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TD Ameritrade's (AMTD) Q2 Earnings Miss, Revenues Climb

TD Ameritrade Holding Corporation AMTD reported a negative earnings surprise of 2.3% in second-quarter fiscal 2020 (ending Mar 31). Adjusted earnings of 86 cents per share lagged the Zacks Consensus Estimate of 88 cents. The figure also slipped 7% from the prior-year quarter’s reported tally.

The company’s results displayed escalating expenses during the fiscal second quarter. A fall in net interest margin (NIM) was also recorded. However, the company witnessed an increase in average client trades per day, indicating investors’ willingness to invest, leading to higher trading activity.

Including certain non-recurring items, net income for the quarter came in at $446 million or 82 cents per share compared with the $499 million or 89 cents reported in the prior-year quarter.

Revenues Climb, Expenses Flare Up

Net revenues for the reported quarter came in at $1.48 billion, up 2.1% year over year. This increase chiefly resulted from higher other revenues, partly offset by lower transaction-based and asset-based revenues. The reported figure surpassed the Zacks Consensus Estimate of $1.42 billion as well.

Total asset-based revenues for the March-end quarter amounted to $920 million, down around 1% year over year, hurt by lower net interest revenues. This was partially muted by higher bank deposit account fees and investment product fees.

Also, commissions and transaction fees edged down 1.2% from the prior-year quarter to $481 million. However, other revenues more than doubled to $79 million from the prior-year quarter.

The quarter's NIM came in at 1.88%, contracting 29 basis points year over year.

Total operating expenses flared up 13.8% year over year to $849 million. This upswing mainly resulted from rise in almost all components of expenses, partly mitigated by lower professional services.

Steady Trading Activity

Average client trades per day for the fiscal second quarter more than doubled on a year-over-year basis to 2.1 million.

As of Mar 31, 2020, net new client assets totaled $45.4 billion, up 13% year over year on annualized basis. Total client assets came in at $1.23 trillion, down 5.4% year over year.

Average spread-based balance was $163.1 billion, up 11.9% year over year, and average fee-based investment balance was down 35.4% to $176.8 billion.

Balance-Sheet Position

As of Mar 31, 2020, TD Ameritrade’s cash and cash equivalents were $3.7 billion, up from the $2.7 billion reported as of Mar 31, 2019. Shareholders’ equity was $9.2 billion, up from the reported figure of $8.7 billion as of Sep 30, 2019.

Outlook

For fiscal 2020, revenues are expected in the range of $4.9-$5.3 billion and GAAP operating expenses are projected at $2.8-$3 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 January-March period. Escalating expenses and margin pressure are concerns. Nevertheless, higher revenues were recorded on a strong trading performance amid the coronavirus scare.

Furthermore, higher 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.

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

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Currently, TD Ameritrade carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Banks

Charles Schwab’s SCHW first-quarter 2020 adjusted earnings of 62 cents per share lagged the Zacks Consensus Estimate of 64 cents. Also, the bottom line decreased 10% from the prior-year quarter. Results for the reported quarter excluded the $37-million expenses relating to the three pending acquisitions and $27-million charges for certain actions taken in response to the coronavirus pandemic.

Interactive Brokers Group’s IBKR first-quarter 2020 adjusted earnings per share of 69 cents surpassed the Zacks Consensus Estimate of 67 cents. The figure came in 25.5% higher than the prior-year earnings. Increase in daily average revenue trades (DARTs), mainly owing to the coronavirus-induced volatility, supported the results. However, lower revenues and rise in expenses acted as headwinds.

Among others, Raymond James RJF is scheduled to announce quarterly results on Apr 29.

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Interactive Brokers Group, Inc. (IBKR) : Free Stock Analysis Report
 
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Raymond James Financial, Inc. (RJF) : Free Stock Analysis Report
 
TD Ameritrade Holding Corporation (AMTD) : Free Stock Analysis Report
 
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