Charles Schwab results are in — and they're down

Charles Schwab results are in — and they're down
'Significant near-term headwinds' hit the giant financial company in the bottom line.
JUL 18, 2023

Earnings season is truly upon us and there have been some stellar results announced. Just a few days ago, JPMorgan Chase announced net income of $14.5 billion, a jump of 67%. Unsurprisingly, CEO Jamie Dimon was pleased. “We reported another quarter of strong results, generating net income of $13.3 billion and an ROTCE of 23% after excluding a net after-tax gain of $1.8 billion relating to the First Republic transaction, as well as discretionary after-tax investment securities losses of $0.7 billion,” he said in a statement.

Move from Madison Avenue to Midtown’s 52nd St., and although there’s plenty of positive talk, the underlying message for the country’s 10th biggest bank is far less upbeat. Charles Schwab’s results are out and they’re not nearly as uplifting for Co-Chair and CEO Walt Bettinger.

Although the figures start with some good news — nearly 1 million new client accounts and $52 billion in core net new assets — by the time you get past all the many positives to CFO Peter Crawford’s first paragraph and you can see that maybe things aren’t quite as rosy as they are across at JPMorgan Chase.

“While navigating significant near-term headwinds, we generated second-quarter revenues of $4.7 billion, down 9% on a year-over-year basis,” Crawford said. “This top-line result was driven primarily by a temporary increase in the utilization of supplemental funding to facilitate client cash allocation decisions during the current rising rate cycle. Net interest revenue declined 10% from the prior year to $2.3 billion as the incorporation of higher cost liabilities brought our net interest margin down by 32 basis points sequentially to 1.87%.”

There is some good news in his message though. “We observed a continued and substantial deceleration in the daily pace of cash outflows versus prior months,“ Crawford said. “The continuation of this trend through the end of the quarter further strengthens our conviction that this realignment activity will inflect before the end of 2023, unlocking growth in client cash held on the balance sheet.”

Charles Schwab has been focused on managing its balance sheet to “optimize capital and liquidity levels” Earlier this year the bank issued $2.5 billion in long term debt to that end.

The good news, however, is that this news wasn’t as bad as Wall Street had expected — Schwab's share price rose in pre-market trading (but is still down 30% for the year).

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