Interest Earning Assets To Drive Ameritrade’s Q4 Earnings

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TD Ameritrade (NASDAQ: AMTD) is scheduled to announce Q4 earnings on Monday, October 24. In comparison to the same period last year, the brokerage’s revenue is expected to increase marginally to $838 million and EPS is estimated to fall slightly to around $0.40. The growth in revenues is likely to be driven by an increase in interest earning assets and assets under management. However, declining trading commissions as a result of a dip in trading volumes in the first two months of the quarter are likely to offset the growth in overall revenue.  The table below outlines key metrics for the brokerage.
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Interest earning assets, which generate about 45% of the company’s revenues, have shown 12% growth in the quarter to date period. With the possibility of an interest rate hike in early 2017, we expect them to increase further, thereby driving the brokerage’s revenue from the segment.

The brokerage’s assets under management have also shown significant growth in July and August. In the wake of the digital advisory platform launched by Ameritrade in alliance with Riskalyze and Adhesion Wealth, we expect a significant rise in the brokerage’s assets under management, which should boost the brokerage’s investment product fees.

With a continuous increase in brokerage accounts and improving macro conditions in the U.S., daily average revenue trades are likely to show a steady improvement. This will likely boost the brokerage’s trading commissions.

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Please refer to our complete analysis for Ameritrade.

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