Schwab net interest revenue drops 24% as clients move cash
Charles Schwab Corp. reported Monday that its net interest revenue sank 24% to $2.2 billion from the year prior as clients moved cash into higher-yielding products.
The company’s bank deposits fell 28% to $284.4 billion in the third quarter from the year prior, beating the $268.8 billion average estimate of analysts surveyed by Bloomberg.
“However, cash realignment activity decelerated further during the quarter — even with the brief uptick in August and an increase in long-term interest rates,” chief financial officer Peter Crawford said in a statement Monday.
The Westlake, Texas-based firm reported $46 billion in core net new assets for the quarter, and $27 billion in September — which was a decline of 32% from a year earlier. Adjusted earnings per share were 77 cents, a slight beat on analysts’ estimates of 74 cents.
Schwab shares fell 0.35% to $51.15 at 8:44 a.m. in New York.
Net revenues fell 16% to $4.6 billion from a year prior, slightly missing analysts’ expectations.
The Federal Reserve’s rate hikes over the past year-and-a-half to combat inflation have pressured Schwab’s banking arm, a pivotal source of revenue. Higher rates encouraged some clients to move money from the bank to other investment products, including money-market funds, in a process known as “cash sorting.”
Company executives have previously said that the worst of that deposit move is over and they anticipate growth again by the end of this year.
The stock tumbled about 38% year-to-date after the bank was hit by some of the turmoil that consumed midsize banks this spring. The firm issued roughly $2.4 billion of senior notes in late August, “further bolstering our diversified liquidity profile,” Crawford said Monday.
The firm has also identified
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