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TD Ameritrade (AMTD) Q3 Earnings & Revenues Beat Estimates

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TD Ameritrade Holding Corporation (AMTD - Free Report) recorded a positive earnings surprise of 12.7% in third-quarter fiscal 2018 (ending Jun 30). The company reported earnings of 89 cents per share, significantly beating the Zacks Consensus Estimate of 79 cents. Moreover, results were up 85% from the prior-year quarter.

The quarter displayed higher revenues and elevated expenses. Rise in net interest margin (NIM) was also recorded. Notably, the company recorded an increase in average client trades per day, indicating improvement in trading activity.

Including certain non-recurring items, net income for the quarter came in at $451 million or 79 cents per share compared with $231 million or 44 cents reported in the prior-year quarter.
Rise in Revenues Offset Escalating Expenses

Net revenues for the reported quarter came in at $1.38 billion, surpassing the Zacks Consensus Estimate of $1.35 billion. Also, net revenues surged 48.4% year over year. The rise chiefly stemmed from higher transaction-based as well as asset-based revenues.

Total asset-based revenues for the quarter amounted to $859 million, up 49.9% year over year, driven by higher bank deposit account fees, as well as investment product fees and net interest revenues.

Commissions and transaction fees climbed 46.3% from the prior-year quarter to $490 million. Further, the quarter's NIM came in at 1.94%, expanding 39 basis points year over year.

Total operating expenses flared up 39.9% year over year to $751million. The rise mainly resulted from rise in a number of expenses, including employee compensation and benefits, professional services, occupancy and equipment costs, and other expenses.

Trading Activity Improves

Average client trades per day for the second quarter increased 54% year over year to 784,000.

As of Jun 30, 2018, net new client assets totaled $20 billion, up 10% year over year. Total client assets came in at $1.2 trillion, up 39% year over year.

Average spread-based balance was $146.6 billion, jumping 24.4% year over year, and average fee-based investment balance was up 35.4%, to $256.8 billion.

Balance Sheet Position

As of Jun 30, 2018, TD Ameritrade’s cash and cash equivalents were $1.3 billion compared with $1.5 billion reported as of Sep 30, 2017. Shareholders’ equity was $7.9 billion compared with $7.2 billion as of Sep 30, 2017.

Our Viewpoint

The company delivered an impressive performance on a significant improvement in trading activities. Furthermore, eased margin pressure in the April-June quarter acted as a tailwind. The company recorded a rise in average client trades per day. Also, the Scottrade acquisition and strong investor engagement supported earnings growth.

Though we remain cautious of elevated costs, which are likely to weigh on the company’s financials, TD Ameritrade’s steady capital-deployment activities and revenue growth are encouraging.

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 Investment Brokers

Charles Schwab’s (SCHW - Free Report) second-quarter 2018 earnings of 60 cents per share surpassed the Zacks Consensus Estimate of 58 cents. Also, earnings surged 54% from the prior-year quarter. Revenue growth (driven by a rise in interest income and trading revenues) and absence of fee waivers supported the results. Further, the quarter witnessed an impressive rise in total client assets and new brokerage accounts. However, higher expenses remained the undermining factor.

Interactive Brokers Group, Inc. (IBKR - Free Report) released second-quarter 2018 results. Earnings per share of 58 cents surpassed the Zacks Consensus Estimate of 51 cents. Also, the figure was higher than prior-year quarter’s earnings of 32 cents per share. Results benefited from an improvement in revenues and rise in DARTs along with lower expenses. Further, the Electronic Brokerage segment continued to perform decently.

E*TRADE Financial (ETFC - Free Report) recorded a positive earnings surprise of 6.7% in second-quarter 2018. Earnings of 95 cents per share easily surpassed the Zacks Consensus Estimate of 89 cents. Moreover, results compared favorably with 70 cents recorded in the prior-year quarter. Results reflected improved net revenues and a benefit to provision for loan losses. DARTs increased year over year. Further, the quarter witnessed rise in customer accounts and reduced delinquencies. However, elevated operating expenses were on the downside.

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