Charles Schwab Corp. said Thursday that a continuing slowdown in stock trading will make it "very difficult" to meet second-quarter earnings forecasts at the biggest U.S. discount brokerage.
Schwab daily average commission stock trades fell 6.6% in May from April, to a 19-month low of 166,300. Average trades slipped further in the first eight trading days of June, to 132,000 per day, the company said.
Commissions account for at least a third of Schwab's revenue.
Analysts, on average, expected the firm to earn 9 cents a share this quarter. But "unless we see some significant increases in trading, achieving the 9 cents is going to be very difficult," Chief Financial Officer Chris Dodds said.
Schwab shares fell $1.32 to $16.03 on the New York Stock Exchange. They are down 44% year to date.
Schwab and other brokers catering to individuals have seen trading volume plummet as U.S. stocks have tumbled the last 14 months.
Last week, two Schwab rivals, Ameritrade Holding Corp. and Datek Online Holdings Corp., also said trading fell in May.
"Our clients' trading activity is mirroring the slowdown in market volumes," Dodds said. In May, New York Stock Exchange volume fell 3.2% from April.
Schwab has been slashing costs to cope with pinched revenue. The firm had 22,600 employees at the end of May, down 14% from the beginning of the year. The drop was a combination of firings and voluntary departures, the company said.
House OKs Bill to Cut SEC Fees, Raise Salaries
The U.S. House on Thursday approved a bill that would reduce fees on stock transactions and raise the pay of the Securities and Exchange Commission's staff.
"This bill will save investors and other market participants $14 billion over the next 10 years," said Rep. Gregory W. Meeks (D-N.Y.).
Approved 404 to 22, the bill would reduce fees the SEC collects on stock transactions, securities registrations and mergers. It also would let the SEC set employee salaries on a par with those at the federal banking regulation agencies.
SEC fees generate six times more than Congress gives the agency to fund its operations. The rest of the money goes to the U.S. Treasury. The securities industry says the fees are passed on to the investing public.
The Senate approved similar legislation earlier this year. The House and Senate must now work out the differences between their bills. Sen. Phil Gramm (R-Texas) said that shouldn't be a problem.
The pay provision in the bill isn't a direct raise. Instead, it would exempt the SEC from a government pay schedule that caps pay for SEC lawyers at $117,600, for example. The SEC says this schedule has created a brain drain as top employees leave for better paying jobs in the private sector.
The SEC cites a 30% attrition rate for its attorneys, accountants and examiners.
The change would let the SEC pay as much as the Federal Reserve and other banking agencies, which secured their own pay exemption in 1989.