TD Ameritrade: “We look ahead at an opportunity to join forces with Schwab”

Maria Nikolova

Required filings are in process, and integration planning teams are being formed, explains TD Ameritrade’s interim president and chief executive officer Steve Boyle.

TD Ameritrade Holding Corp. (NASDAQ:AMTD) has earlier today posted its financial report for the first quarter of fiscal year 2020, providing some insight into the business climate following the announcement that the company will be acquired by Schwab.

Steve Boyle, interim president and chief executive officer, stroke an upbeat note:

“Now we look ahead at an opportunity to join forces with Schwab, which will pool our complementary resources and expertise to meet our commitment to self-directed investors and independent registered investment advisors”.

He explained that, until the deal closes, which is expected to happen in the second half of 2020, the companies will continue to operate as separate entities focused on growing and retaining client relationships, retaining key talent, and winning in the marketplace. Required filings are in process, and integration planning teams are being formed, Mr Boyle added. The TD Ameritrade team will be headed by the same leader responsible for its successful integration of Scottrade.

“In the retail channel, attrition slowed following our pricing changes but picked up again after the Schwab acquisition news. Outflows are in-line with the trends we observed at Scottrade in 2016, which normalized after the first two months following the deal announcement. On the institutional side of our business, new account activity and retention remained strong with only minor impacts to net new assets following the Schwab announcement and no meaningful changes in trends”, Mr Boyle said.

Schwab is set to acquire TD Ameritrade in an all-stock transaction valued at approximately $26 billion. Under the transaction terms, TD Ameritrade stockholders will receive 1.0837 Schwab shares for each TD Ameritrade share. This represents a 17% premium over the 30-day volume weighted average price exchange ratio as of November 20, 2019.

The deal is seen to create significant strategic benefits for the combined organization and is expected to deliver attractive returns for the owners of both companies, while further improving the investing and trading experience of both Schwab and TD Ameritrade clients. The combination allows Schwab to continue to add further scale on top of its organic growth, helping to drive sustainable, profitable growth and long-term value creation.

In its report issued today, TD Ameritrade noted the effect of the zero commissions on its results. Trading was robust in the first quarter averaging 1 million trades per day, which helped offset a portion of the revenue impact from zero commissions. The company had 38 days eclipsing 1 million trades in the first quarter, compared to 23 days in all of fiscal 2019.

For the quarter to end-December 2019, TD Ameritrade registered net new client assets of $29 billion, with the annualized growth rate being 9%. Total client assets reached $1.4 trillion. The net revenues for the period amounted to $1.3 billion.

The company registered $0.70 in GAAP earnings per diluted share, on net income of $379 million.

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