E-Trade Earnings Narrowly Beat After TD Ameritrade, Interactive Brokers Miss

E-Trade Financial (ETFC) just barely topped Q4 forecasts late Thursday after TD Ameritrade (AMTD) and Interactive Brokers (IBKR) missed on earnings Tuesday as the online brokerage industry eliminated trading fees last year. E-Trade Financial stock fell near a buy point.


E-Trade Earnings

Estimates: Wall Street expects E-Trade earnings to tumble 21.7% to 83 cents despite revenue falling 7.8% to $678 million, according to Zacks Investment Research.

Results: EPS of 84 cents for Q4 on revenue of $679 million. Total customer assets swelled 33% to $677.5 billion, and average interest-earning assets dropped 8% to $55.2 billion. Daily average revenue trades grew 16% to 330,821.

Net interest income, the biggest driver of E-Trade revenue, fell 14%; commission revenue plunged 55%; and fees and services revenue jumped 68%.

Net new accounts rose 12% quarter over quarter to 52,371, as the broker slashed trading commissions to zero in Q4. That helped to boost net new assets 104% sequentially to $5.7 billion. Net new accounts cratered 95% year over year and net new assets plunged 72% year over year.

Stock: Shares of E-Trade Financial fell 1.2% flat late after closing down 0.9% at 46.07 on the stock market today, staying above a 46.06 double-bottom buy point initially cleared in November, MarketSmith analysis shows. It is now seeking support at 50-day moving average. The relative strength line for E-Trade stock has been on the decline since November 2019.

Interactive Brokers stock eased 1.9% to 48.24 Thursday, still below a 53.97 buy point. Charles Schwab (SCHW), which missed Q4 views last week, stock gave up 1%, and TD Ameritrade stock retreated 1.1% to 50.70, working on a 54.09 flat-base buy point.

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Interactive Brokers Earnings

Estimates: Analysts had foreseen EPS rising 7% to 61 cents as revenue grows 2.6% to $504.6 million, according to Yahoo Finance.

Results: Interactive Brokers earnings for Q4 came in at 58 cents a share on revenue of $500 million. Customer equity grew 36% to $174.1 billion, customer accounts increased 15% to 690,000, while daily average revenue trades  decreased 16% to 797,000. Total assets grew 18% to $71.7 billion.

The company also disclosed it is providing information to FINRA, the SEC, the CFTC and the Justice Department. It believes regulators are focused on compliance practices, including anti-money laundering and Bank Secrecy Act practices.

TD Ameritrade Earnings

Estimates: Wall Street expected EPS of 77 cents, down 30.6%, on revenue of $1.29 billion, down 14.4%, according to Zacks Investment Research. In October 2019, the online broker and its peers dropped online ETF and stock trading commissions to zero.

Results: TD Ameritrade earnings for the fiscal Q1 came in at 74 cents on revenue of $1.29 billion. Average client trades per day rose 10.8% to 1.03 million. Net new assets grew 9% to $28.7 billion, down from 10% growth a year ago to $31.8 billion.

Transaction fee and commission revenue dived 43% to $305 million. Asset-based revenue – including bank fees, net interest revenue and investment fees – rose 1.2% to $958 million.

Schwab-TD Ameritrade Merger

Last November, larger brokerage rivals Charles Schwab and TD Ameritrade agreed to merge in a $26 billion, all-stock deal.

The move shocked Wall Street, which had seen E-Trade Financial as the likely target of Charles Schwab and TD Ameritrade, after the online brokers all took online ETF and stock trading commissions to zero in October.

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But E-Trade Financial could still be scooped up for its 5.3 million retail brokerage accounts and 2 million corporate stock-plan accounts, according to CFRA Research. Goldman Sachs (GS) and Morgan Stanley (MS) are seen as the most likely acquirers.

For now, antitrust issues hang over aspects of Charles Schwab’s-TD Ameritrade deal. If the merger wins approvals, it is expected to close in the second half of 2020.

Find Aparna Narayanan on Twitter at @IBD_ANarayanan.


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