With ongoing market volatility keeping retail investors offline, Christopher V. Dodds, chief financial officer of Charles Schwab Corp., warned that the company might not hit second-quarter profit projections.
Mr. Dodds spoke in a telephone interview Thursday just after the San Francisco-based company released its trading volume figures for May. The report showed a 7% decline in daily average trades, to 166,300, from the previous month and had represented a 16% drop from May 2000.
And Mr. Dodds warned that it could get worse: June is also shaping up to be weak.
May was pretty credible, but June has started out poorer than we expected, he said. Unless we see some significant increase over the next couple of weeks its going to be hard to achieve the current consensus.
The Nasdaq stock market has taken a tumble this month and is off 3% since the beginning of June.
As of Thursday morning Wall Street analysts were looking for Schwab to post operating profit of 9 cents a share, but Mr. Dodds indicated that he expects them to change their estimates in the coming days.
They already are. Judah Kraushaar, an equity analyst with Merrill Lynch & Co. in New York, revised his outlook for Schwab on Thursday, trimming a penny from his second-quarter earnings estimates and 4 cents from his full-year projections, to 39 cents. In a research note he wrote that its monthly trading activity and client asset levels were both considerably weaker than we expected.
Mr. Kraushaar was not the only one looking to revise profit projections for Schwab.
Richard H. Repetto, an equity analyst with Putnam Lovell Securities in New York, described Schwabs monthly report as disappointing based on his prediction that its trading volume would decline just 4% in May.
He added, however, that while trading activity was somewhat slower in May than we expected, more troubling was trading volume experienced in the first eight days of June. Its currently down 21% from May levels.
On Thursday afternoon, Putnam Lovell cut its estimates on Schwab for the quarter to 7 cents a share.
Mr. Dodds said that the company would continue to keep a close eye on costs. Were watching our asset flows quite carefully and monitoring attrition very, very carefully, he said. We have continued to ask our manager and management teams to keep a very tight rein on costs.
There are currently no plans for more layoffs, however, he said. In March, Schwab announced plans to fire up to 13% of its employees, and most of those cuts have already been made. Through layoffs and attrition it has cut its workforce by 14%, to 22,597, since the beginning of the year.
Schwabs stock sank 7.61% Thursday in trading at the New York Stock Exchange.