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Scottrade Deal Transforms TD Ameritrade

The narrow-moat company expects to realize significant synergy savings in the coming months--and may experience revenue synergies, too.


Signs point to additional benefits from the Scottrade acquisition flowing into earnings over the coming quarters. TD Ameritrade plans to finish transitioning Scottrade’s clearing operations in the March quarter, after which it should start realizing the bulk of the around $200 million of synergy savings expected in the first year. While it’s often reasonable to be skeptical of revenue synergies related to acquisitions, it seems that Scottrade clients traded less derivatives than TD Ameritrade clients. As brokerages have higher revenue on option trades, it’s quite plausible that more derivatives trading at Scottrade customers will increase revenue, especially if TD Ameritrade leverages its educational offerings. Another metric that bodes well for the Scottrade acquisition is that net new client asset growth was about 9.5% in the quarter, in line with the company’s historical growth rate. This was reassuring, as competitors have likely increased their efforts to lure Scottrade clients during the integration period.

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