Charles Schwab 2011 Annual Report Download - page 19

Download and view the complete annual report

Please find page 19 of the 2011 Charles Schwab annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Building Earnings Power for Stockholders
Whether our activities are focused on acquisition, monetiza-
tion, or retention, they have one thing in common: They
are designed to deliver outstanding long-term growth of
earnings per share.
The current record-low interest rate environment makes it
difcult to measure the progress we are making at building
earnings power. However, a careful review illustrates the
progress we have made during the nancial crisis.
Our rm’s record quarter for earnings was the second quarter
of 2008, when we earned $0.27 per share from continuing
operations. If we apply the same economic environment
from Q2 2008 to the second quarter of 2011 — including
a 2 percent Fed Funds rate and the S&P 500 averaging
1,350 — and assuming no other change, we would have
earned $0.39 per share. Put another way, it took us almost
35 years to grow quarterly earnings to $0.27 per share from
continuing operations. A mere three years later, we would
have grown our EPS power another 44 percent, to $0.39, if
conditions had remained constant.
Creating and Delivering Long-Term Stockholder Value
Our 2011 performance conrms that Schwab is on the right
track. As we look toward 2012 and beyond, we will stay the
course with our “through clients’ eyes” strategy, and we will
continue to focus on our successful operating priorities.
Our goal is not just to build earnings power, but also to
deliver it to our stockholders as the environment improves.
As I write this letter, it is difcult to see the economic envi-
ronment improving to a signicant extent in the near term.
As we move into 2012, we are facing what is likely to be a
turbulent, bruising, and important presidential election. In
addition, we continue to witness sovereign debt problems
in Europe, the ongoing deleveraging of the consumer, and
the extraordinary commitments by the Federal Reserve to
keep interest rates anchored at record-low levels.
Nevertheless, your management team remains focused on
continuing to build the Schwab brand and franchise, serving
millions more clients and gathering billions of dollars in new
assets. Each and every day, we apply our efforts to building
earnings power that will benet our long-term shareholders.
For as we all know, the challenges of today won’t last forever.
Thank you for your condence.
Warmly,
WALT BETTINGER
March 10, 2012
17
0%
20%
10%
-10%
-20%
-30%
30%
40%
50%
60%
70%
2007200620052004 2008 2009 2010 2011
Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4
-17%
-4%
14%
25% 24% 30%
34% 36%
CLIENT PROMOTER TRENDS FOR INVESTOR SERVICES*
* Client Promoter Score (CPS) is a program in which we survey clients and ask them to rate us, from 0 to 10, on their willingness to recommend
Schwab. CPS is calculated by taking the percentage of “promoters” minus the percentage of “detractors” to arrive at a net indicator of loyalty.
EPS POWER*
Hypothetical based on Q2 2011 and Q2 2008
environment (2% Fed Funds, 1,350 S&P 500 avg.).
Actual EPS
* Does not address
performance
beyond Q2 2011.
Q2 2011
$0.20
$0.39
Q2 2008
$0.27