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Schwab (SCHW) to Slash Jobs & Cut Offices Space to Lower Costs
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The Charles Schwab Corporation (SCHW - Free Report) announced a business streamlining plan as part of its cost-saving measures. Per the filing with the Securities and the Exchange Commission (SEC), the company will slash jobs and close or downsize its corporate offices with an aim to achieve at least $500 million in annual cost savings.
In addition to the cost efficiencies associated with the integration of TD Ameritrade ("TDA") (acquired by Schwab in October 2020), the above-mentioned action is a step taken to simplify its business to better prepare for the post-integration period.
While Schwab did not mention the count of positions that will be impacted by this move, it stated that in the coming months, jobs mostly in non-client-facing areas will be eliminated.
Per the SEC filing, SCHW expects to incur employee compensation benefits and facility exit-related costs of nearly $400-$500 million. The company anticipates costs related to the reduction in headcount to be incurred in the second half of 2023 and real estate exit costs this year and in 2024.
Given the economic uncertainty, Schwab has been forced to use other sources of funding to make up for the lack of cash flow. In June, the company noted that it was turning to more expensive sources of funding, like borrowing from Federal Home Loan Bank, to make up for its lack of cash flow.
Additionally, earlier this month, Schwab stated that it is experiencing a decline in net new asset flows, primarily because of the attrition of TDA retail and advisory clients. The company's chief financial officer, Peter Crawford, said, "We believe that the ultimate attrition will be in-line with or slightly better than our initial estimates, approximately 4% of Ameritrade revenue prior to the deal or around 1% of combined total client assets as of December 31, 2022."
SCHW also noted that it is exiting some of Ameritrade's "atypical custodial relationships" that are inconsistent with the company's approach to serving Registered Investment Advisors.
Over the past three months, shares of SCHW have gained 12.6% compared with the industry's upside of 7.2%.
Image Source: Zacks Investment Research
Currently, Schwab carries a Zacks Rank #3 (Hold).
Stocks to Consider
A couple of better-ranked stocks from the finance space are The Bancorp (TBBK - Free Report) and JPMorgan Chase & Co (JPM - Free Report) .
The Zacks Consensus Estimate for The Bancorp’s current-year earnings has been revised 1.4% upward over the past 30 days. Its shares have gained 11.9% in the past three months. Currently, TBBK carries a Zacks Rank #2 (Buy).
JPMorgan Chase currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised marginally upward over the past 30 days. In the past six months, JPM’s shares have rallied 9.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Schwab (SCHW) to Slash Jobs & Cut Offices Space to Lower Costs
The Charles Schwab Corporation (SCHW - Free Report) announced a business streamlining plan as part of its cost-saving measures. Per the filing with the Securities and the Exchange Commission (SEC), the company will slash jobs and close or downsize its corporate offices with an aim to achieve at least $500 million in annual cost savings.
In addition to the cost efficiencies associated with the integration of TD Ameritrade ("TDA") (acquired by Schwab in October 2020), the above-mentioned action is a step taken to simplify its business to better prepare for the post-integration period.
While Schwab did not mention the count of positions that will be impacted by this move, it stated that in the coming months, jobs mostly in non-client-facing areas will be eliminated.
Per the SEC filing, SCHW expects to incur employee compensation benefits and facility exit-related costs of nearly $400-$500 million. The company anticipates costs related to the reduction in headcount to be incurred in the second half of 2023 and real estate exit costs this year and in 2024.
Given the economic uncertainty, Schwab has been forced to use other sources of funding to make up for the lack of cash flow. In June, the company noted that it was turning to more expensive sources of funding, like borrowing from Federal Home Loan Bank, to make up for its lack of cash flow.
Additionally, earlier this month, Schwab stated that it is experiencing a decline in net new asset flows, primarily because of the attrition of TDA retail and advisory clients. The company's chief financial officer, Peter Crawford, said, "We believe that the ultimate attrition will be in-line with or slightly better than our initial estimates, approximately 4% of Ameritrade revenue prior to the deal or around 1% of combined total client assets as of December 31, 2022."
SCHW also noted that it is exiting some of Ameritrade's "atypical custodial relationships" that are inconsistent with the company's approach to serving Registered Investment Advisors.
Over the past three months, shares of SCHW have gained 12.6% compared with the industry's upside of 7.2%.
Image Source: Zacks Investment Research
Currently, Schwab carries a Zacks Rank #3 (Hold).
Stocks to Consider
A couple of better-ranked stocks from the finance space are The Bancorp (TBBK - Free Report) and JPMorgan Chase & Co (JPM - Free Report) .
The Zacks Consensus Estimate for The Bancorp’s current-year earnings has been revised 1.4% upward over the past 30 days. Its shares have gained 11.9% in the past three months. Currently, TBBK carries a Zacks Rank #2 (Buy).
JPMorgan Chase currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised marginally upward over the past 30 days. In the past six months, JPM’s shares have rallied 9.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.