Charles Schwab Keeps It Real (SCHW)

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The Charles Schwab Corporation (NASDAQ: SCHW) posted a 4% earnings drop down to $0.26 EPS, which is after a $0.04 item for previously disclosed charges.  Revenues fell 3% from Q3-2007 down to $1.251 billion, but pre-tax profit margin rose 0.2% to $39.9%.  First Call had estimates at $0.24 EPS and $1.28 billion in revenues.  All in all, its core metrics are still holding up well even if Schwab’s clients are feeling the pinch.

What is interesting despite the turmoil, is that the online tradingfirm posted a third quarter net interest gain of 3% and tradingrevenues rose by 16% compared to Q3-2007.

Net new accounts for the quarter were 21,000 and now at 5.2 million asof September 30, 2008, up 4% from Q3-2007.  For Charles Schwab Bank,its assets were up 78% from Q3-2007 at $23.7 billion, with outstandingmortgage and home equity loans grew 77% from Q3-2007 to $5.3 billion,and it posted first mortgage originations of $511 million during thequarter.

A partial comment from Founder & Chairman Charles Schwab outlines a manager trying to discuss the current climate:

  • “Investors are experiencing market conditions that are as difficult asI have seen in my career and that test anyone’s resolve and confidence.Schwab’s focus has remained right where it belongs – helping ourclients navigate through this storm…."

The CFO called its current position as one still showing strength bynoting, "…flexible, all-weather balance sheet with over $4 billion ofstockholders’ equity, multiple sources of liquidity and strong creditratings."

Chuckie’s shares closed at $20.97 yesterday and are indicated down at$20.15 in pre-market indications.  Its 52-week trading range is $17.05to $26.20.

Jon C. Ogg
October 15, 2008