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Schwab Reports Fourth Quarter and Full Year Results
SAN FRANCISCO, Jan. 18 /PRNewswire-FirstCall/ -- The Charles Schwab
Corporation announced today that its net income for the quarter ended December
31, 2004 was $53 million. In comparison, the Company reported a net loss of
$41 million for the third quarter of 2004 and net income of $148 million for
the fourth quarter of 2003. Excluding $62 million in after-tax charges
relating to its ongoing cost reduction effort and $49 million in after-tax
charges related to the Company's exit from the capital markets business,
Schwab's fourth quarter 2004 adjusted operating income was $164 million -- up
53% from the $107 million adjusted operating income generated in the prior
quarter, and up 12% from the year-ago quarter's $147 million.
For the year ended December 31, 2004, the Company's net income was $286
million, down 39% from 2003. Adjusted operating income for 2004 was $538
million, 10% higher than the 2003 level.
Three Months Ended Twelve Months Ended
--December 31,-- % --December 31,-- %
Financial Highlights 2004 2003 Change 2004 2003 Change
Reported Results:
Revenues
(in millions) $1,060 $1,062 -- % $4,202 $3,896 8%
Net income
(in millions) $53 $148 (64)% $286 $472 (39)%
Diluted earnings
per share $.04 $.11 (64)% $.21 $.35 (40)%
After-tax
profit margin 5.0% 13.9% 6.8% 12.1%
Return on
stockholders' equity 5% 13% 6% 11%
Adjusted Operating Results(1):
Revenues
(in millions) $1,060 $1,045 1% $4,188 $3,879 8%
Income
(in millions) $164 $147 12% $538 $491 10%
Diluted earnings
per share $.12 $.11 9% $.39 $.36 8%
After-tax
profit margin 15.5% 14.1% 12.8% 12.7%
(1) Non-GAAP income measures which exclude gains or losses from
discontinued operations, non-recurring gains on sales of investments,
restructuring charges, impairment charges, and a non-recurring tax
benefit.
In reviewing the Company's performance, Chairman and CEO Charles Schwab
commented, "The last six months have been a period of extensive change at
Schwab, as we have refocused on our core strategy of meeting the needs of
individual investors and the independent advisors who serve them, exited the
capital markets business, and launched a firm-wide cost reduction initiative.
Throughout all of these corporate actions, however, we have remained focused on
building stronger relationships with our clients by reducing our commission
rates and enhancing our services -- and our progress here is reflected in our
fourth quarter client fundamentals. Clients brought a total of $16.8 billion
in net new assets to the firm in the fourth quarter, our highest level,
excluding asset inflows relating to acquisitions, in 13 quarters. Total client
assets were a record $1.081 trillion at year end, up 12% from December 2003.
In December, clients opened 56,000 new accounts, 37% higher than November and
our best month since April 2004. We believe that providing great service at a
great value will enable us to continue to attract investors of all types --
independent investors, active traders, and those who want advice."
CFO Christopher Dodds noted, "The securities markets improved and client
activity picked up during the fourth quarter of 2004, helping the Company to
achieve its seventh consecutive quarter of growth in non-trading revenues --
asset management and administration fees, net interest income and other
revenues reached a new record of $842 million, up 15% from the fourth quarter
of 2003. This increase more than offset the impact of our reduced trading
commissions and yielded 8% overall revenue growth for 2004. While $261 million
in after-tax charges associated with our cost reduction initiative and our exit
from the capital markets business contributed to net income of $286 million for
the year, those actions have enabled us to dramatically reduce our cost base
and improve our margins. Our 15.5% after-tax operating profit margin for the
fourth quarter is the highest level since the first quarter of 2000 and
reflects our emphasis on improving returns to stockholders. We are entering
the new year with a leaner, more focused organization that can continue to rely
on a strong balance sheet with $4.4 billion of stockholders' equity. That
financial strength enabled us to reduce our long-term debt by $187 million,
increase our dividend by 43%, and repurchase $383 million of common stock
during the course of 2004."
Business highlights for the fourth quarter (data as of quarter-end unless
otherwise noted):
Advised Investing
-- For accounts at the Company with an ongoing advisory component
(includes accounts enrolled in Schwab Private Client and Schwab Advised
Investing(TM), accounts managed by independent investment advisors
(IAs), and U.S. Trust(R) accounts):
-- Net new client assets during the quarter = $11 billion.
-- Total assets = a record $515 billion, up 18% year-over-year.
-- Total number of accounts = 1.5 million.
Individual Investor Business
-- Number of clients enrolled in Schwab Private Client and Schwab Advised
Investing = 43,300, up 22% from the prior quarter.
-- Announced a new branch strategy that revolves around one-on-one
relationships with a Schwab consultant for clients with more complex
needs. The new strategy also includes the use of satellite branch
offices staffed with one or two consultants to provide a cost-efficient
way of serving certain markets.
-- Streamlined the range of offers and enhanced software functionality for
active traders.
-- Improved our options trading offering to include reduced pricing,
enhanced tools and expanded education.
-- Introduced the Individual 401(k) plan for owner-only businesses and the
self-employed.
Schwab Institutional Business
-- Total client assets associated with Schwab Institutional =
$348 billion, up 21% year-over-year.
-- Client assets new to the Schwab Advisor Network(R) program during the
quarter = $1.8 billion.
-- Client referrals to IAs through Schwab Advisor Network(R) program
during the quarter = 3,500, down 9% from the prior quarter.
-- Client assets at Schwab associated with IA referral programs =
$25 billion, up 29% year-over-year and up approximately $2.4 billion
during the quarter.
-- Hosted the 14th annual IMPACT(R) conference, where over 1,000 IAs
attended the 4-day conference which included more than 30 educational
sessions, forums and workshops.
-- Debuted a new section in the Schwab Institutional website that provides
IAs with tools and services to help them understand and comply with
ongoing compliance issues and the latest regulatory changes affecting
the industry.
Corporate Services Business
-- Net new assets at Corporate Services during the quarter = $1.8 billion.
-- Total client assets in employer-sponsored retirement plans at Schwab =
$131 billion, up 14% year-over-year.
U.S. Trust Business
-- Total referrals from Schwab to U.S. Trust were over 280, compared with
over 330 in the prior quarter.
-- Client assets at U.S. Trust associated with the referral program =
$4.7 billion, up 48% year-over-year and up $470 million during the
quarter.
-- Total client assets at U.S. Trust = $141 billion, up 3% year-over-year.
Products
-- Total client assets held in third-party Mutual Fund OneSource(R) funds
= $128 billion.
-- Total client assets held in proprietary funds (SchwabFunds(R),
Excelsior(R) and other) = $155 billion.
-- Total client assets held in fixed income securities = $141 billion, up
8% year-over-year.
-- Launched the Schwab Tax-Free YieldPlus Fund(TM) and the Schwab
California Tax-Free YieldPlus Fund(TM) -- two new ultra short tax-free
bond funds for investors seeking a higher yield than a money fund but
with less risk than a short-term bond fund.
-- For Charles Schwab Bank, N.A.:
-- Balance sheet assets = $4.4 billion, up 8% from the prior quarter.
-- Outstanding mortgage and home equity loans = $1.2 billion.
-- First mortgage originations during the quarter = $247 million.
-- Launched the Charles Schwab Bank Visa(R) credit card with
WorldPoints(TM) Rewards.
-- Introduced the Pledged Asset Mortgage, a home financing option that
allows investors to use eligible securities in their investment
portfolio as additional collateral for a home mortgage loan.
The Charles Schwab Corporation (NYSE/Nasdaq: SCH), through its operating
subsidiaries, provides securities brokerage and financial services to
individual investors and the independent investment advisors who work with
them. With over 7 million individual investor accounts and more than $1
trillion in client assets, The Charles Schwab Corporation is one of the
nation's largest financial services firms. Its subsidiary Charles Schwab & Co.,
Inc. (member SIPC) provides a complete range of investment services and
products, including an extensive selection of mutual funds; financial planning
and investment advice; retirement plans; referrals to independent fee-based
investment advisors; and custodial, operational and trading support for
independent fee-based investment advisors. Its subsidiary Charles Schwab Bank,
N.A. (member FDIC) provides banking and mortgage services and products. The
corporation's other operating subsidiaries include U.S. Trust Corporation
(member FDIC) and CyberTrader(R), Inc. (member SIPC). These companies' Web
sites can be reached at http://www.schwab.com/, http://www.schwabbank.com/,
http://www.ustrust.com/, and http://www.cybertrader.com/.
DATASOURCE: Charles Schwab Corporation
CONTACT: press, Glen Mathison, +1-415-636-5448, or investors/analysts,
Rich Fowler, +1-415-636-9869, both of Charles Schwab
Web site: http://www.schwab.com/