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TD Ameritrade’s Investment Outlook and Capital Return Plans

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Share buyback

TD Ameritrade (AMTD) posted strong organic growth in the first nine months of fiscal 2015. Trends for trading, asset gathering, and fee-based assets remained positive compared to the previous year. The company is riding on momentum with a relevant, superior service, attractive product offering, and an effective multi-channel sales and service model. TD Ameritrade has repurchased 125,000 shares of its common stock with an average price of $36.75 per share totaling $5 million.

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Consolidating spreads

TD Ameritrade’s spread-based revenues increased to $365 million in 3Q15 compared to $351 million in the prior year’s corresponding quarter and $354 million in 2Q15. Its increase in revenues was mainly due to margin lending and IDA fees. The company’s average spread-based assets also expanded marginally to $95.2 billion compared to $94.3 in the previous quarter. Margin lending revenues increased by $7 million, partially offset by a lower rate due to a mix of clients.

The long end of the curve continues to trend downward, making it difficult for TD Ameritrade to increase its overall net interest margins. The company is focusing on maintaining strong organic growth, controlled variables, and investing in new technologies. It’s working to identify new investment opportunities that will help in building long-term earnings growth.

Here’s how a few of TD Ameritrade’s peers in the brokerage industry fared in terms of net profit margins.

  • Interactive Brokers Group (IBKR)—41.13%
  • E*TRADE Financial Corporation (ETFC)—16.15%
  • Charles Schwab Corporation (SCHW)—21.46%

Together, these companies form 1.31% of the Financial Select Sector SPDR Fund (XLF).

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