Charles Schwab Posts 1st Quarterly Profit Decline in 3 Years
Charles Schwab Corp., the biggest U.S. discount brokerage firm, said Thursday its quarterly profit declined for the first time in nearly three years, as the stock market plunged and expenses rose.
San Francisco-based Schwab said fourth-quarter earnings from operations fell 15% to $161 million, or 11 cents a share, in the fourth quarter, down from $191 million, or 14 cents, in the year-ago period. Net income, which includes costs relating to Schwab’s acquisitions of U.S. Trust Corp and CyberCorp Inc., fell 27% to $138.7 million.
“They did a very good job on managing compensation, but seemed less focused about managing operating expenses,” said Henry McVey, an analyst at Morgan Stanley Dean Witter & Co.
Schwab fell 88 cents to close at $27.38 on the New York Stock Exchange.
Schwab Chief Financial Officer Christopher Dodds last month said it would be “tough” for the firm to meet analysts’ published estimates of 14 cents a share because of the decline in customer assets and revenue-producing trades. The 19 analysts surveyed by First Call/Thomson Financial lowered their estimates to 12 cents.
Schwab hasn’t fallen short of analysts’ average expectations since the quarter ending June 1998.
Schwab had revenue of $1.3 billion in the fourth quarter, compared with $1.27 billion in the year-ago period.
Schwab clients brought a total of $41 billion in net new assets to the firm in the fourth quarter. Total client assets totaled $872 billion on Dec. 31, compared with $861 billion at the end of November.
Schwab’s total expenses, excluding interest, rose 16% to $1.1 billion from year-before period. The company’s profit margin, net income divided by revenue, narrowed to 12.1% from 12.7%. Schwab’s full-year profit margin was 14.7%. The company is projecting a 2001 margin of 13.5% to 14%.
At a Glance
Other California company earnings, excluding one-time gains and charges unless noted:
* South San Francisco-based biotech giant Genentech Inc. said fourth-quarter profit rose 73% on higher sales of its drugs for breast cancer and non-Hodgkin’s lymphoma. Profit from operations rose to $83.4 million, or 16 cents a share, from $48.1 million, or 9 cents, a year earlier. Analysts had forecast earnings of 78 cents. Revenue rose 35% to $485.3 million.
* Pasadena-based Jacobs Engineering Group Inc. reported fiscal first-quarter net income of $20.1 million, or 75 cents per share, on record revenue of $929.2 million for the period ended Dec. 31. That compares with a net loss of $5.8 million, or 22 cents, on revenue of $809.1 million a year ago. The year-earlier period was affected by a special litigation-settlement charge of $38 million.
* Pacific Union Bank, a Los Angeles-based lender that caters to the Korean American community, reported a 60% rise in fourth-quarter net income of $3.1 million, or 36 cents per share, compared with $1.9 million, or 29 cents, a year ago. Total assets held for the period was $732.2 million compared with $595.2 million.
* Wine maker Robert Mondavi Corp. of Oakville reported a 16% increase in fiscal second-quarter profit of $15.2 million, or 93 cents per share, compared with $13.1 million, or 82 cents, a year ago. Revenue rose 21% to $148.4 million.
