Charles Schwab ( SCHW) shares jumped more than 6% Tuesday after the online brokerage and asset management company said profits rose 12% in the first three months of the year, despite the volatile markets.

The San Francisco-based company recorded a profit of $305 million, or 26 cents a share, meeting analysts' estimates. That compares to $273 million, or 22 cents a share, in the year-earlier quarter. Revenue rose 13% from a year ago, but fell 3% from the fourth quarter to $1.3 billion.

"In the face of a tough economic environment, our clients have remained actively engaged with us in managing their investments," said Chairman and CEO Charles Schwab in a company statement.

CFO Joe Martinetto said while short-term interest rates and difficult equity markets weighed on revenues, "sustained expense discipline" and other factors helped offset the impact somewhat. Schwab posted 13% year-over-year revenue growth, a 39% pre-tax profit margin, and a 37% increase in earnings per share from continuing operations, he said.

Martinetto also touted the brokerage's "rigorous capital management." He said the company repurchased $350 million in common stock during the first quarter, and saw a 33% return-on-equity.

At the end of March, the firm had $1.39 trillion in customer assets. Schwab brought in 246,000 new brokerage accounts, a surge of 27% from a year earlier. Net new client assets totaled $41.3 billion -- fueled by a surge in assets from its corporate and retirement services arm.

Still Schwab recorded $93.8 billion of market losses during the quarter.

Last year, Schwab sold its high-net-worth wealth management business U.S. Trust to Bank of America ( BAC). Instead, Schwab has been actively increasing its share in retirement services and 401(k) planning. It purchased The 401(k) Company from Nationwide Financial Services ( NFS) last year, expanding its 401(k) administration business from small and medium-sized companies to large conglomerates

"On balance, first quarter '08 was a solid quarter, but as expected," writes David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. "Results continue to demonstrate the strength of Schwab's asset gathering machine. ... We expect Schwab shares to be an outperformer today."

But one potential area of trouble for the nation's largest discount broker is that the company "appears to be adding mortgage loans at a rapid clip," Trone writes in a note.

Schwab's outstanding mortgage and home equity loans jumped 61% from a year earlier to $3.9 billion. The company said first mortgage originations during the quarter totaled $1.1 billion.

In addition, first quarter mortgage origination volume "almost doubled" from the fourth quarter, Trone writes. "While these growth numbers are off a small base, and the loans are prime, this expansion could create credit issues if unemployment were to worsen enough."

Online brokerage competitor E*Trade Financial ( ETFC) was forced to accept a bailout from Citadel Investments after it took writedowns on its asset-backed securities portfolio, primarily within collateralized debt obligations, or CDOs, and second-lien securities. Citadel ended up taking a 20% stake in the company, as well as purchasing the $3 billion asset-backed securities portfolio for just $800 million.

As the credit crunch worsened last year, E*Trade embarked on a restructuring to refocus the company on retail banking and trading and away from mortgage originations and piling on risky asset-backed securities onto its balance sheet.

Schwab's stock was up 5.3 to $19.28 on Tuesday morning. Online brokers TD Ameritrade ( AMTD) and E*Trade are each set to report quarterly earnings on Thursday.

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