Charles Schwab 2013 Annual Report Download - page 33

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)
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RESULTS OF OPERATIONS
The following discussion is an analysis of the Company’s results of operations for the years ended December 31, 2013, 2012,
and 2011.
Net Revenues
The Company’s major sources of net revenues are asset management and administration fees, net interest revenue, and
trading revenue. Asset management and administration fees, net interest revenue, and trading revenue all increased in 2013 as
compared to 2012. Asset management and administration fees and net interest revenue increased, while trading revenue
decreased in 2012 as compared to 2011.
Year Ended December 31,  2013 2012 2011
 % of % of  % of
Growth Rate Total Net Total Net  Total Net
2012-2013 Amount Revenues Amount Revenues Amount Revenues
Asset management and administration fees 
Schwab money market funds before fee waivers 5 % $ 936 $ 891  $ 865
Fee waivers 15 % (674) (587)  (568)
Schwab money market funds after fee waivers (14)% 262 5% 304 6 %
 297 6%
Equity and bond funds 26 % 157 3% 125 3 %
 118 3%
Mutual Fund OneSource® 14 % 774 14 % 680 14 %
 680 14 %
Total mutual fund service fees 8 % 1,193 22 % 1,109 23 %
 1,095 23 %
Advice solutions 24 % 718 13 % 580 12 %
 522 11 %
Other 14 % 404 8% 354 7 %
 311 7%
Asset management and administration fees 13 % 2,315  43 %  2,043
 42 %  1,928  41 %
Net interest revenue 
Interest revenue 9 % 2,085 38 % 1,914 39 %
 1,900 41 %
Interest expense (30)% (105) (2)% (150) (3)%
 (175) (4)%
N
et interest revenue 12 % 1,980  36 %  1,764
 36 %  1,725  37 %
Trading revenue 
Commissions 6 % 864 16 % 816 17 %
 866 19 %
Principal transactions (6)% 49 1% 52 1 %
 61 1%
Trading revenue 5 % 913  17 %  868
 18 %  927  20 %
Other – net (8)% 236  4%  256
 5 %  160  3%
Provision for loan losses (106)% 1 - (16) -  (18) -
N
et impairment losses on securities (69)% (10) - (32) (1)%
 (31) (1)%
Total net revenues 11 % $ 5,435  100 % $ 4,883
 100 % $ 4,691  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, and investment management 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 third-party mutual fund service fees, trust fees,
401(k) record keeping fees, and mutual fund clearing and other service fees. Asset management and administration fees vary
with changes in the balances of client assets due to market fluctuations and client activity. For a discussion of the impact of
current market conditions on asset management and administration fees, see “Current Market and Regulatory Environment
and Other Developments.”
Asset management and administration fees increased by $272 million, or 13%, in 2013 from 2012 primarily due to increases
in mutual fund service fees and advice solutions fees. Asset management and administration fees increased by $115 million,