Charles Schwab said its net income in the first three months of this year fell by 45 per cent to $119 million when compared with the same quarter of 2009. However, the firm said it believed the worst of negative market pressure on its results had passed.

“We believe that the worst of the environmental pressure on our revenues is now behind us, and that our strong business momentum will help us achieve improving financial performance in the coming months,” said Charles Schwab, chairman of the eponymous firm he heads.

Net revenues fell by 12 per cent, year-on-year, to $978 million, the firm said in its results statement yesterday.

Elaborating on the details, Joe Martinetto, chief financial officer, pointed out that Charles Schwab has repaid about $200 million in maturing debt and completed a $543 million equity offering to bolster company growth during the quarter.

"Short-term rates finally stopped declining in late January/early February and subsequently began to rise a bit, which helped our first quarter net interest margin reach 183 basis points, up slightly from the prior quarter. This improvement, coupled with continued growth in our client base - our average interest-earning assets for the first quarter equaled $72.3 billion, up 48 per cent year-over-year - helped us achieve net interest revenue that was 7 per cent higher than last year and sequentially higher for the second straight quarter.

“The rate environment improvement occurred too late, however, to prevent money market fund fee waivers from reaching $125 million in the first quarter, and asset management and administration fees declined by 16 per cent year-over-year,” he said.

Walt Bettinger, chief executive, added: "Our investments in improved pricing, client solutions, service and our brand are yielding continued strength in our key metrics - net new assets totaled $23 billion in the first quarter, total client assets reached a record $1.49 trillion, up 36 per cent year-over-year, and new brokerage accounts totaled 230,000, the highest since the first quarter of 2008 and up 11 per cent from a year ago.”

“We ended March serving 7.8 million total brokerage accounts, 768,000 banking accounts, and 1.5 million retirement plan participants," Bettinger added.

As the firm has disclosed previously, it is the subject of consolidated class action litigation resulting from individual lawsuits filed between March and May 2008, and regulatory investigations relating to the investment policy, disclosures and marketing of the Schwab YieldPlus Fund(R), an ultra-short bond fund ("Bond Fund").

This fund was designed to invest in a variety of fixed income instruments, including corporate bonds, asset backed securities, mortgage-backed securities and other fixed income investments. The credit crisis that began in mid-2007 led to a decline in the value of a majority of fixed income investments market wide. As a result, certain Schwab clients who chose to invest in the Bond Fund saw their investments fall, triggering litigation, the firm said in its statement.

“For the quarter ended March 31, 2010, the company has accrued $11 million in connection with the class action litigation,” it said.