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Charles Schwab fired 600 workers because of the slowdown in the economy and pressure from falling interest rates, the company said.
The cuts represent about 3% of the bank's workforce and affect all sectors in an effort to streamline expenses because net interest income is under pressure.
"This spring, we launched a process to review our expense base to ensure we remain well positioned to serve our customers while navigating in an increasingly challenging economic environment," the company said in a statement. communicated. "As part of this process, we have decided to eliminate about 600 positions within the company.The positions involved cover all categories of personnel, as well as organizations and sites of the company. business."
Rates fell amid worries about the slowdown in economic activity in the United States and globally. A business source said staff cuts were a direct result of the pressure of lower rates on incomes, which hurt banks by reducing the margin between loans and deposits.
In July, Federal Reserve policymakers reduced their overnight bank benchmark rate by a quarter of a point and are expected to make two further cuts before the end of the year. , the first at the meeting next week. President Donald Trump lobbied aggressively on the Fed for further cuts, and even advocated zero or negative rates in a pair of tweets on Wednesday.
Net interest income is an important source of revenue for Schwab, whose shares significantly underperformed the market this year. The stock rose only 1.2% in 2019, compared with 16.5% for the SPDR S & P Bank ETF.
Other major banks are also under pressure. Officials from Citigroup and Wells Fargo said this week at a sectoral conference that they expect a drop in interest income, citing slower growth and cuts. from the Fed.
In the second quarter results, Schwab's net interest income decreased by 4% compared to the first quarter. The company said in July that if Fed cuts continue, it expects a further decline by the end of the year. A company official had recently told his employees that Schwab had been cheated this year in his rate forecasts, according to the Wall Street Journal.
"While it's never easy to say good-bye to valuable colleagues, these actions are a prudent step in allowing us to manage the growth of our expenses while continuing to invest in initiatives that allow us to To achieve greater scale and increased efficiency, such as platform improvements and digital experiences, "the company said.
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