EX-12.1 3 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
September 30,
   Nine Months Ended
September 30,
     2006
    2005
   2006
    2005
Earnings from continuing operations before taxes on earnings      $   437    $ 329   $ 1,248    $ 878
Fixed charges                           

Interest expense:

                           

Brokerage client cash balances

      109      96     325      271

Deposits from banking clients

      128      59     308      149

Long-term debt

      8      9     25      26

Short-term borrowings

      11      8     34      23

Other

      6      6     17      14
    
  
 
  

Total

      262      178     709      483

Interest portion of rental expense

      15      17     46      51
    
  
 
  

Total fixed charges (A)

            277            195           755            534
    
  
 
  

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

      $   714    $ 524   $ 2,003    $ 1,412
    
  
 
  
                            

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

      2.6      2.7     2.7      2.6
    
  
 
  

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

      11.9      9.2     11.2      8.7
    
  
 
  
(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.