Schwab Meets Lowered Expectations in 1st Quarter
Leading online stockbroker Charles Schwab Corp. met Wall Street’s lowered earnings expectations Tuesday as its customers dramatically slowed their trading activity in the first quarter.
The San Francisco-based company earned $97 million, or 7 cents a share, in the quarter, a 68% drop from a profit of $300 million, or 22 cents a share, in the same period a year ago.
Excluding charges to pay for recent acquisitions, Schwab said it earned $120 million, or 8 cents a share--which matched the consensus estimate of analysts polled by First Call/Thomson Financial.
Analysts had slashed their first-quarter estimates in late March after Schwab warned that customers had sharply pulled back from trading activity, given the stock market’s turbulence. The firm said it would lay off up to 13% of its work force--as many as 3,400 employees.
Schwab’s executives remained circumspect in their commentary on the earnings report.
“We believe that the current market environment has led to fundamental changes in investor behavior that may persist for some time,” Chairman Charles Schwab said.
Schwab shares (ticker symbol: SCH) inched up 13 cents to $18.13 on the New York Stock Exchange. The earnings were reported early in the day.
The brokerage said its average daily trading volume in the quarter fell to the lowest level since the fourth quarter of 1999. Volume tumbled from 234,600 trades a day in December to 222,200 in January, 189,000 in February and 176,500 in March.
The March total was down 50% from a year earlier--which was the peak for technology stocks favored by many individual investors.
The lackluster trading activity appears to be continuing so far in April, said analyst Guy Moszkowski of Salomon Smith Barney.
Overall, Schwab’s first-quarter revenue totaled $1.2 billion, down 30% from a year earlier.
Schwab’s stock mutual fund business saw investors flee in March. A net $754 million in domestic growth stock fund shares was redeemed in the month. Foreign stock fund redemptions totaled $401 million.
But Schwab continues to add more customers overall. The company said it added 280,000 new accounts during the first quarter, boosting its total accounts to 7.6 million, a 9% increase from a year ago.
