Charles Schwab (SCHW, $41.95) slashing 600 workers, to revive interest margins

Charles Schwab revealed plans to retrench 3% of its workforce, as it attempts to boost interest margins amidst macroeconomic headwinds.

The financial services giant is laying off 600 employees, hoping that the move would lower expenses and therefore mitigate pressure from declining interest rates and economic challenges. Impacted positions span all staffing grades, as well as organizations and locations across the company, as indicated by the company’s statement.

Charles Schwab’s banking unit has been experiencing pressure on its profit margins amidst a low-interest-rate environment. The global and domestic macroeconomic headwinds/uncertainties and therefore declining interest rates seem to have aggravated the narrowing of interest margin between loans and deposits for Charles Schwab. Furthermore, the Federal Reserve is expected to implement more rate cuts this year after dropping rates by a quarter of a percentage point over the summer – something that could potentially add to Charles Schwab’s concerns, since a large portion of its revenue comes from net interest.

In its second quarter earnings, Schwab’s net interest revenue declined -4% from the first quarter. In July, the company said that if the Fed rate cuts continued, it expected a further squeeze into the end of the year.

Through the job cuts, the company is hoping to achieve better control of expenses, and improvements  on scale and efficiency — like platform improvements and digital experiences - according to the company.