Investing.com -- Charles Schwab (NYSE:SCHW) has reported a 22% dip in net profit in 2023, as the financial services group said it dealt with "challenges" posed by a tighter interest rate environment.
Adjusted net income at the Texas-based company dropped to $6.16 billion over the twelve months ended on Dec. 31.
Dragging down earnings was a move by clients to reposition their money into higher-yielding money market accounts, which led to a 9% fall in net revenues during the period to $18.84B.
Shares in the group were lower in premarket trading on Wednesday.
Despite a slowdown in the unprecedented pace of Federal Reserve rate increases last year, borrowing costs remained at a historically elevated range of between 5.25%-5.50%.
"As expected, clients took advantage of the highest yields in nearly two decades by increasing their allocations to investment cash and fixed income alternatives available at Schwab," said Chief Financial Officer Peter Crawford in a statement, adding that the firm's balance sheet subsequently shrank by $59B.
But this realignment activity eased in the second half of the year, Crawford noted, including a seasonal uptick in client cash in December. Core net new assets exceeded $40B last month, pushing the yearly figure up to $306B.