Schwab is buying TD Ameritrade

[disneysteve]

Apparently, Charles Schwab is buying TD Ameritrade. I'm also pleased with that. I ended up with TD by default when they bought Scottrade but I don't like them as much as Scottrade. I find their website very user-unfriendly. I always seem to have trouble finding what I'm looking for. I'll be happy to have those holdings at Schwab, where I already have an account so now there will one less place I need to keep track of and all 3 of my accounts will be in one place (I have 2 accounts at TD and one at Schwab).

[james.hendrickson]

Yes - its all over the news this morning. From a corporate management standpoint, if you lose 20% of your revenue due to market pressure, you have to find a way to make the money back - and it looks like schwab has decided to take a bigger chunk of a less valuable market.

I'm not much of a prognosticator, but another move you might see is big brokerage houses expanding their offerings by breaking into cryptocurrency or fractional real estate ownership.

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From Barrons:

Charles Schwab Is Buying TD Ameritrade for $26 Billion, Report Says

By Avi Salzman
Nov. 21, 2019 9:01 am ET

Merging gives the companies more scale, so they can earn fees from a higher asset base.

Charles Schwab is buying TD Ameritrade for $26 billion, and the deal could be announced as soon as today, according to a report by Fox Business. Ameritrade stock (ticker: AMTD), which is down on the year, was trading 23% higher in premarket action. Schwab (SCHW) was up 11%. E*trade (ETFC)—the smallest player in the group—fell 4%. A merger between its two most direct rivals could leave that company at a substantial competitive disadvantage.

The move doesn’t come as a major surprise. Deals were expected in the industry, because the business model for discount brokers has fallen apart this year.

The major brokers have dropped stock- and ETF-trading fees to zero. And low interest rates have hurt results, because the brokers depend on earning interest from their clients’ deposits. Schwab makes most of its money from interest income. TD Ameritrade makes a higher proportion of its revenue from fees, and was considered a potential acquisition target. “We will take a look at anything that makes financial and strategic sense,” Ameritrade CEO Tim Buckley told analysts last month.

Merging gives the companies more scale, so they can earn fees from a higher asset base. Barron’s pointed out in a recent cover story that Schwab could be a winner in the shakeout. It added 142,000 clients last month after eliminating commissions, a 31% jump from the previous month.

One analyst likes the deal, even if Schwab is paying a high price.

“A Schwab for Ameritrade deal would likely be solidly accretive for Schwab even if it offered a substantial premium,” Wells Fargo analyst Christopher Harris wrote in response to the news. “That is because of Schwab’s higher equity value (2021E P/E ratio of 16.4x for Schwab vs 13.5x for Ameritrade) and the potential for meaningful expense synergies.” He estimates the deal could result in “expense synergies” as high as 50%—likely meaning major cost cuts and layoffs at the combined company.

The biggest potential complicating factor to a Schwab-Ameritrade deal is TD Bank’s 43% stake in Ameritrade. TD Bank has a banking agreement with Ameritrade through 2021 that would likely have to be dissolved to make the economics attractive to Schwab. “Without the TD Bank agreement in place, SCHW could earn substantially better economics on AMTD’s customer cash balances,” Harris noted.

Neither company immediately responded to requests for comment.

Write to Avi Salzman at avi.salzman@barrons.com

Link here.

[kork13]

Solid move in my view. I'm guesstimating, but they're probably the #3 & #4 retail investment houses in the country (behind Vanguard & Fidelity), so just like in the Sprint/T-Mobile deal, when 3 & 4 team up, they have a better chance of taking on #1 & #2. I had accounts with Schwab a while ago, though I left it behind to simplify... But I really liked the company. I expect that as they absorb the assets, customers, etc. from TDA, they'll be able to do an even better & more competitive job for their customers.

[bjl584]

I don't have experience with either.
I have an account at Fidelity and am happy with them.

Guess we'll see how it all plays out.

[disneysteve]

Today's email from TD:

We're excited to announce that Charles Schwab and TD Ameritrade have reached an agreement for Schwab to acquire TD Ameritrade.

The combined company will retain the Schwab name, and will reflect the best that each legacy firm has to offer, including leading trading and wealth management platforms, investor education, award-winning service, and banking.* This should bring clients like you an outstanding investing experience. For now, the transaction is subject to customary closing conditions and is expected to close in the second half of 2020. During that time, there should be no impact to your account or how you work with TD Ameritrade. For additional information about the transaction, please visit www.amtd.com for details.

[QuarterMillionMan]

I'm getting emails from TD Ameritrade that May 26 is when the switch will take place. Curious If I had an old Schwab account will I be able to use the same username & password. All I did was transfer the funds out and left a zero balance.

[disneysteve]

I'm getting emails from TD Ameritrade that May 26 is when the switch will take place. Curious If I had an old Schwab account will I be able to use the same username & password. All I did was transfer the funds out and left a zero balance.

My mom has a TD account but not a Schwab account. She got an email a few weeks ago instructing her to set up her Schwab access.

I have both TD and Schwab and have heard nothing so I think that means I can keep using my Schwab sign in.

[disneysteve]

I’ve been looking forward to this for almost 4 years now. As I said in my initial post, I’ve never liked TD and only got stuck with them by default. It will be great to have those holdings rolled into my Schwab account.

[QuarterMillionMan]

I was able to sign into 1 of my 3 Schwab accts but it was for a 457 government self-directed deferred compensation plan. A 2nd was for a regular acct. A 3rd was for a trust account which I've yet to recall the usernames & passwords. Sometimes I get myself into some complicated situations, lol. Anyway this is the email that I got today. About 1 month ago and then 2 weeks ago I got the first two of the emails. It's getting down to the wire.

[QuarterMillionMan]

I am ready.

[james.hendrickson]

Schwab is fine, you'll be happy.