Schwab saw decline in net new assets in Q4

'No one at Schwab is kidding themselves that everything is perfect right now,' says CEO Walt Bettinger.

Charles Schwab Corp.’s shares tumbled after the brokerage reported declines in profit, new assets and deposits as it navigated a tumultuous year of interest rate hikes that dented the firm’s balance sheet.

Schwab said net new assets fell 48% to $66.3 billion in the fourth quarter while net income also dropped by almost half. Bank deposits in the period declined 21% to $290 billion and the company’s total retail brokerage accounts fell short of analyst estimates at 34.8 million.

Schwab closed out what was one of the firm’s most turbulent years in its five-decade-plus history, swept up in the regional banking chaos as interest-rate hikes eroded the value of its investments. Consumers also pulled their deposits in search of higher-yielding alternatives, compounding those pressures.

“No one at Schwab is kidding themselves that everything is perfect right now,” Chief Executive Officer Walt Bettinger said Wednesday during a call discussing earnings. “Perhaps it was the most challenging in my time at Schwab — certainly the most challenging since the bursting of the internet bubble in 2000.”

Shares in the company fell as much as 7% and traded down 5% at 10:03 a.m. in New York.

Bettinger recently said that firms could shorten the durations of their securities books, helping them avoid similar challenges. The Westlake, Texas-based brokerage had also turned to more expensive forms of funding, such as retail certificates of deposit and Federal Home Loan Bank advances, to assist those consumers looking for higher yields.

On Wednesday, CFO Peter Crawford reiterated that the firm is moving away from those sources, saying it repaid 18% of peak balances reached in May 2023, “as realignment activity decelerated by almost 80% during the second half of the year, including a seasonal increase in client cash in December.”