10-KPeriod: FY2007

SCHWAB CHARLES CORP Annual Report, Year Ended Dec 31, 2007

Filed February 27, 2008For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation's 2007 10-K filing indicates a strong financial performance, particularly driven by its banking segment. The company saw significant growth in its net interest revenue, a substantial increase in total assets, and a notable rise in return on average stockholder's equity, which more than doubled from the previous year. This robust performance is supported by an expanding loan portfolio and a growing base of customer deposits. Despite the overall positive financial trends, investors should note the increasing exposure to mortgage-backed securities, particularly non-agency types, which carry inherent risks. While the company's risk management and allowance for credit losses appear to be keeping pace with loan growth, the expanding nature of the securities portfolio warrants attention. The strong profitability and shareholder returns highlight the company's successful execution of its business strategy in 2007.

Financial Highlights

31 data points
Beta

Revenue

$4.99B

Net Income

$2.41B

48.2% Net Margin

EPS (Diluted)

$1.96

Cash & Equivalents

$6.76B

Free Cash Flow

$1.58B

Financial Statements
Beta
Revenue$4.99B
Operating Income$1.12B
Interest Expense$623.00M
Net Income$2.41B
EPS (Basic)$1.98
EPS (Diluted)$1.96
Shares Outstanding (Diluted)1.22B

Key Highlights

  • 1The company reported a significant increase in Net Interest Revenue for its banking segment, growing from $316 million in 2006 to $468 million in 2007.
  • 2Total assets for Charles Schwab Bank increased substantially from $9,779 million in 2006 to $12,853 million in 2007.
  • 3Return on average stockholder's equity saw a dramatic improvement, rising from 26.34% in 2006 to 34.31% in 2007.
  • 4The loan portfolio grew to $3,450 million in 2007, with residential real estate mortgages and home equity lines of credit forming the largest components.
  • 5Securities available for sale increased significantly to $7,556 million in 2007 from $6,011 million in 2006, with a notable portion in non-agency mortgage-backed securities.
  • 6The allowance for credit losses on the loan portfolio increased to $7 million in 2007, reflecting the growth in the loan book.

Frequently Asked Questions

The primary drivers of Charles Schwab Corporation's financial performance in 2007 appear to be strong growth in its banking segment, evidenced by a significant increase in net interest revenue and total assets. The company also benefited from a substantial improvement in its return on average stockholder's equity.

The company's loan portfolio grew to $3,450 million in 2007, primarily consisting of residential real estate mortgages and home equity lines of credit. While the allowance for credit losses has increased to $7 million, investors should monitor the non-agency mortgage-backed securities within the 'Securities available for sale' portfolio, as these carry higher inherent risks.

The trend in 2007 suggests a positive outlook for net interest revenue, as it increased by over $150 million year-over-year, driven by both increased volume and higher interest rates on earning assets. The continued growth in customer deposits, which provide a relatively low-cost funding source, further supports potential for sustained net interest revenue.

Profitability has significantly improved, with the return on average stockholder's equity jumping to 34.31% in 2007 from 26.34% in 2006. The ratio of average stockholder's equity to average total assets decreased slightly to 5.33%, indicating the company is utilizing leverage to drive higher returns on equity.