Investing giant Charles Schwab is planning on downsizing and becoming a smaller bank in the future in an attempt to remain profitable. The news didn’t sit well with investors, sinking Charles Schwab stock by 10.18%.
In a conference call with analysts on Tuesday, Charles Schwab CEO Walt Bettinger said that the bank intends to rely on partners for off-balance sheet deals, believing it is a path to more efficient use of capital. By doing this, Bettinger expects Charles Schwab to shrink over time.
“These various actions should lead — again over time — to a bank that is somewhat smaller than our bank has been in recent years while retaining the ability to meet our clients’ banking needs, lower our capital intensity, and, importantly, protect the economics we’re able to generate from owning a bank,” Bettinger explained.
Announcing its earnings, Charles Schwab revealed it added 985,000 new brokerage accounts in the past quarter, coming below the 1.04 million expected by analysts. However, its net income of $1.33 billion and earnings per share that came at $0.66 topped the estimates.
After the slide on Tuesday, which was the largest for the bank since the banking crisis in 2023, Charles Schwab’s stock closed at $67.43 per share. The company’s shares are currently 2.42% down year-to-date.