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How the TD Ameritrade Deal Affected Schwab's Q4 Earnings

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images of Schwab and TD Ameritrade signs (Photos: Shutterstock)

Charles Schwab topped financial analysts’ expectations for both earnings and sales in the fourth quarter of 2020, its first quarterly report following the $22 billion acquisition of rival TD Ameritrade on Oct. 6.

Schwab said its adjusted net income soared 68% year over year to $1.46 billion, while earnings rose 17% to $0.74 cents per share. Revenue rose about 60% to nearly $4.2 billion; about $1.8 billion was tied to net interest revenue.

With record client trading and the purchase of TD Ameritrade, trading revenue soared 88% from a year ago to $854 million. Total asset management and administrative fees rose 17% to $897 million.

“Producing record operating performance and closing the largest brokerage acquisition in history during the fourth quarter of 2020 was an extraordinary capstone to an extraordinary year,” according to CEO Walt Bettinger.

Schwab said it now has over 29.5 million brokerage accounts, up 140% from a year ago. It has some 32,000 employees vs. 19,700 a year earlier.

“Our clients also continued to set numerous single-day trading records, including a peak of 7.8 million trades on Nov. 9,” according to Bettinger.

Asset Update

As for total client assets, they stood at $6.69 trillion at the end of 2020, up 66% from a year earlier.

Advisor Services assets were $3.02 trillion as of Dec. 31, 2020, up 58% from a year ago and 50% from the prior quarter; Investor Services assets were $3.67 trillion, up 72% from Q4’19 and 54% from Q3’20.

Net new Advisor Services assets for Q4’20 were $751.5 billion, $680.6 billion of which came from TD Ameritrade. Investor Services added net $939.2 billion in assets, of which $890.6 billion were tied to the acquisition.

Excluding the TD Ameritrade deal, Schwab’s core net new assets were $119.4 billion in Q4’20, Bettinger said.

For the full year, Schwab had adjusted net income of $3.78 billion, earnings of $2.45 per share and revenue of $11.7 billion. Core net new assets, not including those tied to TD Ameritrade, topped $200 billion for the third consecutive year, the CEO added.

— Check out Schwab-TD Ameritrade Creates New RIA-lity on ThinkAdvisor.