Discount broker Charles Schwab Corp.'s second-quarter earnings fell 31% amid restructuring and federal insurance costs while revenue fell on a drop in assets.
Online brokers have been struggling with lower stock prices and low interest rates. Chief Executive Walt Bettinger said Thursday the economic and market outlook remains challenging entering the second half despite positive signs such as gains in the stock markets during the second quarter.
Chief Financial Officer Joe Martinetto added write-downs on the company's investment portfolio remain contained, with $13 million in credit-related charges during the period. The losses remain centered in the company's holding of Alt-A mortgage-backed securities.
Schwab posted income of $205 million, or 18 cents a share, down from $295 million, or 26 cents a share, a year earlier. The results included $40 million in pretax charges related to cost cuts and a $16 million assessment from the Federal Deposit Insurance Corp.
Revenue fell 17% to $1.09 billion as asset-management and administration fees fell 21% and interest revenue dropped 29%.
Analysts surveyed by Thomson Reuters expected earnings of 18 cents on revenue of $1.08 billion.
Pretax margins slid to 30.9% from 39.3%.
Total assets dropped 12% to $1.22 trillion amid the stock market's decline from a year earlier. New accounts rose 32% in the investor segment amid the market's recent rebound, putting the total at 5.3 million, up 3% from a year ago.
Trading revenue rose 18% as average daily trades climbed 17%.
Schwab has said it would waive certain fees on some of its money-market funds, made necessary by low interest rates so that clients' yields don't turn negative. The fee waivers will likely hurt as fees earned on assets make up just under half of the company's quarterly revenue. However, some analysts have said an increase in assets would offset the roughly $60 million in money-fund fee waivers.
Schwab's shares closed Wednesday at $18.09 and haven't traded premarket.
