Charles Schwab Stock Slumps as Fed Rate Hikes and FDIC Charge Squeeze Profit

Charles Schwab (SCHW) shares sank close to 3% in early trading Wednesday after the discount brokerage and financial services firm reported profit and sales plunged on a decline in interest revenue and a regulatory charge.  

Schwab posted fourth quarter net income of $1.05 billion, a 47% drop from a year earlier. Revenue fell 19% to $4.46 billion. Net interest revenue slid 30% to $2.13 billion. 

CFO Peter Crawford said that Federal Reserve interest rate hikes and the spillover effects of the banking crisis impacted the company’s financial results throughout 2023.

Like other major financial companies, Schwab paid a special Federal Deposit Insurance Corporation (FDIC) assessment to cover the costs of the collapse of Silicon Valley Bank and Signature Bank. The $172 million charge made up about one-third of the additional $11 billion in expenses Schwab had in the quarter.

Crawford added that the benefits of high interest rates were more than offset by lower interest-earning assets and increased utilization of higher-cost supplemental funding.

CEO Walt Bettinger said the company performed well during the year despite “an uneven environment with shifting views on the trajectory of the U.S. economy, persistent geopolitical unrest, and a temporary disruption within the regional banking sector.”

Shares of Charles Schwab were down 2.9% at $62.50 per share as of 11:45 a.m. ET Wednesday following the news. They’ve lost about one-quarter of their value over the past year.