Charles Schwab Warns It May Not Meet Forecasts

Reflecting the continuing malaise on Wall Street, Charles Schwab Corp., the world’s biggest discount broker, said Thursday that its first-quarter earnings may fall below analysts’ estimates as trading tumbles this year along with stocks.

Profit forecasts of 8 cents a share are “too aggressive,” Chief Financial Officer Christopher Dodds said. Schwab’s 8 million customers made 19% fewer trades in January than a year ago, and volume is lower this month on concern among investors about a war with Iraq, the company said.

“It’s worse than what we had expected,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. “When retail investors sit on their hands it’s sad for all the retail firms, and when it’s sad for all the retail firms that really hurts Schwab.” Hintz rates Schwab “underperform,” Bernstein’s lowest ranking.

Schwab, which had a record loss of $79 million in the fourth quarter of 2002, has seen its share price plummet 73% since the end of 2000. In response to a drop in revenue in seven of the last eight quarters, Schwab has tried to diversify by offering advisory services and college and retirement savings products.

January, traditionally a strong month for trading, was Schwab’s busiest trading month in 2002.

“They’ve got a great business model, but volume and asset trends don’t bode well for them right now,” said Erick Maronak, research director at Newbridge Partners.