Charles Schwab 3Q Profit Falls 34 Percent

FILE - In this April 14, 2008 file photo, the entrance of a Charles Schwab office in San Jose,...

FILE - In this April 14, 2008 file photo, the entrance of a Charles Schwab office in San Jose, Calif., is seen. Charles Schwab Corp. said Thursday, Oct. 15, 2009, that it was able to attract new accounts and client assets during the third quarter, but its profit fell 34 percent as trading activity slowed, a sign that investors are still hesitant to jump into the market. (AP Photo/Paul Sakuma, file)

(AP)

Charles Schwab Corp. said Thursday it was able to attract new accounts and client assets during the third quarter, but its profit fell 34 percent as low interest rates and waivers on certain fees ate into revenue.

Revenue fell 19 percent to $1.01 billion, just short of what analysts expected. The miss weighed on the company's shares in midday trading, sending the stock down 91 cents, or 4.7 percent, to $18.37.

The San Francisco-based brokerage said its revenue took a hit as asset management and administration fees declined 24 percent during the quarter to $451 million, due in part to $78 million in fees that were waived as part of Schwab's efforts to attract new clients.

Net interest revenue fell 34 percent year-over-year to $294 million as rock-bottom interest rates cut into the returns Schwab earns on its investments.

Low interest rates have been a drag on Schwab's revenue since the Federal Reserve lowered its benchmark interest rate to a record low of near zero last December as part of its efforts to spur economic activity and keep borrowing costs low.

Though the Fed has said it does not plan to raise interest rates in the near future, many speculate that the central bank may have to step in and raise rates sooner rather than later to support a weakening dollar and fend off inflation. That would be a boon for Schwab's results.

"As rates do begin to come up, as the economy begins to strengthen, we should see the impact on our financials pretty immediately," Chief Financial Officer Joe Martinetto told The Associated Press.

Schwab also saw its trading revenue decline 4 percent to $241 million. Clients averaged 318,500 trades per day during the third quarter, down 5 percent from the same time last year, when the panic-driven selling that marked the weeks leading up to and immediately following the bankruptcy of Lehman Brothers resulted in a record quarter of trading activity at the company.