Charles Schwab beats profit estimates on higher rates; deposits drop

By - Reuters

(Reuters) - Charles Schwab Corp beat first-quarter profit estimates as rate hikes by the Federal Reserve boosted the financial services provider's interest income, even as it struggled with a decline in deposits from the U.S. banking crisis last month.

The company's shares were last down 1.5% in choppy premarket trading on Monday. They shed 37% in the first quarter after Charles Schwab was caught up in the banking turmoil triggered by the collapse of two regional U.S. banks last month.

"The first quarter presented clients with a mixed macroeconomic backdrop," CEO Walt Bettinger said in a statement.

"While equity markets rebounded from year-end 2022 levels, investor sentiment remained bearish – especially following the onset of the banking industry turmoil in early March." 

    Deposits shrank at Charles Schwab as customers moved capital to chase greater returns from other asset classes. Analysts have noted that depositors have moved their cash into money market funds to seek better returns as banks have so far remained sluggish in raising rates they pay depositors.

The firm's deposits fell to $325.7 million in the first quarter from $366.7 million in the prior quarter. They tumbled 30.1% from a year earlier.

Charles Schwab deposits dipped following the banking turmoil,

Charles Schwab said it would pause its share buyback program in light of recent uncertainty in the U.S. banking sector and the resulting concerns around new regulations.

On an adjusted basis, profit rose to 93 cents per share for the three months ended March 31. Analysts on average expected 90 cents per share, according to Refinitiv IBES data.

Net interest revenue surged about 27% to $2.77 billion.

Total net revenue rose 10% to $5.12 billion from $4.67 billion a year earlier.

(Reporting by Siddarth S in Bengaluru; Editing by Sriraj Kalluvila)

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