Discount brokering is tough business when the market's whipping investors.
Look no further than marquee name-brand broker Charles Schwab
Average client trading volume dropped last month to 101,500 trades, down 28% from February 2002, and off 20% compared to January 2003. Schwab is still adding net new assets, though, with $4.5 billion collected during the month. That brings the total of clients' accounts to $755.1 billion, which is 9% below last February's levels.
March isn't shaping up any better, with the venerable broker's clients making only 96,000 trades in the first seven trading days of the month. Because of the ongoing weakness, the company is taking steps to stay lean and ready for better times. It hopes to save $40 million a quarter through extensive cost cutting. Further hiring restrictions, changes to employee benefits, discretionary expense reductions, and marketing deferrals are all on the table.
Schwab also -- and not surprisingly -- lowered expectations for its current quarter. Analysts were looking for $0.07 a share for Q1, and according to CFO Christopher Dodds, that's still "too aggressive." He didn't offer a more accurate estimate. The first quarter closes at the end of this month.
Until the stock market strengthens, Schwab's business will continue to hurt. Shareholders likely will, too, since a recovery in stock price seems hinged on the market's own turnaround.
Charles Schwab is one of David Gardner's Motley Fool Stock Advisor recommendations.