Bearing the battle scars of market volatility and its impact on investor behavior, Charles Schwab Corp. said Tuesday that its first-quarter profits sank 68% and revenues 30%.
There were positive notes. Some analysts were encouraged by Schwabs ability to shave expenses and match Wall Streets expectations, however reduced.
But the declines were undeniably severe. Net earnings for the San Francisco financial services company were 7 cents a share on revenue of $1.2 billion and net income of $97 million, which included charges related to its purchase of the money manager U.S. Trust and the brokerage CyBerCorp. Schwabs fourth-quarter profits had fallen 27%, its first quarterly dip in three years.
Excluding the unusual items, first-quarter profits from operations were 8 cents a share, in line with lowered Wall Street expectations.
Were gratified to see earnings come in at the higher end of our range, Christopher V. Dodds, Schwabs chief financial officer, said in a telephone interview Tuesday. Still, he said, the numbers are not up to our historical or present ambitions.
Schwab will continue to cut expenses in areas including marketing, executive compensation, facilities, and technology, Mr. Dodds said. It has already said it will eliminate 13% of its work force, or 3,400 positions. There are no plans for a further payroll reduction, he said, but added, Never say never.
The company will begin laying people off in the next two weeks. Out of respect to employees, Mr. Dodds said, he could not specify where the cuts will be made.
He was also reticent about predictions for the rest of 2001. The visibility is poor and were not willing to give specific guidance on the full year, he said.
Schwab will continue to stress its ability to advise customers, Mr. Dodds said, noting that it opened 14 branches in the first quarter and may open 30 others by yearend.
He pointed out that despite the continued rout in the equities market, Schwab brought in $31 billion of net new assets during the quarter. However, up to three times the normal level of new money was put in money market accounts and fixed income, as fewer people traded equities, he said. Earlier this week the company cut commissions for active traders in an attempt to boost trading volume.
Richard Repetto, an equity analyst with Putnam Lovell Securities in New York, said Schwab has done a good job reining in costs but has to do more.
Its expenses have declined faster than revenues, which is a good thing in this market, he said. But they need to look at where to cut more behind that and cut where they can.
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