Schwab quarterly profit hits 5-year high

SAN FRANCISCO — Charles Schwab Corp. posted its best quarterly profit in five years as higher money management fees, rising interest rates and lower expenses enabled the discount stock brokerage to offset a continuing decline in trading revenue.

The San Francisco-based company said Monday it earned $186 million, or 14 cents per share, for the three months ended in June. That represented a 65 percent increase from net income of $113 million, or 8 cents per share, in the second quarter last year.

It was Schwab's most profitable three-month period since the company earned $199 million during the second quarter of 2000 — the busiest year in the brokerage's history.

Revenue for this year's second quarter totaled $1.09 billion, a 5 percent increase from $1.03 billion last year.

Schwab's earnings per share were a penny above the mean estimate among analysts surveyed by Thomson Financial.

The company's shares gained 63 cents, or nearly 5 percent, to close at $13.37 on the New York Stock Exchange.

The results indicate that a reorganization launched a year ago by company founder Charles Schwab is beginning to pay off.

"I feel like Schwab is a battleship that is coming out of dry dock and is ready to return to the offensive," Charles Schwab said during an interview Monday.

After the company's board ousted David Pottruck as chief executive, Charles Schwab returned to the helm, determined to woo back alienated customers by cutting prices while he also tried to boost profits by cutting costs.

That mission has largely been accomplished, Charles Schwab said Monday.

The price cuts have spurred more Schwab customers to buy and sell stocks, but that hasn't been enough to boost trading revenue.

Although Schwab's commission-generating trades rose 24 percent from last year to an average of 176,500 per day during the second quarter, the company's trading revenue fell 28 percent to $187 million. Schwab's commissions averaged $16.28 per trade in the second quarter, down from $30.06 per trade last year.

While trading commissions plunged, money management and other administration fees climbed 7 percent to $552 million.