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Charles Schwab is laying off 600 workers in response to a slowing economy and pressure from slumping interest rates, the company said.
The cuts represent about 3% of the bank's workforce and come across all sectors amid an effort to streamline expenses as net interest revenue comes under pressure.
"This Spring, we initiated a process to review our expense base to ensure we remain well-positioned to serve clients while navigating an increasingly challenging economic environment," the company said in a statement. "As part of that process, we have decided to eliminate approximately 600 positions across the firm. Impacted positions span all staffing grades, as well as organizations and locations across the company."
Rates have been falling amid worries about slowing economic activity both globally and in the U.S. A company source said the staff reductions are a direct result of the income pressure from declining rates, which hurt banks by narrowing the margin between loans and deposits.
In July, Federal Reserve policymakers cut their benchmark overnight borrowing 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 been aggressively pushing the Fed for more cuts and even advocated zero or negative rates in a pair of tweets Wednesday.
Net interest revenue is a large income driver for Schwab, whose shares have badly underperformed the market this year. The stock is up just 1.2% in 2019 compared with the 16.5% gain for the SPDR S&P Bank ETF.
Other big banks also are getting pressured. Officials from Citigroup and Wells Fargo said at an industry conference this week that they expect lower interest income as well, citing the growth slowdown as well as the Fed cuts.
In second quarter earnings, Schwab's net interest revenue fell 4% from the first quarter. The company said in July that if the Fed cuts continued, it expected a further decline into the end of the year. A company official had told employees recently that Schwab was wrong this year in its rate forecasts, according to The Wall Street Journal.
"While it is never easy to say goodbye to valued colleagues, these actions are a prudent step to ensure we manage our expense growth while continuing to invest in initiatives that allow us to achieve greater scale and efficiency — like platform improvements and digital experiences," the company said.