Discount brokerage firm The Charles Schwab Corporation (SCHW) released its monthly activity report for May 2010 on Monday, recording a 7.0% sequential decline in total client assets. At the end of May, client assets totaled $1.412 trillion, up 16% on year-over-year basis.

For the month of May, client trading was very active, with daily average trades recorded at 512,700, up 17.0% from the prior month and 14.0% on a year-over-year basis. For the month, Schwab’s net new assets — including both new and existing clients — summed to $4.7 billion, up 23.7% from prior month. Net new assets reported excludes outflow of $29.5 billion by a mutual fund clearing services client. This client transferred its assets to an internal platform.

Including such clearing outflow, net new assets totaled negative $24.8 billion.

To date, an additional outflow of approximately $22 billion has been recorded as the client completed the asset transfer.

Though Schwab customer trading pitched up, total assets shrank attributed to the downturn in stocks and $29.5 billion withdrawal by one client.

For the month of April 2010, Schwab’s closest competitor E*TRADE Financial Corporation (ETFCD) recorded positive net new brokerage assets of $0.7 billion.

Despite the deteriorating financial environment, Schwab continues to be healthy with multiple sources of liquidity, a sound capital position and a high quality balance sheet that enabled it to end 2009 with almost stable client metrics. Furthermore, the company aims to protect its financial strength and operating performance by managing expenses even more aggressively in the coming quarters.

The results are expected to be to be impacted by the challenging market conditions and low interest rate environment, while the stronger client activity resulting from increased market volatility, focus on lower-cost capital structure and management’s aggressive efforts to control cost will provide some support in the upcoming quarters.

Concurrent to the monthly activity report, Schwab announced permanent operating expense ratios (OERs) reductions on six of eight Schwab exchange trade funds (ETFs).

The six ETFs reducing OERs include:

  • Schwab U.S. Broad Market ETFTM from 0.08% to 0.06%
  • Schwab U.S. Large-Cap Growth ETFTM from 0.15% to 0.13%
  • Schwab U.S. Large-Cap Value ETFTM from 0.15% to 0.13%
  • Schwab U.S. Small-Cap ETFTM from 0.15% to 0.13%
  • Schwab International Equity ETFTM from 0.15% to 0.13% and      
  • Schwab Emerging Markets Equity ETFTM from 0.35% to 0.25%.

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