49erSteve---Thursday April 15, 8:45 am Eastern Time
Company Press Release
SOURCE: Charles Schwab Corporation
Schwab Reports Record Quarterly Results Earnings
Rise 110% on 57% Revenue Growth Online Assets
Reach $219 Billion
SAN FRANCISCO, April 15 /PRNewswire/ -- The Charles Schwab Corporation (NYSE: SCH - news) reported net income
of $142.9 million, or $.34 per share, on revenues of $951.6 million for the quarter ended March 31, 1999. Net income for the
first quarter of 1998 was $68.0 million, or $.16 per share, on revenues of $604.4 million. Both revenues and net income for the
first quarter of 1999 were the highest in the Company's history.
Three Months Ended
--March 31,-- %
Financial Highlights 1999 1998 Change
Revenues (in millions) $951.6 $604.4 57%
Net income (in millions) $142.9 $68.0 110%
Diluted earnings per share (a) $.34 $.16 113%
After-tax profit margin 15.0% 11.3%
Return on stockholders' equity 36% 23%
(a) Reflects the December 1998 three-for-two common stock split.
In reviewing the first quarter, Chairman and Co-CEO Charles R. Schwab commented, ''Throughout a period marked by
record volumes in the securities markets, we continued to enhance our ability to provide Schwab's customers with access,
information and guidance designed to help them succeed as investors. We believe our efforts are reflected in the continued
strength of the Company's fundamentals -- during the past three months our customers brought a record $28 billion in net new
assets to the firm and opened 388,000 new accounts. After reaching the $500 billion milestone during January, we ended the
quarter with $542 billion in customer assets held in 5.9 million active accounts.''
''Our customers' daily average revenue trades exceeded 160,000 in the first quarter of 1999, which was 90% more than a
year ago,'' the Chairman said. ''This unprecedented level of activity led to strong growth in our trading revenues -- principal
transaction revenues more than doubled, while commissions rose by 59%. Additionally, our broad range of services continued
to appeal to investors, as net interest income and mutual fund service fees grew by 43% and 35%, respectively, over last year.
Our ongoing investments in technology have enabled the firm to handle significant increases in customer activity without a
corresponding rise in staffing levels. Full-time equivalent employees totaled 14,800 at month-end March, up 11% from last
year. Given the recent growth in our customer base, we are proceeding with an aggressive hiring program designed to help us
keep pace with our customers' service needs -- the Company is currently working to fill well over 1,000 open positions. Our
continued focus on expenses and risk management, in combination with the recent surge in customer trading volumes, helped
Schwab achieve a 15% after-tax profit margin for the first quarter, well above our performance in recent years.''
President and Co-CEO David S. Pottruck said, ''The past three months demonstrated why we believe Schwab's combination
of high-tech and high-touch is redefining full-service investing. Reflecting our continued leadership in online investing, our Web
site handled an average of 50 million hits each business day during the first quarter and online trades accounted for 65% of total
trades for the period, up from 12 million and 48%, respectively, a year ago. We believe that we now have the most active
encrypted Web site in the world. By quarter-end, we had 2.5 million active online accounts with $219 billion in assets, and our
momentum has continued into April. On Monday the 12th we processed 192,000 online trades and 303,000 trades overall,
which were both Company records.''
''While Web-based activity continued to grow during the first quarter, our automated telephone systems were handling
370,000 calls and 10,000 trades each day as well,'' Mr. Pottruck continued. ''We also opened seven new branches during the
period, bringing our total to 298. Schwab employees answered an average of 140,000 calls and processed an average of
58,000 trades each day during the quarter, a feat made possible by the extraordinary commitment of our customer service staff
and the participation of approximately 450 headquarters employees trained to assist customers during periods of exceptional
volume.''
''We believe that delivering full-service investing means delivering the information and guidance customers expect, along with
multi-channel access,'' Mr. Pottruck added. ''During the first quarter we launched our Schwab Signature Services(TM)
program, which provides the nearly 600,000 Schwab customers who either have at least $100,000 to invest or trade at least
twelve times a year with access to a package of services designed to expand as their relationship with Schwab grows. The
program includes priority access to dedicated representatives and a special Web site that includes tools like our Quarterly
Profile Report(TM), which assists in the evaluation of investment performance, and online access to both our CEO and Mutual
Fund Speakers Series. We've also completed the rollout of the Equity Report Card(TM) and the Positions Monitor(TM),
which are Web-based investment evaluation tools that provide comparisons against market benchmarks. In addition, we now
offer SchwabAlerts(TM), which enables customers to receive news relating to their investments and market activity via e-mail.''
''The Company continues to improve the way it meets the needs of the 5,400 independent investment managers who use us for
custodial, trading and support services,'' the President said. ''As part of that effort, we recently inaugurated an Emerging
Practices Advisory Council, a forum for managers with developing practices to share their thoughts and ideas with us. Overall,
customer assets at Schwab under the management of independent investment managers totaled approximately $163 billion as
of month-end March, up 34% from a year ago.''
''During the first quarter we launched three proprietary equity index funds in the U.S. designed for our investment manager
customers, who can now choose from over 875 funds at Schwab that are tailored to their needs,'' Mr. Pottruck said. ''Our
SchwabFunds® family now includes 39 funds with a total of $91 billion in customer assets, a 44% increase over last year.
Total mutual fund assets at Schwab reached $226 billion as of month-end March, including $73 billion in Mutual Fund
OneSource® funds.''
Mr. Pottruck noted, ''Early in 1999, we took another step in building our international presence by completing the acquisitions
of Priority Brokerage Inc. and Porthmeor Securities Inc. of Toronto, which we combined to form Charles Schwab Canada,
Co. In addition, we became the first brokerage firm in the United Kingdom to enable customers to open and manage
self-directed Individual Savings Accounts through the Internet.''
The Company's Annual Meeting of stockholders will be held at 2:00 p.m. on Monday, May 17, 1999, in San Francisco at the
Yerba Buena Center for the Arts Theater, 700 Howard Street. Stockholders who wish to attend may return the ticket request
card included with their proxy material. Any questions concerning the Annual Meeting should be directed to the Assistant
Corporate Secretary at 415-636-1406.
The Charles Schwab Corporation, through its principal operating subsidiary, Charles Schwab & Co., Inc. (member
SIPC/NYSE), is one of the nation's largest financial services firms serving 5.9 million active accounts with $542 billion in
customer assets through 298 branch offices, four regional customer telephone service centers and automated telephonic and
online channels. The Charles Schwab Web Site(TM) can be reached at www.schwab.com.
THE CHARLES SCHWAB CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
Three Months
Ended
March 31,
1999 1998
Revenues
Commissions $472.7 $297.8
Mutual fund service fees 169.3 125.4
Interest revenue, net of interest expense (A) 149.9 104.6
Principal transactions 131.3 52.7
Other 28.4 23.9
Total 951.6 604.4
Expenses Excluding Interest
Compensation and benefits 390.2 265.9
Communications 66.8 47.0
Occupancy and equipment 60.0 45.2
Advertising and market development 52.6 40.2
Depreciation and amortization 34.9 34.2
Professional services 32.3 19.0
Commissions, clearance and floor brokerage 24.4 19.3
Other 54.3 21.2
Total 715.5 492.0
Income before taxes on income 236.1 112.4
Taxes on income 93.2 44.4
Net Income $142.9 $68.0
Weighted-average common shares outstanding
- Diluted (B) 419.3 412.2
Earnings Per Share (B)
Basic $.36 $.17
Diluted $.34 $.16
Dividends Declared Per Common Share (B) $.0280 $.0267
(A) Interest revenue is presented net of interest expense.Interest
expense for the three months ended March 31, 1999 and 1998 was
$173.5 million and $155.6 million, respectively.
(B) Reflects the December 1998 three-for-two common stock split.
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