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TD Ameritrade's (AMTD) Q3 Earnings Beat, Revenues Increase

Zacks Equity Research

TD Ameritrade Holding Corporation AMTD reported an earnings surprise of 29.8% in third-quarter fiscal 2020 (ending Jun 30). Adjusted earnings of $1.09 per share outpaced the Zacks Consensus Estimate of 84 cents. The figure also climbed 4.8% from the prior-year quarter’s reported tally.

The company witnessed an increase in average client trades per day, highlighting investors’ willingness to invest, leading to higher trading activity. Moreover, revenues escalated depicting high transaction volumes. However, the company’s results displayed escalating expenses. A fall in net interest margin (NIM) also played spoilsport.

Including certain non-recurring items, net income for the quarter came in at $569 million or $1.05 per share compared with the $555 million or $1.00 per share reported in the prior-year quarter.

Revenues Climb, Expenses Flare Up

Net revenues for the reported quarter came in at $1.59 billion, up 6.7% year over year. This upside chiefly resulted from higher transaction-based and other revenues, partly offset by lower asset-based revenues. The reported figure handily surpassed the Zacks Consensus Estimate of $1.41 billion as well.

Total commissions and transaction fees surged 36.7% from the prior-year quarter to $652 million. Also, other revenues soared 89.8% year over year to $112 million.

However, total asset-based revenues for the June-end quarter amounted to $822 million, down 13.9% year over year, on lower net interest revenues, bank deposit account and investment product fees.

Also, the quarter's NIM came in at 1.39%, contracting 84 basis points year over year.

Total operating expenses flared up 4.8% year over year to $808 million. This upswing mainly resulted from rise in almost all components of expenses, partly mitigated by lower advertising and other expenses.

Strong Trading Activity

Average client trades per day for the fiscal third quarter more than tripled on a year-over-year basis to 3.4 million due to zero commissions and consistent volatile markets.

As of Jun 30, 2020, net new client assets totaled $33 billion, up 11% year over year on an annual basis. Total client assets came in at $1.46 trillion, up 11.5% year over year.

Average spread-based balance was $197.9 billion, up 38.5% year over year, while average fee-based investment balance significantly dropped 43.3% to $164.8 billion.

Balance-Sheet Position

As of Jun 30, 2020, TD Ameritrade’s cash and cash equivalents were $2.6 billion, down from the $2.9 billion reported as of Sep 30, 2019. Shareholders’ equity was $9.6 billion, down from the reported figure of $8.7 billion as of Sep 30, 2019.


For fiscal 2020, revenues are expected to be $4.9-$5.3 billion and GAAP operating expenses are projected at $3-$3.1 billion, including advertising expenses of $250-$300 million and intangible amortization of $115-$120 million. NNA growth rate is expected to be 7-10%.

Our Viewpoint

The company put up a decent performance during the April-June period. Higher revenues were recorded on a solid trading performance amid the coronavirus scare. Furthermore, elevated average clients per day are anticipated to continue.

Additionally, rising new client assets and anticipated strong investor engagement will likely keep supporting bottom-line growth, marching ahead. Notably, the company remains on track to complete the Schwab deal in the second half of 2020. Nevertheless, escalating expenses and margin pressure are concerns.

TD Ameritrade Holding Corporation Price, Consensus and EPS Surprise

TD Ameritrade Holding Corporation Price, Consensus and EPS Surprise
TD Ameritrade Holding Corporation Price, Consensus and EPS Surprise

TD Ameritrade Holding Corporation price-consensus-eps-surprise-chart | TD Ameritrade Holding Corporation Quote

Currently, TD Ameritrade carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Charles Schwab’s SCHW second-quarter 2020 adjusted earnings of 54 cents per share lagged the Zacks Consensus Estimate of 55 cents. Also, the bottom line decreased 19% from the prior-year quarter. Results for the reported quarter excluded acquisition and integration-related costs as well as the amortization of acquired intangibles.

We now look forward to the upcoming quarterly results of E*TRADE Financial ETFC and Raymond James Financial RJF. Raymond James is slated to release results for the June-end quarter on Jul 29, while E*TRADE will report on Jul 23.

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