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Charles Schwab swings to profit

Discount brokerage Charles Schwab Corp. on Monday said it swung to a profit in the third quarter, helped by asset growth and a moderate rise in revenue.
/ Source: The Associated Press

Charles Schwab Corp.’s quarterly profit surged above $200 million for the first time since the dot-com boom, continuing a comeback that has been orchestrated by the stock brokerage’s eponymous founder.

The San Francisco-based company said Monday that it earned $207 million, or 16 cents per share, for the three months ended in September. That contrasted with a loss of $41 million, or 3 cents per share, at the same time last year.

Revenue for the period totaled $1.14 billion, a 14 percent increase from $1 billion last year.

The earnings were a penny above the consensus estimate among analysts surveyed by Thomson Financial.

Analysts raised their estimates last month after Schwab’s management announced the brokerage’s third-quarter profit would be the highest since the investors were snapping up the stocks of unprofitable Internet companies more than five years ago.

That frenzy encouraged Schwab to expand aggressively, hiring thousands of more workers to accommodate the intense demand.

But Schwab’s revenue shriveled after the Internet investment frenzy fizzled and its suddenly skittish customers curtailed their trading activity. The company tried to offset the losses by diversifying through acquisitions and imposing account service fees, but those moves backfired.

With the company mired in the worst slump in its history, founder Charles Schwab returned as chief executive in a management shake-up 15 months ago. Since his return, Schwab has continued to lower the company’s expenses and passed along some of the savings to customers by lowering stock trading commissions and eliminating most of the account service fees introduced by the previous management team.

The brokerage’s trading commissions averaged $15.05 during the third quarter, a 34 percent decrease from $22.96 last year. But the lower prices are generating far more trading activity. Schwab’s revenue-generating trades averaged 194,700 per day in the third quarter, a 52 percent increase from 128,100 per day last year.

“Schwab is now focused on forging a new era of profitable growth by developing stronger relationships with our clients,” Charles Schwab said in a statement Monday.

As part of the effort, the brokerage has made Charles Schwab the centerpiece of its current advertising campaign, called “Talk To Chuck.”

The comeback has revitalized the company’s long-slumping stock, which has gained nearly 60 percent since Charles Schwab’s return.

Through the first nine months of this year, Schwab earned $538 million, or 41 cents per share, on revenue of $3.28 billion. That compared with net income of $233 million, or 17 cents, per share on revenue of $3.14 billion last year.