employer-sponsored retirement plans at
Schwab = $133 billion, up 9% year-over-year. U.S. Trust Business *
Total referrals from Schwab to U.S. Trust were over 360, compared
with over 310 in the prior quarter. * Client assets at U.S. Trust
associated with the referral program = $5.1 billion, up 27%
year-over-year and up $187 million during the quarter. * Total
client assets at U.S. Trust = $139.8 billion, up 2% year-over-
year. Products * Total client assets held in third-party Mutual
Fund OneSource(R) funds = $125 billion, up 9% year-over-year. *
Total client assets held in proprietary funds (Schwab Funds(R),
Excelsior(R) and other) = $156 billion, up 2%, year-over-year. *
Total client assets held in fixed income securities = $147 billion,
up 13% year-over-year. * For Charles Schwab Bank, N.A.: - Balance
sheet assets = $5.2 billion, up 11% from the prior quarter. -
Outstanding mortgage and home equity loans = $1.6 billion. - First
mortgage originations during the quarter = $288 million. * Launched
the Schwab Target Funds, a diversified set of five mutual funds,
which will invest in a combination of Schwab and Laudus Funds(TM)
with varying allocations based on retirement dates ranging from
2010 to 2040. The fund series also includes a Retirement Income
Fund for clients already in retirement who are looking for improved
portfolio income generation. 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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