Discount Brokerages to Donald Trump: Keep Tweeting
January 18 2017 - 12:40PM
Dow Jones News
By Michael Wursthorn
Discount brokerages are hoping President-elect Donald Trump
keeps things interesting with his tweets after he takes office.
In the weeks since Mr. Trump's election, discount brokerages
have seen a jump in trading activity among their clients -- day
traders and mom-and-pop investors, among others -- pushing
commission revenue higher at time when brokerages have struggled to
boost trading fees.
"Just the social-media presence of the president-elect has an
unambiguous effect on our business, which is making commissions
every time somebody makes a trade," TD Ameritrade Chief Executive
Tim Hockey said in an interview with The Wall Street Journal. "When
statements are made by the most powerful man on the planet, then
that drives investors and traders to take a position based on that
tweet."
TD Ameritrade said it saw an average 487,000 client trades a day
in the quarter ended Dec. 31, 11% more than the year before and the
company's third best quarter ever. Mr. Hockey said trading surged
following Mr. Trump's win and continued to pick up whenever the
president-elect targeted his tweeting at a specific company.
When Mr. Trump took to Twitter on Dec. 6 to suggest the U.S.
government cancel a planned order with Boeing Co. for a new version
of Air Force One, trading in the aircraft maker's stock jumped 93%
from its previous 15-day average, according to Mr. Hockey.
"I knew you were asset-sensitive, but now I guess you're
tweet-sensitive as well," analyst Richard Repetto, of Sandler
O'Neill + Partners, said on TD Ameritrade's quarterly earnings call
with analysts Wednesday morning.
Mr. Hockey expects to see more trading spikes this year as Mr.
Trump continues to single out specific companies in his
social-media posts, with recent targets including Ford Motor Co.
and General Motors Co.
Charles Schwab Corp., which also reported quarterly results
Wednesday, said it saw an average 573,000 client trades a day for
the fourth quarter, up 7% from the same period a year earlier,
while new retail brokerage accounts were 182,000, up 21%.
Schwab's profit for the quarter was $522 million, up from $416
million a year earlier, on revenue of $1.97 billion, which was 17%
higher.
Schwab didn't directly attribute the gains to Mr. Trump's
social-media use but said clients relied on the firm's services to
navigate events such as "the tumult of the president election."
A recent E*Trade survey of more than 900 active investors with
at least $10,000 in an online-brokerage account found that
three-fifths of those aged 25 to 34 had traded based on a tweet by
Mr. Trump. Among those 35 to 54, 36% had done so, and among those
55 and over, 20% had.
Still, while Mr. Trump's tweeting has been a boon for brokerages
and individual investors, a majority of Americans believe the
president-elect's Twitter usage is a bad idea, according to a Wall
Street Journal/NBC News poll.
TD Ameritrade, which is working to wrap up its deal to buy rival
brokerage Scottrade Financial Services Inc., said the higher
trading activity helped push revenue up 5.8% in the quarter. TD
Ameritrade reported earnings of $216 million, or 41 cents a share,
for its fiscal first quarter ended Dec. 31, up from $212 million,
or 39 cents a share, a year earlier.
Revenue rose to $859 million from $812 million. Analysts polled
by Thomson Reuters expected a profit of 41 cents a share on revenue
of $859.2 million.
In October, TD Ameritrade announced a $4 billion acquisition of
smaller rival Scottrade. A decline in stock trading and a
relentless price war in commissions has stock sellers seeking new
ways to make money. Mr. Hockey said TD Ameritrade is in the midst
of integration planning after regulators allowed the deal to
proceed, keeping it on track to close later this year.
Without giving specific numbers, Mr. Hockey said Scottrade has
been just as busy in the last quarter. "Scottrade has seen many of
the same industry effect we all have in the last quarter," he told
analysts on the call.
Joshua Jamerson contributed to this article.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
January 18, 2017 12:25 ET (17:25 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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