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SAN FRANCISCO — Charles Schwab Corp. said Thursday that its second-quarter profit tumbled 31 percent as the brokerage's revenue fell and it recorded some one-time charges.
Shares fell 53 cents, or 2.9 percent, to $17.56 in midday trading. Shares gained 13 percent during the second quarter and are up about 12 percent for the year.
The San Francisco-based company earned $205 million, or 18 cents per share, in the quarter ended June 30. That's down from $295 million, or 26 cents per share, a year earlier.
Results included $40 million in expenses to reduce its overhead and a $16 million charge for a special assessment from the FDIC.
Analysts, who typically exclude one-time items in their estimates, had expected a profit of 18 cents per share, according to a poll by Thomson Reuters.
Schwab said its revenue fell 17 percent to $1.09 billion, just slightly above the $1.08 billion analysts had forecast.
During the quarter, the company added $17.3 billion in net new assets and 197,000 new brokerage accounts. Total accounts stood at 5.3 million as of June 30, up 3 percent from the year-earlier period. Total client assets declined 12 percent to $1.22 trillion as of quarter end.
Client activity picked up during the quarter, with Schwab clients averaging 349,700 trades per day, up 17 percent from the second quarter of last year. This helped send trading revenue up 18 percent to $272 million.
However, asset management and administration fees fell by 21 percent from a year earlier.
CEO Walt Bettinger said the economic and market outlook in the second half of the year remains challenging, but he did see some positives in the second quarter. Gains in the broader market provided clients with the first market-driven improvement in their account balances since the third quarter of 2007, he said.
The company said it's still on track to reduce 2009 expenses by 7 percent to 8 percent, having moved its headquarters to lower cost space in San Francisco during the second quarter. This resulted in charges of $40 million, as expected. Schwab cut about 600 jobs during the first quarter as part of its cost reduction plans.
Overall, the quarter was decent, said Deutsche Bank analyst Michael Carrier in a note to clients. However, ongoing market headwinds and economic uncertainty will likely limit any upside to earnings in the near term, he said. Carrier kept a "Hold" rating on the stock.
Stifel, Nicolaus & Co. analyst J. Jeffrey Hopson was a bit more upbeat, saying the company's solid results demonstrate its "unique positioning" in the financial services sector.
Still, low interest rates will likely continue to put pressure on Schwab's results going forward, Hopson said.
In December, the Federal Reserve lowered its benchmark interest rate to a range of zero to 0.25 percent, and plans to keep the rate at that record low level for some time. Lower interest rates mean Schwab earns less on its investments.
