Schwab Falls As Profits Dry Up
Jan 19, 2024The bank has given back all the gains they’ve earned since November
BREAKING NEWS
Despite beating The Street’s estimates for Q4, declining profits at Charles Schwab have sent the stock into a nose dive. Where is all this bear sentiment coming from?
WHAT HAPPENED
Schwab’s net income got cut in half to $1 billion YoY. While that allowed Schwab’s EPS to mildly beat expectations, topline revenue also fell to $4.45 billion, an 18% drop from last year. The stock simply hit a wall of interest rate pressure.
YIELD CRUNCH
As interest rates rose in 2023, Schwab’s clients were pressured to move cash from lower-yielding accounts to riskier plays with higher returns. At the same time, expenses are going up for the bank—causing their net interest revenue to drop all the way down to $9.4 billion. Schwab got crushed from both sides of the equation here.
WHY IT MATTERS
Even though our interest rate environment is stabilizing, banks are still clearly under a lot of pressure from high interest rates and higher expenses. Schwab is one of the firms most hurt by all these headwinds. While investors are still hopeful that things can stabilize across 2024, Schwab stock fell over 5% in early trading.
