SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2010

Summary

The Charles Schwab Corporation (SCHW) reported its financial results for the quarter ended September 30, 2010. The company saw a modest increase in net revenues of 5% year-over-year, reaching $1,063 million, primarily driven by growth in net interest revenue and asset management fees. However, net income declined significantly by 38% to $124 million, largely due to increased expenses, including substantial charges for a class action litigation reserve related to the Schwab YieldPlus Fund and money market mutual fund losses. Despite the drop in profitability, key client activity metrics remained strong, with net new client assets totaling $14.6 billion and total client assets reaching $1.47 trillion, an 8% increase from the prior year. The company's balance sheet also strengthened, with total assets increasing to $87.3 billion and total liabilities growing to $81.3 billion, largely due to an increase in deposits from banking clients. Schwab Bank maintained its 'well capitalized' status, indicating a solid financial foundation.

Key Highlights

• 1Net revenues increased by 5% to $1,063 million, driven by higher net interest revenue and asset management fees.
• 2Net income decreased by 38% to $124 million, impacted by significant one-time charges related to litigation reserves and money market fund losses.
• 3Total client assets grew 8% year-over-year to $1.47 trillion, reflecting continued client trust and asset growth.
• 4Net new client assets were $14.6 billion for the quarter, demonstrating ongoing client acquisition.
• 5Deposits from banking clients saw a substantial increase of approximately $10 billion, bolstering the company's funding base.
• 6Schwab Bank maintained its 'well capitalized' regulatory status, indicating strong capital adequacy.
• 7The company issued $700 million in Senior Notes during the quarter to support balance sheet growth.

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