Schwab Shares Rise on Outlook

Discount brokerage Charles Schwab Corp. said Thursday that it expected first-quarter profit to rise about 30% from the last three months of 2005, sending its shares up 3.8%.

Schwab forecast about $25 million of pretax costs related to job cuts in the first quarter. The San Francisco-based company shed about 150 jobs in its individual-investor unit and U.S. Trust wealth management arm, Chief Financial Officer Christopher Dodds said in an interview. New hires kept Schwab’s workforce at 14,000, he added.

“We’re looking to put forth what should be the second-best quarter in the company’s history by far,” Dodds said. “Even though we’ve done some staff reductions in a couple places, we’re actually hiring in others.” Schwab posted its best net income in the first quarter of 2000.

Founder and Chief Executive Charles Schwab, 68, has reduced prices six times since May 2004 amid an industrywide pricing war. The discount brokerage said customer stock trades on which it collected a commission surged 51% in February from a year earlier, as the lower fees and rising stock markets attracted investors. Schwab added $10.6 billion in net new assets during February, bringing total client assets to $1.23 trillion.

Schwab had net income of $187 million in the fourth quarter of 2005. A 30% advance in the first quarter would result in profit of $243 million. Dodds projected first-quarter earnings of 18 to 19 cents a share, including the $25-million job cuts charge announced Thursday, compared with analysts’ average estimate of 17 cents, according to Thomson Financial.

“This was a very strong report, both in terms of asset flows, account adds and trading activity,” Fox-Pitt Kelton analyst David Trone wrote in a note to clients Thursday.

Schwab shares rose 65 cents to $17.59.

Charles Schwab returned as CEO of the company that bears his name in July 2004 after three years of declining revenue and increased competition under CEO David Pottruck.