Schwab to Lay Off Staff, Close Offices to Save $500M a Year

Charles Schwab is planning to trim its workforce, services and office locations as it tries to lower its yearly operating expenses by some $500 million a year, it said late Monday in a regulatory filing.

The moves are part of its final integration efforts tied to the $22 billion purchase of TD Ameritrade, which are set to be completed over the Labor Day weekend, Sept. 2-5.

"In order to achieve these cost savings, the company expects to incur exit and related costs, primarily related to employee compensation and benefits and facility exit costs, of approximately $400 [million] to $500 million," the firm explained in the 8-K filing.

"The company anticipates most costs related to position eliminations will be incurred in the second half of 2023, and costs related to real estate will be incurred in 2023 and 2024," it said.

The firm's share price is down nearly 28% so far this year and closed Monday at $59.40. The stock fell 0.6% in after hours trading as of 6 p.m. Monday in New York.

See: 6 Schwab Integration Worries of TD Ameritrade Advisors: Advisors' Advice

"We have said, we intend to take a series of actions this year and into 2024 aimed at removing cost and complexity from the firm, including reducing our expense base and streamlining our operating model," said Mayura Hooper, a Schwab spokesperson, in a statement sent via email to Bloomberg.

"This will result in eliminating some positions in the coming months, mostly in non-client facing areas. We don't yet have specifics to offer on how many positions will be eliminated," Hooper explained.

A week ago, Schwab reported lower net flows in both retail and advisory clients' assets tied to its TD Ameritrade acquisition. The client attrition was in line with the firm's expectations for the deal, which was announced in 2019, it said.

Schwab noted that this attrition should subside in the first half of next year. CFO Peter Crawford said the weaker flows amount to about 4% of Ameritrade revenue prior to the deal, or around 1% of combined total client assets as of the end of last year.

Earlier Cuts to Offices, Staff

In mid-July, Schwab confirmed plans to shut down U.S. offices in five cities and downsize locations in six metropolitan areas. The locations being shuttered on Oct. 1 are in Atlanta, San Antonio, San Diego, St. Louis and Tampa.

In addition, the firm has told employees its offices are being reduced in size at single locations in Boston; Henderson, Nevada; Jersey City, New Jersey; and San Francisco; as well as at two spots in Chicago. The smaller locations will remain in place or be moved to nearby areas.

Schwab slashed another 80 or so jobs earlier this year, as well. These reductions came on top of the roughly 1,200 layoffs that had taken place since October 2020.

"As we've shared previously, job actions are part of our multi-year integration roadmap to reduce overlapping or redundant roles across the Schwab and TD Ameritrade broker-dealers," a Schwab spokesperson told ThinkAdvisor in April.

–Jeff Berman contributed to this report.

(Credit: Chris Nicholls, ALM/Adobe Stock)