Ameritrade’s Growth Across Key Monthly Metrics Continues In October

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TD Ameritrade (NASDAQ:AMTD) has continued its growth trend across key metrics in October. Interest earning assets, which contribute around 50% of the revenues, have seen phenomenal growth (~12%) in asset volume in October and overall year. This surge in volumes has likely been driven by both the rate hike in December of 2015 and the anticipation of another possible hike in early 2017. However, low yields on these assets in comparison to other competitor brokerages (Charles Schwab and E-Trade) have possibly led to low growth in revenue from the division. The acquisition of Scottrade, which will provide scale to Ameritrade, is likely to cause the yields to improve, thereby propelling revenue growth.

Assets under management have also continued to grow with customers seeking expert financial advice to manage their assets. The digital advisory business and the company’s focus on newer investment products to meet customer demand are likely to drive these asset volumes and consequently, higher investment product fees.

Trading volumes have been down for quite sometime now, owing to both unfavorable macro-conditions and that fact that investors are looking for safer investment alternatives. Additionally, with intense competition from other brokerages, revenue per trade has continued to decline over the years. With the acquisition of Scottrade, the company expects to be well-positioned, if not eliminate the pricing competition. We expect the volumes to pick up due to increased volatility in the market from the recent U.S. elections and a possible improvement in the macro-conditions.

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Please refer to our complete analysis for Ameritrade.

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