Schwab again declines to say which staffers will get pink slips by Christmas to save $500-million in 2024 expenses, and the math remains sketchy

Charles Schwab Corp. CEO Walter Bettinger restated his company's intent to eliminate enough positions to cut $500 million in salaries and related expenses, including real estate, from its annual budget. 

Yet, top executives of the Westlake, Texas, company again postponed disclosure of just how many and exactly who will get the ax – or when Schwab plans to inform the affected employees.

Philip Waxelbaum, founder and CEO of Masada Consulting LLC, a recruiting company, said Schwab's waiting game will take its toll.

“They're going to start rolling it out, and it'll probably run through the holidays because you don't have enough HR people to process that many people in one day. 

"It's just tragic. This will be a disaster. It'll be a lot of people home for Christmas."

Sense of urgency

In a Monday analysts' call, Bettinger reiterated Schwab is still following the plan laid out in an August Securities and Exchange Commission (SEC) filing.

It sets a Dec. 31 deadline for the layoffs, all of which will be non-client facing. See: Charles Schwab Corp. discloses imminent, sweeping 'TD Ameritrade' layoffs, indirectly revealed in new SEC filing

For most organizations, real estate costs are the second largest expense after salaries, according to one office consulting firm. 

Commercial real estate costs vary widely depending on location—ranging from a high of $83-per-square foot in Midtown Manhattan to just $17.93 in mid-sized cities like Louisville. The nationwide average is $34-per-square-foot. Utilities add another $3.40 per square foot. 

The average work station is 45 square feet, so real estate savings could come in at around $1,683 per employee, according to the firm. 

The average back-office salary nationwide is $50,237 annually, according to glassdoor.com. To reach $500 million in savings, layoffs would have to be closer to 9,500 employees, or $477 million in savings. 

Real estate savings would yield about $16 million, although Schwab could save much more because it's allowing a large number of employees to work from home.  See: In apparent reversal, Charles Schwab Corp. is telling thousands of staffers in five cities to work from home -- six more cities, including its old San Francisco headquarters, are on the chopping block

Wrapping up

Most, if not all, of the employees are thought to work in TD Ameritrade (TDA) back offices, who are still needed to wrap up the merger, which Schwab considers 80% complete as of its Labor Day transition. 

But corporate sources say a sense of urgency also exists because Schwab wants to clear the books on these expenses before the end of the year.  Walt Bettinger pulls $500 million rabbit from hat based on projected cuts to Schwab 'headcount' and 'real estate savings' -- assuring analysts it wasn't previously 'baked in'

“Firms typically want to get expenses wrapped up in the fourth quarter so they don't have to carry the costs into the new year,” says Waxelbaum.

Shareholders waiting

Schwab announced earlier this year it is closing or downsizing offices in Boston, Chicago, Henderson, Nev., Jersey City, NJ, and San Francisco. See: In apparent reversal, Charles Schwab Corp. is telling thousands of staffers in five cities to work from home -- six more cities, including its old San Francisco headquarters, are on the chopping block

In its SEC 8K filing, Schwab acknowledged that real estate expenses will flow into 2024. 

Disclosing layoffs in the summer and letting them linger could be an effective policy because it lets Schwab executives get an inkling of a reaction from Wall Street, Waxelbaum said.

Indeed, when the news was announced in August, Michael Wong, Morningstar senior analyst, wrote in a note that the savings would be substantial for shareholders both because it's the gift that gives every year.. 

“The $500 million of expected cost savings is much more important and beneficial than the $400 million to $500 million of one-time charges, so this is a net positive to shareholders,” he wrote in August.

Shareholders, however, are still waiting to see those gains. Schwab stock (SCHW) has been struggling to regain ground since its dramatic plunge in March and the downward spiral that followed. Shares bottomed out at a 52-week low of $45. 

The stock began to make a comeback in May, but lost momentum in July and slid from $63 to a $53.69 close today (Oct. 17) in relatively flat trading.  

Human cost

The cutbacks will have an emotional cost as well and employees are discussing their anxiety online on message boards such as https://www.thelayoff.com/charles-schwab

“My stress levels are through the roof. If this doesn't get resolved this week, I'll have to start medicating, which is not something I ever thought I'd have to do due to work,” says one person representing themselves as an in-limbo TDA/Schwab staffer. 

Some staffers are weighing the needs they can see internally and suspect that the layoffs could be pushed off until the next integration.

Staffers have posted that Schwab executives have said that staffers laid off this year would be eligible for bonuses this year. 

"If there is bonus eligibility, the severance is going to reflect that," Waxelbaum says. “A lot of this becomes an accounting exercise.”

The bonuses that are easiest to handle are those that are based on a formula. The bonuses based on merit are more subjective and challenging during layoffs, Waxelbaum says.

“The c-suite is covered with parachutes and the bottom staffers are taken care of, but just like everything else in America - the middle is where you don't want to be," he adds. 

Bleeding staff

Cutting costs is of the utmost importance, Bettinger stated in the company's release Monday.

“We have identified a number of opportunities for increased efficiency, including capturing the remaining deal expense synergies, streamlining our operational design, aligning our geographic footprint to match our hybrid workforce, and harnessing the benefits of increased automation. 

"Once fully implemented, we expect these actions to deliver at least $1 billion of incremental annual expense savings," he said in the release. 

Schwab has already cut many TD staffers. 

More than 1,000 mostly TDA staff -- and some Schwab legacy staffers -- have left the combined firms since they merged, over three rounds of cuts.

Departures included well known TDA executives Tom Nally, president of TDA Institutional, spokesperson Kristin Petrick, retail head Peter deSilva, and interim president and CEO Steve Boyle. See: Bernie Clark and Tom Bradley reign again atop RIA custody at Schwab.