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Charles Schwab Q1 Profits Down By 45%

Charles Schwab has reported a net income of $119m on total net revenue of $978m for the first quarter of 2010, compared with $218m on total net revenue of $1.1bn, down 45% from the first quarter of 2009.

In the investeror services, net new accounts for the quarter totaled approximately 52,000, up 20% year-over-year. Total accounts reached 5.4m as of March 31, 2010, up 3% year-over-year.

Walt Bettinger, CEO of Charles Schwab, said: “Our investments in improved pricing, client solutions, service and our brand are yielding continued strength in our key metrics – net new assets totaled $23bn in the first quarter, total client assets reached a record $1.49 trillion, up 36% year-over-year, and new brokerage accounts totaled 230,000, the highest since the first quarter of 2008 and up 11% from a year ago. We ended March serving 7.8m total brokerage accounts, 768,000 banking accounts, and 1.5m retirement plan participants.”

Joe Martinetto, CFO of Charles Schwab, said: “Asset quality continues to be high overall and the delinquency, nonaccrual, and loss reserve ratios for Schwab Bank’s loan portfolio equaled 0.76%, 0.44% and 0.69%, respectively, at month-end March, all far below national averages. We repaid approximately $200m in maturing debt and completed a $543m equity offering to support company growth during the quarter, and we ended March with approximately $970m in available cash and other liquid assets at the parent level.

“Short-term rates finally stopped declining in late January/early February and subsequently began to rise a bit, which helped our first quarter net interest margin reach 183 basis points, up slightly from the prior quarter. This improvement, coupled with continued growth in our client base – our average interest-earning assets for the first quarter equaled $72.3bn, up 48% year-over-year – helped us achieve net interest revenue that was 7% higher than last year and sequentially higher for the second straight quarter.

“The rate environment improvement occurred too late, however, to prevent money market fund fee waivers from reaching $125m in the first quarter, and asset management and administration fees declined by 16% year-over-year. In addition, with client trading activity remaining muted relative to year-ago levels and our reduced online trade pricing taking effect in January, overall trading revenue was down 19%. Our first quarter expenses include an $11m pre-tax charge relating to pending litigation involving the Schwab YieldPlus ultra-short bond fund. Our overall expense discipline remains very much in place, and our first quarter spending was consistent with our operating plan.”