Charles Schwab Corp. said that its second-quarter earnings would not meet analysts' consensus estimates because customer trading levels have remained weak.
The San Francisco company, which generates the bulk of its revenues from securities trading, said its average daily revenue from trades last month fell 25% from a year earlier and 6% from April. The average number of daily trades fell 18% from May 2001 and 6% from April 2002.
Christopher Dodds, Schwab's chief financial officer, told wire services that the company would likely report earnings of 7 or 8 cents per share for this quarter. The analyst consensus is 9 cents, according to Thomson First Call.
Mr. Dodds did not give guidance for full-year earnings per share, for which analysts expect 39 cents.
Schwab reported that total client assets dropped 4%, to $833.2 billion as of May 31, but posted $4.6 billion in inflows from new and current clients.
"In this environment, we feel that these numbers are strong results," and the company is pleased with the performance of its newest business lines, particularly private client services, a spokesman said.
Such news did not come as a surprise to analysts, some of whom had adjusted their earnings outlook before the announcement. Schwab's shares, which had sold off almost 4% in Wednesday's trading, fell 3.38% on Thursday. The American Banker index of 225 banks fell 3%, the Standard & Poor's 500 dropped 1.05%, and the Nasdaq fell 1.46%.
"Schwab is a volatile earnings story," said Mark L. Constant, an analyst with Lehman Brothers. However, compared with the overall market, its trading volumes was somewhat disappointing, he said.
The Schwab spokesman said that future earnings will depend on investor sentiment, which, despite encouraging signs from the economy, is currently dampened by corporate governance issues and geopolitical instability. "We see investors pretty discouraged, and we don't have a sense when that will change."
Schwab is not the only company feeling the pinch. Citing weak market conditions, Andrew B. Collins, an analyst at U.S. Bancorp Piper Jaffray, lowered his full-year earnings estimates for three trust and processing companies on Thursday.
Mr. Collins lowered his targets for Bank of New York Co. by 6 cents for this year, to $2.06 a share, and by 10 cents for next year, to $2.30. He also cut his estimates for Northern Trust Corp. by 5 cents both for this year, to $2.32, and for next year, to $2.65. He lowered his estimates for State Street Corp. by 6 cents for this year, to $2.22, and by 10 cents for next year, to $2.50.
Also on Thursday, Michael R. Hughes of Merrill Lynch & Co. lowered his estimates for American Express Co. by 4 cents for this year, to $2.02 a share, and by 6 cents for next year, to $2.24. In his research note, Mr. Hughes wrote that the market downturn will continue to hurt the company's money management unit.
American Express fell 3.32%, State Street 3.08%, Northern Trust 3.14%, and Bank of New York 1.84%.
