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Schwab Reports Second Quarter Results

CFO Joe Martinetto commented, “With no major surprises or disruptions from the environment, we came through the second quarter about where we expected to be financially – balance and spread-related revenues ran at or slightly above plan, trading revenue remained relatively muted, and expenses reflected our moves to ensure spending growth remains below revenue expansion.”

“While year-over-year growth in total revenues and net income for the second quarter was limited by last year’s $70 million pre-tax gain, the signs of our building earnings power are clear,” Mr. Martinetto said. “Strength in asset gathering and advice enrollments helped asset management and administration fees grow by 15% over the second quarter of 2012, net interest revenue rose by 3% even though short-term interest rates were below year-earlier levels, and a modest rebound in client activity lifted trading revenues by 7%. The temporary and seasonal factors that elevated compensation and benefits expense in the first quarter faded largely as anticipated and we continue to expect that careful headcount management will result in limited growth during the rest of 2013. We’re still aiming for full-year 2013 expense growth that allows for both increased investment in our clients and improvement in profit margin and earnings for the year.”

Mr. Martinetto concluded, “Recent increases in longer-term rates driven by the ongoing economic recovery are certainly helpful in mitigating downward pressure on our net interest margin, as we reinvest our fixed-rate assets at maturity. Since our balance sheet is structured so that Schwab’s net interest revenue is more sensitive to changes in short-term interest rates - which have held relatively steady lately after dipping earlier in the year – more rapid and significant revenue impacts will be visible as that end of the yield curve begins to rise. With the economic recovery and overall rate environment currently pointing towards continued easing of headwinds for the company, the healthy balance sheet and solid capital base we’ve built keep us well positioned to drive growth going forward.”

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