EX-12 3 exh12_1.txt
THE CHARLES SCHWAB CORPORATION Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in millions) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 -------- -------- -------- -------- Earnings from continuing operations before taxes on earnings $ 329 $ 72 $ 878 $ 485 Fixed charges Interest expense: Brokerage client cash balances 96 29 271 59 Deposits from banking clients 59 24 149 74 Long-term debt 9 8 26 24 Short-term borrowings 8 6 23 11 Other 6 5 14 9 ------------------------------------------------------------------------------------------------------------------------------------ Total 178 72 483 177 Interest portion of rental expense 17 20 51 62 ------------------------------------------------------------------------------------------------------------------------------------ Total fixed charges (A) 195 92 534 239 ------------------------------------------------------------------------------------------------------------------------------------ Earnings from continuing operations before taxes on earnings and fixed charges (B) $ 524 $ 164 $1,412 $ 724 ==================================================================================================================================== Ratio of earnings to fixed charges (B) / (A) (1) 2.7 1.8 2.6 3.0 ------------------------------------------------------------------------------------------------------------------------------------ Ratio of earnings to fixed charges excluding brokerage and banking client interest expense (2) 9.2 2.8 8.7 5.6 ------------------------------------------------------------------------------------------------------------------------------------ (1) The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes, "earnings" consist of earnings from continuing operations before taxes on earnings and fixed charges. "Fixed charges" consist of interest expense as listed above, including one-third of rental expense, which is estimated to be representative of the interest factor. (2) Because interest expense incurred in connection with both payables to brokerage clients and deposits from banking clients is completely offset by interest revenue on related investments and loans, the Company considers such interest to be an operating expense. Accordingly, the ratio of earnings to fixed charges excluding brokerage and banking client interest expense reflects the elimination of such interest expense as a fixed charge.