Charles Schwab Corp expects to waive about $100 million in money market fees in the current quarter, up 28 percent from the previous quarter, the largest U.S. discount brokerage said on Thursday.

Management, speaking at a quarterly update for investors, added that the first 100 basis-point rise in interest rates could eliminate fee waivers altogether.

With near-zero interest rates continuing to hamper the online brokerage, it said Thursday it would incrementally move billions of dollars -- but no more than $10 billion -- from clients' money market funds into its bank unit in 2010.

Schwab had $178.7 billion in client money market funds at the end of September.

Low interest rates, brought on by the recession, have forced the company to waive the fees it charges clients in managed funds. Schwab, by far the biggest online broker, also runs a fast-growing bank and offers investment advice.

The $100 million in fourth quarter waivers would be up from $78 million in the third quarter, and $36 million in the first half of the year. It is also higher than the company's previous forecast, which suggested $86 million in waivers remained this year.

Schwab shares were little changed after the new forecast. They were up 1.8 percent at $17.25 on the Nasdaq.

Chief Financial Officer Joe Martinetto said the company was preserving capital and flexibility amid market uncertainty, but we're now thinking that maybe the worst of that has past us.

There is a substantial number that still sits out in money funds that we would see migrating toward the bank, Martinetto said, adding later that $10 billion was the absolute most that could transfer next year.

San Francisco-based Schwab, which broadcasted its investor update online, posted a 34 percent profit drop in the third quarter, meeting Wall Street expectations.

(Reporting by Jonathan Spicer; Editing by Tim Dobbyn)

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