Schwab delays funds market as European brokers retreat

Schwab delays funds market as European brokers retreat

Bloomberg is reporting plans by Charles Schwab Europe to delay the opening of a funds marketplace. News of the retreat comes as online brokers across Europe slash costs and cut staff in response to falling equity markets and waning interest in Internet trading.

Bloomberg says the Schwab European fund market, similar to the US parent's OneSource service, was scheduled to open by mid-year. It quotes Russ Shaw, Schwab's European head of commercial development, who says the service will not now be launched until the year-end.

"We are still proceeding with the idea, but we want to get the structure right," Shaw is quoted as saying. "We don't want to hemorrhage profitability."

The fund market was expected to operate by telephone initially, and later over the Internet. About 150 staff who left the broker's UK operation in January are not being replaced, says Bloomberg.

The US parent recently cut back earnings forecasts and announced plans to cut 3400 jobs worldwide. The retrenchment at Schwab has been mirrored at other online brokers, as retail investors have backed away from volatile markets.

Consors, Europe's second-largest online broker, has reported a 20 per cent drop in first quarter trading volume compared to the previous quarter. The group, which reported a net profit of EUR 17 million for 2000, in line with expectations, says it will be cutting back on costs while the markets remain weak.

Shares in Direkt Anlage Bank, Europe's number three online broker, have also slumped, as the company warns of a slowdown in earnings growth for 2001. New customer acquisitions have dropped by more than half this year, to 45,000 compared to the year ago period.

Comdirect, the German online broker has moved to rebutt speculation that it is to close its UK operation following comments from chairman Martin Kohlhaussen that its French and UK subsidiaries might have to be scaled back. The broker says closure of the UK operation - which has 800 subscribers - is only one of a number of options being considered.

While the outright closure of underperforming outposts is an option for many, it is more likely that the next six months will be marked by a spate of mergers and acqusitions of rival interests, as European online brokers scale back their plans for expansion and instead enter a period of consolidation.

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