EX-12.1 2 dex121.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES Computation of Ratio of Earnings to Fixed Charges

THE CHARLES SCHWAB CORPORATION

 

Exhibit 12.1

 

Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in millions)

(Unaudited)

 

    

Three Months Ended

March 31,

     2006
    2005

Earnings from continuing operations before taxes on earnings

    $  399    $  246

Fixed charges

          

Interest expense:

          

Brokerage client cash balances

    109    81

Deposits from banking clients

    82    39

Long-term debt

    8    9

Short-term borrowings

    8    6

Other

    5    3
    
  

Total

    212    138

Interest portion of rental expense

    15    19
    
  

Total fixed charges (A)

    227    157
    
  

Earnings from continuing operations before taxes on earnings and fixed charges (B) 

    $  626    $  403
    
  

Ratio of earnings to fixed charges (B) ÷ (A) (1)

    2.8    2.6
    
  

Ratio of earnings to fixed charges excluding brokerage and banking client interest expense (2)

    12.1    7.6
    
  
(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.