Charles Schwab Corp (NYSE:SCHW) reported a big drop in revenue for its fiscal fourth quarter.
The multinational financial services company disclosed its 4Q earnings on Wednesday, with net income declining to $1.05 billion, down 47% from the year-ago figure of $1.97 billion.
The brokerage, like other financial firms, faced challenges from the US Federal Reserve's aggressive rate hikes, impacting its reliance on client deposits for bond purchases and loans.
Adjusted earnings per share exceeded analyst estimates at $0.68, compared to the expected $0.64.
Asset management and administration fees, earned from managing mutual funds and exchange-traded funds, showed promise, increasing by 18% to $1.24 billion as client assets reached a record high.
To diversify funding sources, Schwab had borrowed from the Federal Home Loan Bank in the first half of 2023, resulting in a fourfold increase in interest payments to $423 million compared to the previous year. These measures led to a 30% decline in net interest revenue, falling to $2.13 billion in the fourth quarter ending December 31.
Charles Schwab also reported a 21% decrease in bank deposits and an 11% drop in total assets at the end of the quarter.
CFO Peter Crawford attributed the company's 2023 financial performance to challenges arising from the Federal Reserve's higher interest rates and the aftermath of the regional banking crisis in March.
Shares of Charles Schwab were down 3% in premarket trading Wednesday. The Westlake, Texas-based company's stock declined 17% in 2023, in contrast to the S&P 500 index's gain of just over 24%.