Charles Schwab 2011 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 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

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)
- 21 -
RESULTS OF OPERATIONS
The following discussion presents an analysis of the Company’s results of operations for the years ended December 31, 2011,
2010, and 2009.
Net Revenues
The Company’s major sources of net revenues are asset management and administration fees, net interest revenue, and
trading revenue, which all increased in 2011 as compared to 2010. Asset management and administration fees and trading
revenue decreased, while net interest revenue increased in 2010 as compared to 2009.
Year Ended December 31, 2011 2010 2009
% of % of % of
Growth Rate Total Net Total Net Total Net
2010-2011 Amount Revenues Amount Revenues Amount Revenues
Asset management and administration fees
Schwab money market funds before fee waivers - $ 865 $ 865 $ 1,011
Fee waivers 31% (568) (433) (224)
Schwab money market funds after fee waivers (31%) 297 6% 432 10% 787 18%
Equity and bond funds 4% 118 3% 114 3% 108 3%
Mutual Fund OneSource 12% 680 14% 608 14% 446 11%
Total mutual funds 5% 1,095 23% 1,154 27% 1,341 32%
Advice solutions 36% 522 11% 384 9% 278 7%
Other 10% 311 7% 284 7% 256 6%
Asset management and administration fees 6% 1,928 41% 1,822 43% 1,875 45%
Net interest revenue
Interest revenue 10% 1,900 41% 1,723 41% 1,428 34%
Interest expense (12%) (175) (4%) (199) (5%) (183) (4%)
Net interest revenue 13% 1,725 37% 1,524 36% 1,245 30%
Trading revenue
Commissions 12% 866 19% 770 18% 884 21%
Principal transactions 2% 61 1% 60 2% 112 3%
Trading revenue 12% 927 20% 830 20% 996 24%
Other 19% 160 3% 135 3% 175 3%
Provision for loan losses (33%) (18) - (27) (1%) (38) (1%)
Net impairment losses on securities (14%) (31) (1%) (36) (1%) (60) (1%)
Total net revenues 10% $ 4,691 100% $ 4,248 100% $ 4,193 100%
Asset Management and Administration Fees
Asset management and administration fees include mutual fund service fees and fees for other asset-based financial services
provided to individual and institutional clients. The Company earns mutual fund service fees for shareholder services,
administration, investment management, and transfer agent services (through July 2009) provided to its proprietary funds,
and recordkeeping and shareholder services provided to third-party funds. These fees are based upon the daily balances of
client assets invested in these funds. The Company also earns asset management fees for advice solutions, which include
advisory and managed account services that are based on the daily balances of client assets subject to the specific fee for
service. The fair values of client assets included in proprietary and third-party mutual funds are based on quoted market
prices and other observable market data. Other asset management and administration fees include various asset based fees,
such as trust fees, 401k record keeping fees, and mutual fund clearing and other service fees. Asset management and
administration fees may vary with changes in the balances of client assets due to market fluctuations and client activity. For
discussion of the impact of current market conditions on asset management and administration fees, see “Current Market and
Regulatory Environment.”
Asset management and administration fees increased by $106 million, or 6%, in 2011 from 2010 primarily due to an increase
in advice solutions fees, partially offset by a decrease in mutual fund service fees. Asset management and administration fees