2023-06-14 10:11:41 ET
Charles Schwab ( NYSE: SCHW ) stock slipped 1.3% in Wednesday morning trading as the company guided for an even worse year-over-year decline in Q2 revenue.
It now sees Q2 top line falling 10%-11% from the year before, vs. -6.4% consensus (10 estimates), compared with "mid-to-upper single digit percentage points" decline in the prior guidance issued in mid-April.
The move comes in the face of "a temporarily compressed NIM and a smaller interest-earning asset base, along with softer trading activity," Chief Financial Officer Peter Crawford said in a statement.
While Schwab ( SCHW ) expects the bulk of more expensive balances, including Federal Home Loan Bank borrowings and retail certificates of deposit, to be repaid before the end of 2024, "they are currently weighing on our near-term net interest margin," he explained.
The finance chief noted that net interest margin contracted by 35 basis points in Q2, as "we estimate that the impact from these transitory borrowings and time deposits will more than offset the benefits of higher asset yields in this environment."
As of May 31, total client assets stood at $7.65T, up from $7.63T in the prior month and +5% from a year earlier. Client cash as a percentage of assets was 11.5% vs. 11.3% in April and 12.0% in May of last year.
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Charles Schwab sees Q2 revenue falling up to 11% amid NIM compression