China Fund News reporter Li Zhi
The largest online brokerage in the United States announced layoffs.
In response to investor pressure, Schwab is planning to cut staff and close or downsize offices to achieve annual cost savings of at least $500 million.
Schwab announces layoffs
Schwab said in a SEC filing on Monday that it is planning to cut jobs and close or downsize offices in preparation for the TD Ameritrade acquisition and streamline operations after the consolidation.
Schwab said it could save at least $500 million a year in operating costs through measures such as streamlining operations, mainly related to employee compensation and benefits and facility exit costs. Most of the layoff-related expenses will be incurred in the second half of 2023, and real estate-related expenses will be incurred this year and next.
Schwab spokeswoman Mayura Hooper said in an emailed statement that it has previously indicated its intention to take a series of actions this year and 2024 aimed at reducing the company's cost and complexity, including reducing the spending base and simplifying operating models. This will lead to the elimination of a number of positions in the coming months, most of which are non-customer-facing areas. It has not been revealed how many positions will be cut.
Schwab's last large-scale layoffs were in 2019. Schwab announced at the time that after an internal assessment, it decided to lay off about 600 employees, covering all employee levels, as well as the entire company's organization and location, equivalent to nearly 3% of Schwab's total workforce.
$8 trillion asset management giant
Charles Schwab, a San Francisco-based financial services company, was founded 30 years ago and is now a leader in the U.S. personal financial services market. As of the end of July, Schwab had total client assets of $8.24 trillion and 36,600 employees.
On July 18, Charles Schwab announced that revenue and earnings in the second quarter of 2023 fell sharply, with net revenue of US$4.656 billion in the second quarter, down 9% year-on-year; Net profit was $1.294 billion, down 28% year-on-year, but also better than Wall Street analysts' consensus expectations. In addition, the company added 1 million brokerage accounts in the second quarter, bringing the total number of customer accounts to 34 million by the end of the quarter.
Charles Schwab chief financial officer Peter Crawford said the decline in second-quarter revenue was impacted by clients relocating funds in an environment of rising interest rates. During the current rate hike cycle, the Company's use of supplementary funds has increased to facilitate clients' cash allocation decisions. Net interest margin decreased 10% year-over-year to $2.3 billion due to higher debt costs and net interest margin (NIM) decreased 32 basis points sequentially to 1.87%.
After the earnings report, Charles Schwab shares jumped 12%, the biggest one-day gain since March 2020. As of now, the stock is trading at $59.4, with a total market capitalization of $105.2 billion.
The "wave of layoffs" continues to spread
Since the beginning of this year, many giants around the world have announced layoffs, and the "wave of layoffs" has continued to spread.
On August 7, according to MarketScreener, Credit Suisse will lay off about 80% of its Hong Kong-based investment bank employees, starting this week. Only about 20 bank employees are likely to be spared the layoff, which will affect Credit Suisse's strong investment banking team of 100 people in Hong Kong, people familiar with the matter said. According to the report, Credit Suisse has the largest proportion of investment banking employees in Asia. The layoffs come after UBS completed its acquisition of Credit Suisse in June. Since the announcement of the transaction, UBS has made it clear that it will reduce the risk of Credit Suisse's investment banking business.
On August 18, Intel revealed plans to cut more than 300 employees in three California office campuses in the near future, which will be part of Intel's cost-cutting plan. The layoffs affect 30 positions in AI, cloud computing and GPU, all highly competitive areas of "strategic importance" for Intel. Intel said in the announcement that the company plans to start laying off employees from August 31, and some of the affected employees may be transferred to new positions.
On Aug. 1, CVS Health, the second-largest U.S. pharmacy chain, said it plans to cut about 5,000 jobs to help cut costs.
In June, according to people familiar with the matter, SoftBank Group was planning a new round of layoffs on its investment arm Vision Fund, which could affect 30% of its employees, the latest cost-cutting move by the Japanese conglomerate. A SoftBank report showed that the company's Vision Fund, which had 349 employees at the end of March, was losing heavily on investments.
Currently, Qualcomm is taking steps to reduce expenses while investing in new products to promote the landing of artificial intelligence on smartphones. However, due to the weakness in the market, the company has begun to reduce the number of employees.
Editor: Joey
Reviewed: Wooden fish