Schwab may cut 3Q EPS
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September 19, 2001: 1:55 p.m. ET
Nation's No. 1 discount broker's earnings hurt by loss of trading days
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NEW YORK (CNNfn) - Charles Schwab Corp., the nation's largest discount broker, disclosed Wednesday that the loss of four trading days last week may cause it to shave 1 cent from its third-quarter earnings.
The shutdown will cost San Francisco-based Schwab (SCH: down $0.90 to $9.11, Research, Estimates) about $20 million in revenue, a spokesman said. When the markets finally opened Monday trading volume nearly tripled to 331,000 client revenue trades, Schwab said.
Volume remained strong on Tuesday but did not reach Monday's totals, a spokesman said who could not supply totals. However, Schwab has not yet decided whether it will cut estimates.
"While our clients' trading activity had increased in early September – daily average revenue trades were 136,000 for the first five trading days of the month – last week's terrorist attacks and their aftermath have added fresh uncertainty to the market environment," Schwab Co-CEO David Pottruck said in a statement.
Schwab shares, which are off 74 percent from their 52-week high, dropped more than 6 percent Wednesday in early afternoon trading.
Earnings tracker First Call had expected Schwab to post 6 cents a share. The one penny loss will cut third-quarter EPS by about 16 percent, analyst Gerard Cronin of McDonald Investments Inc. said.
Cronin also lowered Schwab's third-quarter expected EPS 5 cents.
"I'm not surprised at all," Cronin said of Schwab's potential cut in EPS. "September is going to determine the quarter for Schwab."
Whether Schwab actually does cut third-quarter EPS by a penny will depend on volumes for the last week of September.
Online brokers have suffered this year as trading volumes have dropped.
In the long term, the issue for brokers will be how long the terrorist attacks on U.S. soil last week will impact investors, Cronin said.
Schwab last month announced reductions of 2,400 employees but has yet to begin the layoffs, a spokesman said.
Schwab said Wednesday that client average trades dropped 30 percent to 162,400 during August from the same period in 2000. Client daily revenue trades fell 38 percent to 114,200 during the month.
Total client assets dropped 18 percent to $821 billion, while Schwab added $6.7 billion in assets in August, the broker said.
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