TD Ameritrade’s $2.7 billion acquisition of rival Scottrade last fall is “paying off beautifully,” Ameritrade Chief Executive Tim Hockey said Tuesday, with expense savings ahead of schedule and retention of clients and their investment money on target.
“We’re a much larger firm now,” with different earnings potential and other financial measures,” Hockey said following Monday’s report on the company’s financial results for the three months that ended June 30. “We now have the scale we want, and we’re quite comfortable to grow from here.”
Omaha-based Ameritrade doesn’t disclose how many clients it has, but the quarter’s net income nearly doubled to $451 million and its clients assets are up 39 percent from a year ago to $1.2 trillion. Savings from integrating Scottrade, which had been based in St. Louis, totaled $485 million in the quarter, Hockey said.
Reasons for the good performance include a strong economy, rising interest rates and favorable stock market, he said. “Our investors continue to be excited about the market. We’ve seen very strong buying activity.”
The company’s stock has been up about 17 percent so far this year.
When it comes to the competition, Ameritrade remains No. 1 in the number of investment trades and is “a closer No. 2 now” to Charles Schwab’s $3 trillion-plus in client assets, Hockey said.
To illustrate how smoothly the conversion of Scottrade clients to Ameritrade’s system has gone since it began in February, Hockey said Scottrade clients downloaded as many copies of Ameritrade’s premium stock trading software in the first 48 hours as Ameritrade had expected over the next five years.
The technical team added more computer servers to keep the downloads going smoothly, he said in an interview with The World-Herald, following a conference call with stock analysts.
Hockey said the company tracked 11 measurements of the integration process. “Some of the numbers, we’re blowing the doors off. Others, we’re just getting started because they’re harder.”
In the wake of the report, Cathy Seifert, a market analyst at CFRA Research in New York City, raised her estimate of how much Ameritrade’s stock price would grow, citing its growth strategy and saying the current price is “supported by strong revenue growth and margin expansion.”
TD Ameritrade closed at $59.61 a share Tuesday.
Hockey said Ameritrade would build up its capital before deciding to resume buying back its shares. The company had $1.34 billion in cash and $2.55 billion in debt on June 30.
He said the company’s business in Singapore has grown, and it just opened an office in Hong Kong, with discussions underway to enter the mainland China market. Chinese investors are hungry for financial education, he said, which is one of Ameritrade’s strengths.
Hockey said it has been 18 months since discount brokerages staged a “price war,” in which they lowered the fees and commissions they charge for their services. Another battle could erupt at any time, he said, “but it won’t be us that’s leading it” because customers are getting good value for the current fees.