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Analyst Blog

Recently, TD Ameritrade Holding Corporation (AMTD - Analyst Report) – an online brokerage firm – reported a rise in average client trades from the prior year in its Activity Report for Aug 2013. Further, U.S. trades increased 2% from the prior-month level.

For the reported month, average client trades were 382,000, up 26% year over year. The rise in client trades largely resulted from a resurgence in the equity markets.

For the month, TD Ameritrade reported $538.4 billion in total client assets, up 17% year over year but down 1% from the prior month. Moreover, average spread-based balances increased 16% year over year to $88.2 billion. However, these balances remained stable from Jul 2013.

At the end of August, average fee-based balances were recorded at $122.2 billion, rising 31% year over year and 1% from the prior month.

Quarterly Performance

As of Jun 30, 2013, average client trades per day increased 12% year over year to 399,216. Net new client assets were $10.8 billion, up 11% from $9.7 billion in the past year.

At the end of June, TD Ameritrade reported total client assets worth $523.5 billion, up 18% year over year. Moreover, average spread-based balance was $84.7 billion, up 14% from $74.2 billion in the prior-year quarter. Average fee-based balance was $118.1 billion, up 34% year over year.

Our Viewpoint

Innovations in online trading, long-term investment in products and services, delivery of advanced customer service, creative as well as cost-effective marketing and sales, along with prudent expense management are the key factors behind the boost in TD Ameritrade’s trading and investing business.

Further, the company’s association with The Toronto-Dominion Bank (TD - Snapshot Report) provides an opportunity to cross-sell its products. This is expected to be a significant growth driver for TD Ameritrade’s organic assets.

Amid a volatile operating environment, TD Ameritrade witnessed a rise in both organic client assets and trading volumes, which will benefit the company. However, a low interest rate environment and stringent regulations will likely be dampeners.

TD Ameritrade currently carries a Zacks Rank #2 (Buy). Other financial stocks that are performing well include E*TRADE Financial Corporation (ETFC - Analyst Report) and Evercore Partners Inc. (EVR - Snapshot Report). Both of these carry the same Zacks Rank as TD Ameritrade.

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