Charles Schwab is laying off 600 workers in response to a declining economy and pressure from falling interest rates, the company said.
The cuts represent about 3% of the bank's workforce and come across all sectors in the midst of an effort to streamline expenditures that net interest income comes under pressure.
"This spring, we started a process to review our cost basis to ensure that we remain well positioned to serve customers as we navigate an increasingly challenging financial environment," the company said in a statement. "As part of this process, we have decided to eliminate about 600 positions throughout the company. Affected positions span all staffing levels, as well as organizations and locations throughout the company."
Prices have fallen below concerns about curbing economic activity both globally and in the United States. A company source said the staff reductions are a direct result of income pressure from falling interest rates, which hurt banks by reducing margins between loans and deposits.
In July, Federal Reserve policy makers cut their benchmark overnight lending rate for banks by a quarter point, and are expected to enact two more reductions before the end of the year, the first coming at next week's policy meeting. President Donald Trump has aggressively pushed the Fed for several cuts, even advocating zero or negative interest rates in a pair of tweets Wednesday.
Net interest income is a major revenue driver for Schwab, whose shares have underperformed the market this year. The share will increase only 1
Other major banks are also under pressure. Citigroup and Wells Fargo officials said at an industry conference this week that they also expect lower interest income, citing growth declines and Fed cuts.
In revenues in the second quarter, Schwab's net interest income fell by 4% from the first quarter. The company said in July that if the Fed cuts continued, it expected a further decline towards the end of the year. A company official had recently told employees that Schwab was wrong this year in its interest rate forecasts, according to the Wall Street Journal.
"While it is never easy to say goodbye to valued colleagues, these actions are a reasonable step to ensure that we manage our cost growth while continuing to invest in measures that allow us to achieve greater scale and efficiency – such as platform improvements. and digital experiences, "the company said.