Discount broker Charles Schwab Corp. posted a 34% drop in third-quarter profit as low interest rates and depressed stock prices continue to cut into asset-management fees.
Revenue was slightly below Wall Street's expectations, and shares were down 3% premarket at $18.66. The stock through Wednesday was up 19% this year, in line with the broader market.
Online brokers are seeing higher trading volumes but continue to struggle with low interest rates and stock prices which are down from a year earlier. Meanwhile, Schwab's decision this summer to waive certain fees on some of its money-market funds is taking a toll on its asset-management fees, which typically account for nearly half of its revenue.
Chief Financial Officer Joe Martinetto said Thursday that write-downs on the company's investment portfolio remain contained, with $11 million in credit-related charges during the latest period. The losses remain centered in the company's holding of Alt-A mortgage-backed securities.
Schwab's income fell to $200 million, or 17 cents a share, from $304 million, or 26 cents a share, a year earlier. Revenue fell 19% to $1.01 billion as asset-management and administration fees fell 24% and interest revenue slid 34%.
Analysts surveyed by Thomson Reuters expected earnings of 17 cents on revenue of $1.03 billion.
Total assets rose 5% to $1.36 trillion. New accounts rose 41% to 29,000, putting the total at 5.3 million, up 3% from a year ago.
Trading revenue fell 4.4% as average daily trades fell 5%.
Despite the industry's current troubles, Collins Stewart early this month said it sees online brokers benefiting long-term from an aging population, an increase in self-directed investing and a shift toward independent financial advisers. It noted that Schwab added net new assets of more than 10% during the financial crisis.
