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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