Schwab lays off up to 2,154 people out of 35,900 staff as it moves to cut costs

By Steve Gelsi

Charles Schwab Corp. has laid of 5% to 6% of its total head count of 35,900 as it moves to contain costs and remove complexity from the broker as it integrates its acquisition of TD Ameritrade.

The employee reduction amounts to 1,795 to 2,154 people after it disclosed plans to reduce its expenses in July.

Other steps include changes to its real estate footprint, streamlining its operating model, and staffing reductions mostly in non-client-facing areas.

"We have said good-bye to approximately 5-6 percent of our workforce," according to an internal memo at Schwab (SCHW) seen by MarketWatch from a company spokesperson. "These were hard but necessary steps to ensure Schwab remains highly competitive, with industry-leading levels of efficiency, well into the future."

Schwab stock rose by 1.9% % on Wednesday.

The job cuts were part of a previously disclosed effort to save $500 million in the second half of the year.

Citing a report by RIABiz that the broker has laid off up to 2,000 employees this week, William Blair analyst Jeff Schmitt reiterated an outperform rating on Schwab.

He said the company offers "the potential for a significant rebound in EPS in 2024 and 2025 as cash sorting abates, short-term funding costs decline, client cash stabilizes, organic growth returns to historic levels and share buybacks reemerge."

Schmitt said in a research note on Tuesday that key risks facing Schwab include higher-than-expected cash sorting -- moving money into higher interest-bearing accounts -- as well as integration risks from its TD Ameritrade acquisition and regulatory reforms such as changes to payment for order flow and a near-term shift in the Fed's interest rate policy to easing.

Ahead of Wednesday's trades, Schwab stock was down 37.5% in 2023, compared to a 9.2% rise by the S&P 500 .

Also read: Charles Schwab's stock on track for biggest one-day gain since March of 2020 after earnings beat

-Steve Gelsi

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11-01-23 1121ET

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