What Key Factors Drove Ameritrade’s Q2 Results?

Ameritrade (NASDAQ:AMTD) released its fiscal second quarter results on April 24, with net revenues of $1.45 billion and EPS of $0.89 per share. The brokerage’s net revenues declined sequentially by 4%, due to lower trading commissions and net interest income. Non-GAAP diluted EPS came in at $0.93, increasing by 27% over the prior year quarter.

Our price estimate for Ameritrade is $59 per share, which is above the current market price. You can view our interactive dashboard on How have Ameritrade’s earnings fared? to modify key forecasts and gauge the impact on the stock price, and see more of our financial services company data here.

Key Drivers of Ameritrade’s Revenues

• Commissions and Transaction Fees declined by 12% over the prior year quarter and 9% sequentially to $487 million. The decline was primarily due to lower trading activity, as average trades per day dropped by 7.3% sequentially and the average trading commission dipped slightly to $7.01 per trade.
• Bank deposit and Account Fees saw an improvement of 13% over the prior year quarter and remained flat sequentially to $430 million. The company earns these fees by providing a sweep program to clients, whereby uninvested cash is swept to money-market accounts to generate higher returns. The BDA yield increased by 23 basis points and average BDA balances reduced by 3% over the prior year quarter.
• Net Interest Revenues increased by 18% to $362 million over the prior year quarter, supported by an interest margin of 4.66%. These revenues declined sequentially by 4% due to lower average margin balances, which fell by 12% to $19.4 billion in the quarter.
• Investment Product Fees declined by 4% sequentially to $137 million for the quarter, driven by a lower yield on fee-based investment products. This yield is expected to decline further due to the growth in lower-yield products, which now account for over $40 billion in assets.

Ameritrade’s management is committed to its expense management target of under $3 billion of operating expenses, down nearly 15% over the previous year. The operating expenses increased by 4% sequentially to $746 million in the quarter, mainly due to a seasonal increase in employment and advertising-related costs. With operating margins higher in the first two quarters compared to last year, we expect Ameritrade to achieve its expense reduction target for the full year.

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own