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What Drove TD Ameritrade’s Second-Quarter Performance?

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May. 31 2018, Published 12:25 p.m. ET

TD Ameritrade’s performance

TD Ameritrade (AMTD) benefited from clients’ higher trading activities in the second quarter, which ended on March 31. Brokerages’ performance would be boosted if equity markets experience high volatility. The volatility would lead to more trading among clients and improve the trading revenues.

In the March quarter, among the company’s competitors (VFH), Charles Schwab (SCHW) reported trading revenues of $201 million. E*TRADE Financial (ETFC) and Interactive Brokers Group (IBKR) reported revenues of $137 million and $220 million, respectively.

Although higher trading benefits the brokerages, they also benefit from higher interest rates. When the Fed announces a rate hike, brokerages attract market observers’ attention.

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Attracting clients is vital

Brokerages’ performance mainly revolves around clients’ participation. Higher client participation would improve a company’s growth prospects. Resorting to digital tools might help brokerages attract new clients. Apart from client satisfaction, there are several other macroeconomic factors that impact brokerages’ performance.

Negative momentum in the financial markets might disrupt brokerages’ performance because fewer clients would be interested in trading. TD Ameritrade’s performance is also sensitive to the pricing actions adopted by competitors in the industry. Reducing the prices might have a negative impact on the company’s financial position. Pricing plays an important role in attracting clients. Moving forward, brokerages are expected to witness positive momentum due to higher interest rates, which could improve their interest revenues.

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