Schwab Warns of Revenue Drop, Cost Bump

Charles Schwab executives said the firm’s full-year revenue could be 8%-9% lower in 2023 than in 2022 “utilizing the recent September Fed Dot Plot and factoring in recent market dynamics,” according to an earnings presentation Monday. Plus, Schwab’s expenses could grow about 9% overall, or 6% on an adjusted basis. 

Its third-quarter revenues were $4.61 billion, down 16% from the prior year and just shy of analysts’ expectations. The firm’s adjusted earnings of $0.77 were 30% less than last year’s results, though they slightly topped predictions.

In the third quarter, the firm’s net interest revenue fell 24% from last year to $2.2 billion, as clients moved to invest cash in products with higher yields. But its asset management and administrative fees rose 17% to $1.2 billion in the latest period. 

Schwab’s stock price rose 4.7% to $53.75 as of 1 p.m. Monday and is down 34.4% year to date.  

Cash, Net New Assets

The firm’s deposits declined 28% from last year’s third quarter to $284.4 billion, but this topped analysts’ $268.8 billion, according to Bloomberg. They also dropped $20 billion from the second quarter. 

But Schwab remains upbeat on the situation. “Cash realignment activity decelerated further during the [third] quarter — even with the brief uptick in August and an increase in long-term interest rates,” CFO Peter Crawford said in a statement.