10-QPeriod: Q3 FY2011

SCHWAB CHARLES CORP Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 7, 2011For Securities:SCHWSCHW-PDSCHW-PJ

Summary

The Charles Schwab Corporation (SCHW) reported a strong financial performance for the third quarter and first nine months of 2011, demonstrating significant year-over-year growth in net revenues and net income. This growth was driven by an increase in net interest revenue and trading revenue, reflecting higher average balances of interest-earning assets and increased trading volumes. The company successfully integrated the acquisition of optionsXpress Holdings, Inc. in September 2011, adding to its scale and capabilities, particularly for active traders. Despite a challenging macroeconomic environment with weakened equity markets and low interest rates, Schwab maintained a robust client engagement, evidenced by substantial net new client assets and a significant increase in daily average trades. The company also highlighted its strong regulatory capital position and sound liquidity management, positioning it well for future growth.

Financial Highlights

38 data points
Beta

Revenue

$1.18B

Net Income

$220.00M

18.6% Net Margin

EPS (Diluted)

$0.18

Total Assets

$102.91B

Cash & Equivalents

$6.38B

Free Cash Flow

$34.00M

Financial Statements
Beta
Revenue$1.18B
Interest Expense$44.00M
Net Income$220.00M
EPS (Basic)$0.18
EPS (Diluted)$0.18
Shares Outstanding (Basic)1.23B
Shares Outstanding (Diluted)1.23B

Key Highlights

  • 1Net revenues increased by 11% to $1.18 billion for the three months ended September 30, 2011, compared to the same period in 2010.
  • 2Net income grew significantly by 77% to $220 million for the three months ended September 30, 2011, compared to $124 million in the prior year.
  • 3Diluted Earnings Per Share (EPS) rose to $0.18 for the quarter, up from $0.10 in the same quarter of 2010.
  • 4The company completed the acquisition of optionsXpress Holdings, Inc. on September 1, 2011, for $714 million, expanding its market reach.
  • 5Total client assets reached $1.58 trillion as of September 30, 2011, a 7% increase year-over-year.
  • 6Daily average client trades increased by 35% to 475,400 in the third quarter of 2011, indicating strong client activity.
  • 7Schwab Bank maintained its 'well capitalized' status, with strong regulatory capital ratios.

Frequently Asked Questions

For the three months ended September 30, 2011, The Charles Schwab Corporation reported net revenues of $1.18 billion, an 11% increase year-over-year. Net income rose significantly by 77% to $220 million, resulting in diluted EPS of $0.18, up from $0.10 in the prior year's quarter. This growth was driven by increases in net interest revenue and trading revenue.

The Charles Schwab Corporation completed the acquisition of optionsXpress Holdings, Inc. on September 1, 2011, for $714 million. This acquisition added optionsXpress's online brokerage platform, which focuses on equity options and futures, to Schwab's offerings, enhancing its capabilities for active traders and investors. The financial results of optionsXpress have been included in Schwab's consolidated statements since the acquisition date.

Despite a challenging market environment characterized by weakened equity markets and low interest rates, Schwab demonstrated strong client engagement and trading activity. The company saw a significant increase in net new client assets and daily average trades. Management believes the company's strategy and financial strength position it to navigate current conditions and capitalize on future opportunities.

The company reported strong regulatory capital. Schwab Bank maintained its 'well capitalized' status with robust Tier 1 Risk-Based Capital and Tier 1 Core Capital ratios. The parent company also maintained a healthy Tier 1 Leverage Ratio, indicating a solid financial foundation.