10-QPeriod: Q1 FY2013

SCHWAB CHARLES CORP Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:SCHWSCHW-PDSCHW-PJ

Summary

Charles Schwab Corporation (SCHW) reported its first quarter 2013 results, showing a modest increase in net revenues of 8% year-over-year, reaching $1.29 billion. This growth was driven by higher asset management and administration fees, along with an increase in net interest revenue. The company also benefited from lower net impairment losses on securities. Despite a slight increase in expenses excluding interest, SCHW managed to grow its net income by 6% to $206 million, or $0.15 per diluted share. Client activity remained strong, with net new client assets reaching $43.4 billion, marking the highest first quarter inflow since 2000. Total client assets also hit a record $2.08 trillion. However, trading revenue saw a decline of 8%, primarily due to lower daily average revenue trades, reflecting a more muted trading environment. The company's balance sheet remained robust, with total assets of $133.3 billion and total liabilities of $123.5 billion, maintaining strong liquidity and capital positions.

Financial Highlights

37 data points
Beta

Revenue

$1.29B

Net Income

$206.00M

16.0% Net Margin

EPS (Diluted)

$0.15

Total Assets

$133.32B

Cash & Equivalents

$6.93B

Free Cash Flow

-$417.00M

Financial Statements
Beta
Revenue$1.29B
Interest Expense$28.00M
Net Income$206.00M
EPS (Basic)$0.15
EPS (Diluted)$0.15
Shares Outstanding (Basic)1.28B
Shares Outstanding (Diluted)1.28B

Key Highlights

  • 1Net revenues increased by 8% to $1.29 billion, driven by asset management, administration fees, and net interest revenue.
  • 2Net income grew by 6% to $206 million, resulting in diluted Earnings Per Share (EPS) of $0.15, consistent with the prior year's quarter.
  • 3Client assets reached a record high of $2.08 trillion, up 14% year-over-year.
  • 4Net new client assets were $43.4 billion, the highest first quarter inflow since 2000.
  • 5Trading revenue decreased by 8% due to lower trading volumes, impacted by a muted market environment.
  • 6Expenses excluding interest increased by 9%, primarily due to higher compensation and benefits, and advertising costs.
  • 7The company maintained strong regulatory capital ratios, with Schwab Bank considered 'well capitalized'.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in asset management and administration fees, which benefited from higher client asset balances, and a rise in net interest revenue due to higher interest-earning asset balances. Lower net impairment losses on securities also contributed positively.

Trading revenue decreased by 8% mainly due to a reduction in daily average revenue trades. This was a consequence of generally lower trading activity and market volatility compared to the prior year's quarter.

Expenses excluding interest increased by 9% year-over-year. The main contributors to this rise were higher compensation and benefits costs, including increased incentive compensation and employee benefits, and a rise in advertising and market development spending.

The company noted that the continued low interest rate environment was constraining net interest revenue. While higher balances of interest-earning assets helped offset this to some extent, the low rates limited the ability to reduce interest expenses paid on funding sources. The company indicated that increases in short-term interest rates tend to have a more immediate positive impact on net interest revenue.