Schwab 2Q profit up 1 percent on fees, trading

Schwab said it earned $295 million, or 26 cents per share, for the quarter ended June 30. That compared with net income of $292 million, or 23 cents per share, in last year's second quarter.

The San Francisco-based broker reported that earnings from continuing operations totaled 27 cents per share in the latest period. And, revenue rose 9 percent to $1.31 billion from $1.21 billion in the year earlier period.

Analysts surveyed by Thomson Financial projected operating earnings of 26 cents per share on revenue of $1.3 billion.

The results, which built on the company's best first quarter since the stock market boom in 2000, were cheered by investors. Shares of the company spiked $2.74, or 14.3 percent, to $21.96 Wednesday.

"We're having very strong results even in the face of a rocky market," said Chief Financial Officer Joe Martinetto. "We've avoided some of the risk factors that drove other people down. We have a strong capital base, a strong liquidity position, and that allows us to be there for our clients in this kind of a market."

Indeed, global banks and brokerages have written down $300 billion of troubled assets since the credit crisis began last summer. However, Schwab had relatively little exposure to subprime lending or mortgage-backed securities.

The company does manage Schwab YieldPlus, a mutual fund that invested a large portion of its assets in mortgage-backed securities. Losses at YieldPlus prompted investors to start bailing early, which forced money managers to sell some of their holdings at sharply discounted prices.

Martinetto said the company booked $16 million of charges related to YieldPlus during the quarter, money that was paid to settle losses with some customers. The fund's assets shriveled from nearly $14 billion last summer to less than $1 billion at the start of the quarter. A lawsuit has since been filed on behalf of Schwab customers who allege they were misled about the fund's safety.

But the volatile stock market conditions that pummeled stocks during the quarter might have worked in Schwab's favor. The broker reported a flood of new customers--with total assets up 1 percent to $1.4 trillion with $26 billion worth of new assets gained during the quarter.