TD Ameritrade Increases Revenue in Q1, But Misses on Profit Figures

TD Ameritrade stock has dropped 27% year-to-date but most of the decline came weeks after the commission cut was announced.

US-based brokerage firm TD Ameritrade, a broker-dealer subsidiary of TD ‎Ameritrade Holding Corporation‏,‏‎ said its fiscal first-quarter revenue rose slightly from a year earlier even as it slashed its trading commissions to zero.

Net revenues at Nebraska-based company was $1.48 billion in the three months through March 2020, up from $1.45 billion in the Q1 2019. This figure is also 15 percent higher form the $1.29 billion it booked in the fourth quarter.

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Looking at its bottom-line metrics, TD Ameritrade earned $446 million, or $0.82 per share. That’s down from $499 million or $0.89 per share in the same quarter a year ago. Adjusted earnings for the quarter were $0.86 per share, down from $0.93 per share last year.

The analysts surveyed by Thomson Reuters expected TD Ameritrade to report earnings per share of $0.87 on revenues of $1.41 billion.

TD Ameritrade stock has dropped 27 percent year-to-date but most of the decline came weeks after the commission change was announced. In after-hours trading Wednesday following the earnings report, the stock was slightly up to sell for $37.52.

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Meanwhile, trading volumes and other operating metrics at Ameritrade surged in the first quarter after fears over the impact of the spreading coronavirus sent almost all tradable assets reeling.

The solid metrics came as volatility picked up from multi-year lows in 2019, setting a fresh record high for net new client assets at $45 billion, split 58 percent retail and 42 percent institutional at an annualized growth rate of 13 percent.

Other business highlights also show a record number for new funded retail accounts at 608,000 and daily average revenue trades, DARTs, at 2.1 million. Furthermore, total client assets jumped to $1.2 trillion.

TD Ameritrade, as well as several US discount brokers, have been enhancing their offering to attract digitally savvy and younger investors, as a slew of micro-investing apps like ‎Robinhood now offer mobile that let beginners buy and sell public stocks without trading ‎fees.

Ameritrade said it expects its earnings to decline as it adjusts to losing more than $20 million in commission revenue because of zero commissions and changing competitive landscape.

Rivals such as Charles Schwab and TD Ameritrade also eliminated commissions for online trading of some stocks and funds. Shares of US retail brokerage firms all traded down following these announcements, signaling that investors think these steps are squeezing their profitability.

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