Charles Schwab 2010 Annual Report Download - page 35

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THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
to replace maturing securities with low yielding securities and the overall yield on such funds may remain below the management fees on
those funds. To the extent this occurs, fees may continue to be waived and could increase from the fourth quarter 2010 level, which would
negatively affect asset management and administration fees.
The Company recorded net impairment charges of $36 million and $60 million related to certain non-agency residential mortgage-backed
securities in 2010 and 2009, respectively, due to credit deterioration of the securities’ underlying collateral. Further deterioration in the
performance of the underlying loans in the Company’s residential mortgage-backed securities portfolio could result in the recognition of
additional impairment charges.
The “Dodd-Frank Wall Street Reform and Consumer Protection Act” was signed into law in July 2010. Among other things, the legislation
authorizes various assessments and fees and requires the establishment of minimum leverage and risk-based capital requirements for insured
depository institutions. CSC is continuing to review the impact the legislation, studies and related rule-making will have on the Company’s
business, financial condition, and results of operations.
RESULTS OF OPERATIONS
The following discussion presents an analysis of the Compan
y
’s results of operations for the years ended December 31, 2010, 2009, and
2008.
Net Revenues
The Compan
y
’s major sources of net revenues are asset management and administration fees, net interest revenue, and trading revenue.
Asset management and administration fees and trading revenue decreased, while net interest revenue increased in 2010 as compared to 2009.
Asset management and administration fees, net interest revenue, and trading revenue decreased in 2009 as compared to 2008.
-19 -
Year Ended December 31,
2010 2009 2008
Growth Rate
2009-2010 Amount
% of
Total Net
Revenues Amount
% of
Total Net
Revenues
Amount
% of
Total Net
Revenues
Asset management and
administration fees
Mutual fund service fees:
Proprietary funds (Schwab
Funds and Laudus
Funds )
(37%)
$601
14% $949 23%
$1,265
24%
Mutual Fund OneSource
36%
628
15% 461 11%
544
11%
Othe
r
13%
105
2% 93 2%
108
2%
Investment management and
trust fees
38%
377
9% 273 7%
34
0
7%
Other
1
2
%
111
3% 99 2%
98
2%
Asset management and
administration fees
(3%)
1,82
2
43% 1,875 45%
2,355
46%
Net interest revenue
Interest revenue
21%
1,723
41% 1,428 34%
1,908
37%
Interest expense
9%
(199)
(5%)
(183)
(4%)
(226)
(4%)
Net interest revenue
2
2
%
1,524
36% 1,245 30%
1,682
33%
Tradin
g
revenue
Commissions
(13%)
77
0
18% 884 21%
915
18%
Princi
p
al transactions
(46%)
6
0
2% 11
2
3%
165
3%
Tradin
g
revenue
(17%)
83
0
20% 996 24%
1,080
21%
Othe
r
(23%)
135
3% 175 3%
94
2%
Provision for loan losses
(29%)
(27)
(1%) (38) (1%)
(17)
(1%)
Net impairment losses on
securities
(4
0
%)
(36)
(1%) (6
0
) (1%)
(44)
(1%)
Total net revenues
1%
$ 4,248
100% $ 4,193 100%
$ 5,15
0
100%
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