Schwab will cut online trade fees
SAN FRANCISCO -- Discount stock brokerage Charles Schwab Corp. said yesterday that it will reduce its online trading commissions for the second time in eight months, delivering the latest blow in an escalating price war.
Beginning Feb. 8, the San Francisco-based company's commission for an Internet stock trade will decrease by 35 percent to $12.95 for customer households with combined assets ranging from $50,000 to $1 million. The reduction affects nearly one-third of the 3.5 million US households with Schwab accounts, said company spokesman Glen Mathison.
Unless they make at least 9 trades in a quarter, customers with less than $50,000 in assets will continue to pay the $19.95 commission that Schwab introduced in June when it lowered prices by 33 percent. Wealthy customers will still pay $9.95 per trade.
Schwab's move comes a few days after Fidelity Brokerage Co. detailed plans to lower its online commissions for active investors from $14.95 per trade to $10.95 per trade. E-Trade Financial Corp. also recently told industry analysts that it will change its pricing before April.
The more aggressive pricing is likely to trim Schwab's profits this year, said Todd Halky, associate director for Sandler O'Neill & Partners.
Schwab expects the reductions to depress its revenue by 1 percent during the next year, said Christopher Dodds, the company's chief financial officer. Dodds didn't forecast how the changes will affect Schwab's earnings.
Schwab stock has been languishing for years as Schwab has struggled to snap out of a slump that was aggravated by a management push to raise prices.
Now, company founder Charles Schwab, who returned as chief executive last summer, is trying to repair the damage.
''This [price cut] may prevent rivals from poaching so many of Schwab's customers," Halky said.
With the latest price cuts, Schwab is essentially matching E-Trade's commissions. Other online brokers such as Ameritrade Holding Corp. and Scottrade, continue to undercut Schwab's new prices.
Schwab thinks its prices represent the better bargain because its customers can also draw upon research tools and the other services that the brokerage has added during the past five years as it morphed into a more upscale firm.
