Schwab Reports Quarterly Results, Net New Assets Total $16.1 Billion
15 April 2005 - 11:45PM
PR Newswire (US)
Schwab Reports Quarterly Results, Net New Assets Total $16.1
Billion SAN FRANCISCO, April 15 /PRNewswire-FirstCall/ -- The
Charles Schwab Corporation announced today that its net income for
the quarter ended March 31, 2005 was $145 million. In comparison,
the Company reported net income of $53 million for the fourth
quarter of 2004 and net income of $161 million for the first
quarter of 2004. Excluding $19 million in after-tax charges
relating to its ongoing cost reduction effort and its exit from the
capital markets business, the Company's first quarter 2005 adjusted
operating income was $164 million -- the same as the prior quarter,
and up 3% from the year-ago quarter's $159 million. A table that
reconciles net income to adjusted operating income is attached.
Three Months Ended -- March 31, -- % Financial Highlights 2005 2004
Change Reported Results: Revenues (in millions) $1,059 $1,108 (4)%
Net income (in millions) $145 $161 (10)% Diluted earnings per share
$.11 $.12 (8)% Pre-tax profit margin(1) 23.2% 22.0% After-tax
profit margin 13.7% 14.5% Return on stockholders' equity 13% 14%
Adjusted Operating Results(2): Revenues (in millions) $1,059 $1,108
(4)% Income (in millions) $164 $159 3% Diluted earnings per share
$.12 $.12 0% Pre-tax profit margin 25.2% 22.0% After-tax profit
margin 15.5% 14.4% (1) From continuing operations. (2) Non-GAAP
income measures which exclude gains or losses from discontinued
operations and restructuring charges. In reviewing the first
quarter, Chairman and CEO Charles Schwab commented, "We remain
intensely focused on delivering what Schwab stands for -- value,
performance and service. In recent months, we've completed a series
of price reductions and enhanced our personal service capabilities
by expanding our relationship-based investment help. With these
moves, I believe we have dramatically improved our value
proposition and created a new connection with our clients. Our
progress with investors is reflected in both our revenue picture
and client asset and account flows. Even as we have reduced the
average amount our clients pay for a trade by over 45%, revenues
declined by just 4% versus a year ago due to our continued success
in building non-trading revenues. Clients brought a total of $16.1
billion in net new assets to the Company in the first quarter, with
65% of these net new assets going into accounts with an ongoing
advisory component. In addition, clients opened nearly 58,000 new
accounts in March, up 30% from February and our strongest showing
since last April. We ended the quarter with $1.077 trillion in
client assets, up 8% from a year ago." CFO Christopher Dodds noted,
"Even against a backdrop of rising interest rates, continuing
concerns about energy prices, and flat to down securities markets,
client activity picked up in the first quarter -- daily average
revenue trades rose by 8% over fourth quarter levels to 191,000,
the highest quarterly level in four years. While our reduced
commission rates resulted in a 5% sequential drop in trading
revenues, the higher rate environment and continued strength in
client inflows yielded our eighth consecutive quarterly increase in
non-trading revenues, which totaled a record $852 million in the
first quarter, up 1% from the prior quarter. Although our total
revenues were essentially unchanged from the fourth quarter,
sharply lower levels of charges associated with our ongoing cost
reduction efforts and our exit from the capital markets business
enabled us to report net income of $145 million for the first
quarter, up from $53 million in the prior period. Our work on
improving our margins continues -- on an adjusted operating basis,
our 25.2% pre-tax profit margin for the first quarter was up 70
basis points from the 24.5% level we achieved in the fourth
quarter. We are also continuing to carefully manage our capital
base -- capital expenditures were just $23 million during the
quarter, and we repurchased $234 million of common stock in the
first three months of 2005." Mr. Dodds added, "Consistent with
recent market volumes and the advent of earnings season, client
trading activity has slowed thus far in April -- daily average
revenue trades for the first 9 trading days of the month totaled
171,000." Business highlights for the first 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 = $11 billion. * Total assets = a record $518 billion,
up 14% year-over-year. * Total number of accounts = 1.5 million.
Individual Investor Business -- Number of clients enrolled in
Schwab Private Client and Schwab Advised Investing = 48,500, up 12%
from the prior quarter. -- Lowered online equity commissions to
$12.95 per trade for domestic retail investors with household
assets between $50,000 and $1 million, or for Active Traders that
trade between 36 to 119 times a year. -- Announced reduced options
pricing to $9.95 plus $0.95 per options contract (previously $1.40
per contract) for clients who place 30 or more trades per quarter,
or with over $1 million in household assets at Schwab. --
Eliminated account service fees on brokerage, educational,
custodial and college saver accounts for clients with at least
$25,000 in household assets at Schwab. These fees are also waived
for clients with $10,000 to $24,999 in household assets who have
either a mortgage or home equity loan from Schwab Bank. --
Broadened our efforts to help clients achieve better investing
outcomes by offering Schwab Equity Ratings(R) (SER) to all retail
clients; also reinstated 24-by-7 customer service. Schwab
Institutional(R) Business -- Total client assets associated with
Schwab Institutional = $352 billion, up 16% year-over-year. --
Client assets new to the Schwab Advisor Network(R) program during
the quarter = $1.7 billion, up 5% year-over-year. -- Client assets
at Schwab associated with IA referral programs = $26 billion, up
22% year-over-year. -- Announced Managed Account Affiliates(TM), a
new bundled managed account offering that provides IAs access to
affiliated investment managers such as U.S. Trust. -- Launched
Business Consulting Services, a new program that combines Schwab
and third-party industry expertise to deliver a comprehensive suite
of consulting resources including industry best practices,
benchmarks and one-on-one consulting services. Corporate Services
Business -- Net new assets during the quarter = $1.7 billion. --
Total client assets in employer-sponsored retirement plans at
Schwab = $129 billion, up 10% year-over-year. -- Introduced the
Schwab Managed Retirement Trust Fund-Income, a fund designed for
401(k) participants in or near retirement that offers stability and
income, along with a growth component. This is the fifth in a
series of targeted retirement funds developed specifically for
401(k) participants. U.S. Trust Business -- Total referrals from
Schwab to U.S. Trust were over 310, compared with over 280 in the
prior quarter. -- Client assets at U.S. Trust associated with the
referral program = $4.9 billion, up 40% year-over-year and up $147
million during the quarter. -- Total client assets at U.S. Trust =
$139 billion, up 2% year-over-year. Products -- Total client assets
held in third-party Mutual Fund OneSource(R) funds = $122 billion,
up 6% year-over-year. -- Total client assets held in proprietary
funds (Schwab Funds(R), Excelsior(R) and other) = $158 billion, up
3%, year-over year. -- Total client assets held in fixed income
securities = $142 billion, up 7% year-over-year. -- For Charles
Schwab Bank, N.A.: * Balance sheet assets = $4.7 billion, up 7%
from the prior quarter. * Outstanding mortgage and home equity
loans = $1.4 billion. * First mortgage originations during the
quarter = $211 million. -- Launched the Schwab Premier Equity
Fund(TM), a fund that invests in a portfolio of higher-rated stocks
chosen using SER. This was the most successful new fund in Schwab
Funds'(R) history, with $334 million in assets raised during the
subscription period. -- Debuted Investor Checking, an integrated,
interest-earning checking account with features such as overdraft
protection, online check images, unlimited check writing and
real-time funds transfer. -- Introduced the dual-employee program,
a new initiative that will enable more than 1,500 client-facing
brokerage employees to be able to educate and offer clients
information about the full suite of banking products offered
through Schwab Bank. -- Achieved first place for our SER-based
model portfolio in Barron's annual stock selection competition
(3-year category). -- Awarded top honors by Corporate Insight for
Schwab.com's research platform and news tools. 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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