Investment brokerage firm, The Charles Schwab Corporation (SCHW) revealed its plan to shift 1000 employees from San Francisco in the coming three to five years as a cost control initiative. Notably, the company will retain its headquarters in San Francisco.
The decision to trim down the employee base in San Francisco was primarily driven by the rising costs for carrying business as well as higher cost of living in the Bay Area. Further, Schwab encountered challenges in hiring professionals in the region owing to the cut-throat competition in the labor market.
Total number of employees at Schwab stood at 13,800, as of Dec 31, 2013, which includes 2700 employees in the Bay Area. However, the company is yet to arrive at a final decision as to which jobs are to be shifted. Also, Schwab is undecided on the probable locations for the transfer. However, a few options may include Arizona, Colorado, Florida, Indiana and Texas.
Notably, company’s fourth quarter 2013 net revenue rose 18% year over year to $1.4 billion, while total non-interest expense was up 8% year over year to $937 million. Therefore, the latest move seems to be a cost reduction initiative by Schwab in order to pave the way for garnering higher revenues in the near term.
Moreover, we believe that synergies from acquisitions and a stable capital position will boost the company’s financials in the near term, while we remain cautious owing to the macro economic head winds across the industry.
Currently, Schwab holds a Zacks Rank #2 (Buy). Some top-ranked Investment brokerage firms worth considering include Investment Technology Group Inc. (ITG), LPL Financial Holdings Inc. (LPLA) and E*TRADE Financial Corp. (ETFC). Both Investment Technology and LPL Financial carry a Zacks Rank #1 (Strong Buy) while E*TRADE Financial holds the same rank as Schwab.
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