Charles Schwab & Co. emerged bruised from a fourth quarter in which it had to cut executive pay to trim costs in the face of market volatility and investor skittishness.

On Thursday the San Francisco-based brokerage reported a 27% decline in profits, to $138.9 million, from the same period in 1999 - its first quarterly dip in three years. With per-share earnings of 11 cents, Schwab fell a penny short of already lowered analyst expectations.

Net income for the full year climbed 8%, however, to $718.1 million. Those results include $85 million in charges for the acquisition of U.S. Trust Corp. and CyBerCorp Holdings.

"Extraordinary conditions led to a quarter that was disappointing from a revenue standpoint," said Christopher V. Dodds, Schwab's chief financial officer, in a telephone interview Thursday. Revenues were up just 5% from the same period in 1999.

But he described the fourth quarter as "very gratifying" in that the company was able to attract $41 billion in new assets, despite the market downturn.

Mr. Dodds pointed to Schwab's evolution into an advice-driven company, including its purchase of U.S. Trust. "Even before this volatility we were engaged in this move to offer more high-quality advice to our customers. They're demanding that of us," he said.

Henry McVey, an analyst with Morgan Stanley Dean Witter & Co., supports that view. "Given the market conditions, we believe retail investors are going to move back toward needing more advice and human contact," he said.


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