SAN FRANCISCO -- Times are tougher than ever for some Wall Street brokerage firms, but their biggest West Coast rival -- Charles Schwab Corp. -- is on a roll.

After a three-year hiatus, the discount brokerage firm has rekindled an aggressive expansion program that should double its 112-office branch network by 1995.

Schwab has also been poking into new markets and offering an avalanche of new products and services, ranging from mutual funds to computer programs for managing stock portfolios to a market hot-line service.

The firm's bottom line looks better, too. Earnings dipped last quarter, but they more than doubled in 1989 on the strength of an increase in trading volume, the attraction of more deposit-like accounts and heavy investments in technology to cut the cost of doing business. Schwab's stock is trading at more than $16 a share, up from a 1989 low of $6.75, and most analysts continue to tout it.

What special wisdom does the nation's largest discount brokerage firm possess at a time when individual investors have supposedly deserted the stock market -- and discount competitors are coping with an industry shakeout?

Apparently, much of Schwab's new success and confidence stems from its skepticism about reports that small investors have abandoned the stock market. While some full-service competitors strayed afar into risky endeavors like junk bonds and leveraged buyouts and other discounters continued to do business as usual, Schwab focused on improving its core business.

"Despite the stock market crash of 1987, the malaise of 1988 and a modest rebound in 1989 and 1990, we're still opening 20,000 to 25,000 accounts a month," said Charles Schwab, the firm's 52-year-old founder and chairman. "People haven't abandoned the stock market at all."

But while stock investing is still an important piece of most Schwab accounts, a high percentage of the new money is flowing into the likes of certificates of deposit, zero coupon bonds, money market funds and hundreds of competing stock and bond mutual funds. Meanwhile, Schwab has broken into new markets. About 1,000 professional financial advisers have invested about $3 billion of their clients' assets through Schwab in just the last three years.

Now the discount brokerage is preparing to market a series of 401(k) retirement programs to medium-size companies. Schwab, in short, isn't just sticking to its knitting.

Some of Schwab's discount brokerage competitors think the industry kingpin -- which already has 45 percent of the discount pie -- is making a mistake. They think Schwab is going to spend far too much on an expansion of its branch network. At least one prominent competitor, New York-based Quick & Reilly Inc., has cut its branch expansion program in half in recent years.

"Eighty-five percent of the discount brokerage business is conducted on the telephone," said Mark White, an executive at Jack White & Co., a San Diego discount brokerage firm. "Customers of a discount brokerage don't want the company to spend more on brick and mortar. The whole idea of a discount brokerage is to cut costs -- and then prices -- as much as possible."

Yet most brokerage industry analysts say Schwab's strategy is smart. The company has a good chance of positioning itself so it has no head-to-head competition, they say. Some predict that Schwab will become the nation's most profitable brokerage firm in the 1990s.

Schwab's strategic direction wasn't always as clear as it is today. The company was founded in April 1971 as a full-service brokerage; then its owners decided to differentiate the firm from competitors by pioneering discount brokerage three years later.

To latch onto funding for expansion, Schwab agreed to be acquired by BankAmerica Corp. in January 1983 for $58 million in BankAmerica stock.

But Schwab, transformed into a bank holding company subsidiary, found itself forced to seek federal regulatory approval for virtually every move it made, including the addition of mutual funds.

Schwab finally decided to buy his company back from BankAmerica in 1987 in a $280 million leveraged buyout.

Today, Schwab sees his firm's future as especially bright. Aging baby boomers will be saving more and thinking harder about investments, he said, and an explosion of personal finance-oriented publications and cable TV programming is making them more independent about financial decisions.

"Our company is perfectly suited to serving customers who want to think for themselves and manage their own financial affairs in the 1990s," Schwab said.