Charles Schwab To Buy TD Ameritrade as Discount Broker War Heats Up

Stockbroker Charles Schwab $SCHW,the largest U.S. discount brokerage, is to buy TD Ameritrade $AMTD it was announced Thursday. Schwab has gained from the incredible volatility in the stock market bull market with NASDAQ at record highs. However competiton has seen brokerage rates plummet, Interactive Brokers $IBKR and E-Trade are two remaining competitors.

Stockbroker Charles Schwab reported better than expected second quarter earnings before the open Tuesday. $SCHW gained from the incredible volatility in the stock market bull market with NASDAQ at record highs. Competitor Interactive Brokers $IBKR report after the close

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The lower brokerage fees  and lower Fed Funds rate means lower commission and interest income

Charles Schwab Corporation NYSE: $SCHW To Buy TD Ameritade $AMTD

Early Thursday Shares of TD Ameritrade, which has a market capitalization of $22.41 billion, rose more than 24% in trading before the open. Charles Schwab rose 10% to $43.40. A deal between Schwab and TD Ameritrade would create a combined group of more than $5 trillion in assets, about $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade.

“This would create a Goliath in Wealth Management,” Wells Fargo senior analyst Mike Mayo said in a note to clients on Thursday.

 CNBC did not provide any financial details on the deal, but Fox Business pegged the deal value at $26 billion, citing sources.

The industry is going through massive disruption. In recent months, all of the major brokerages have announced plans to go to zero commissions. Schwab was the first of the major players to make the move, eliminating commissions in early October.

Schwab’s competitors, including Fidelity and TD Ameritrade, were quick to follow. Schwab CEO Walter Bettinger has been designated to run the combined company, sources said.

TD Ameritrade CEO and President Tim Hockey said in July he is leaving the brokerage in February of 2020. Schwab’s founder and Chairman Charles Schwab told CNBC’s Bob Pisani last month that consolidation in the retail brokerage industry is a “logical conclusion that will occur.” “Certainty at the right valuation, we would do it, but we are really strong and very independent the way we do things, and so if its happens that it’s appropriate for our shareholders we will do it,” Schwab said in response to a question about whether Schwab is a possible buyer of another brokerage.

Calls to Schwab and TD Ameritrade weren’t immediately returned.

“Clients also sought our help and guidance; digital advisory solutions sustained an asset gathering pace of around $1 billion a month, reaching $33.3 billion at quarter-end. Total assets receiving ongoing advisory services at Schwab equaled a record $1.77 trillion at month-end June, a 15% year-over-year increase, compared with overall client asset growth of 12%. We ended the quarter serving $3.40 trillion in total client assets across 11.2 million active brokerage accounts, 1.3 million banking accounts, and 1.6 million retirement plan participants.” CEO Bettinger said last year 


About Charles Schwab

The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 345 offices and 11.2 million active brokerage accounts, 1.6 million corporate retirement plan participants, 1.3 million banking accounts, and $3.40 trillion in client assets as of June 30, 2018.

Through its operating subsidiaries, the company provides a full range of wealth management, securities brokerage, banking, money management, custody, and financial advisory services to individual investors and independent investment advisors Read more:

Source: CNBC, Schwab

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