SCHWAB CHARLES CORP Quarterly Report for Q1 Ended Mar 31, 2009

Summary

The Charles Schwab Corporation reported a decrease in net income for the first quarter of 2009 compared to the same period in 2008. Net income was $218 million ($0.19 per diluted share) in Q1 2009, down from $305 million ($0.26 per diluted share) in Q1 2008. This decline was primarily driven by lower net revenues, which fell 15% year-over-year to $1.11 billion, largely due to a decrease in asset management and administration fees and net interest revenue. The challenging market environment, characterized by depressed equity valuations and a low-interest-rate environment, significantly impacted revenue streams. Despite the revenue decline, the company managed to reduce expenses excluding interest by 5% through cost-saving measures, including severance and facilities charges. The company's balance sheet remained robust, with total assets increasing to $54.9 billion from $51.7 billion at the end of 2008. Schwab Bank also maintained its 'well capitalized' status. Investors should note the ongoing impact of market conditions on fee-based revenues and net interest income, as well as the potential for further impairment charges on certain mortgage-backed securities.

Key Highlights

• 1Net income decreased by 29% to $218 million in Q1 2009 from $305 million in Q1 2008.
• 2Diluted EPS fell to $0.19 in Q1 2009 from $0.26 in Q1 2008.
• 3Total net revenues declined 15% to $1.11 billion, primarily due to lower asset management fees and net interest revenue.
• 4Expenses excluding interest decreased by 5% to $756 million, reflecting cost reduction efforts.
• 5Total assets grew to $54.9 billion as of March 31, 2009, from $51.7 billion as of December 31, 2008.
• 6The company recorded $14 million in net impairment losses on securities, mainly related to mortgage-backed securities.
• 7Schwab Bank maintained its 'well capitalized' regulatory status.

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