| 15 October 2009

The Charles Schwab Corporation (SCHW) reported its third-quarter earnings before market open this morning, meeting analyst expectations set earlier at $0.17 per share. The company posted a $200 million profit, which is about on par with last quarter's profit of $205 million.

CEO Walt Bettinger summarized the quarter's activity, saying, "Overall, we attracted another $20 billion in net new assets during the third quarter, added 181,000 new brokerage accounts." Schwab added 190,000 accounts in the second quarter.

"Total client assets reached $1.36 trillion," said Bettinger, "up 5%, reflecting both improved equity market valuations and our success in continuing to attract and retain clients.” Last quarter Schwab client assets dropped 12% to $1.22 trillion.

Schwab's banking business continued to climb, with a 67% increase in accounts over the year-ago figures. Total investing accounts reached 5.3 million, a 3% increase over a year ago. Average daily trades dipped 10% quarter-over-quarter to 273,700 daily average revenue trades (DARTs)

Speculation surrounded this particular earnings announcement that a takeover of E*TRADE Financial (ETFC) was imminent. Both Schwab and TD Ameritrade (AMTD) have been named as a possible buyers of the troubled organization. TD Ameritrade and E*TRADE are scheduled to report their earnings in two weeks, on October 27th.

In separate news, the LA Times is reporting that the SEC sent a letter to Schwab warning them that regulators plan to recommend legal action against the organization. At issue are two Schwab funds, the Schwab YieldPlus Fund and the Schwab Total Bond Market Fund, which dramatically underperformed their peers. Investors are alleging that they were deceived when they purchased the funds.

Schwab has already settled a number of separate individual complaints relating to the fund's performance, and still has a chance to dissuade investigators from filing a claim.