PJC Piper Jaffray Companies

TD Ameritrade Holding Corporation (AMTD) – an online brokerage firm – reported a 17% increase in average U.S. trades in its Activity Report for the month of Jan 2013. On a year-over-year basis, the U.S. trades were up 3%.

For the reported month, Daily Average Revenue Trades (DARTs) were 387,000 compared with 331,000 recorded in the prior month. The rise in DARTs primarily resulted from the improvement in the equity markets.

Broker performance is generally measured through DARTs that represent the number of trades, from which brokers can commissions or fees.

TD Ameritrade reported $499.3 billion in total client assets in January, up 17% year over year and 4% from the prior month. Moreover, average spread-based balances augmented 12% year over year to $83.4 billion. Further, these balances scaled up 3% from Dec 2012.

At the end of January, average fee-based balances stood at $107.8 billion, up 32% year over year and 5% from the last month.

Quarterly Performance

As of Dec 31, 2012, DARTs decreased 9% year over year to 334,035. Net new client assets reported were $15.6 billion, up 53% from $10.2 billion a year ago.

For the quarter, TD Ameritrade reported $480.8 billion in total client assets, up 18% year over year. Moreover, average spread-based balance was $79.3 billion, up 9% from $72.6 billion in the prior-year quarter. Average fee-based balances surged 28% year over year to $100 billion.

Our Viewpoint

The competitive position of brokerage business in the market depends on trading customers, with emphasis on active traders. As the long-term investing customer group is less developed compared to trading customers, there is an opportunity for future growth in case the long-term customer base expands.

Development of innovative ways for online trading and long-term investing products and services, delivery of advanced customer service, creative and cost-effective marketing and sales, as well as expense discipline can be considered as the key factors behind TD Ameritrade’s strategy of boosting its trading and investing business.

Amidst a volatile operating environment, TD Ameritrade witnessed a decline in organic client asset. The company also reported waning trading volumes, and therefore a significant turnaround remains elusive. Further, a low interest rate environment is a matter of concern.

TD Ameritrade currently retains a Zacks Rank #2 (Buy). Other brokerage firms that are also performing well include Evercore Partners Inc. (EVR), Greenhill & Co., Inc. (GHL) and Piper Jaffray Companies (PJC). All these stocks carry a Zacks Rank #1 (Strong Buy).

 
TD AMERITRADE (AMTD): Free Stock Analysis Report
 
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