Charles Schwab Corp Faces Turbulent Year Amid Interest Rate Hikes

investing.com:

Quiver Quantitative — Charles Schwab (NYSE:SCHW), a prominent player in brokerage and banking, faced a challenging year marked by declining profits, assets, and deposits, reflecting the broader impact of the Federal Reserve's interest rate hikes on the financial industry. The firm's net new assets dropped significantly in the fourth quarter, falling 48% to $66.3 billion, while net income almost halved. Furthermore, a notable decline in bank deposits and total retail brokerage accounts falling short of analyst expectations added to the firm's woes. These setbacks initially led to a sharp drop in Schwab's share prices, though they slightly recovered later in the trading day.

The year proved to be one of the most turbulent in Schwab's over five decades of operation, largely due to the regional banking chaos and the eroding value of investments caused by interest rate hikes. Schwab, like many financial firms, faced increased funding costs as depositors shifted their resources to higher-yielding options like money market funds. In response, Schwab resorted to more expensive funding sources, including retail certificates of deposit and Federal Home Loan Bank advances. CEO Walt Bettinger candidly acknowledged the challenges, comparing the situation to the difficulties faced during the burst of the internet bubble in 2000.

Market Overview: -Charles Schwab navigates a tumultuous 2023 due to rising interest rates, impacting its investments and deposits. -Profit, new assets, and deposits all experience significant declines. -Despite an initial stock dip, cautious optimism emerges as CEO outlines future plans.

Key Points: -Net new assets plunge 48%, net income drops by half, and bank deposits fall 21%. -CEO Walt Bettinger