Ameritrade's Earnings Impact TD Bank

Among the news out with online brokerage TD Ameritrade Holding Corp.’s (AMTD) third quarter earnings, which showed net income rose to US$159-million – its best quarter ever, was Toronto-Dominion Bank’s (TD) piece of the action.

TD said it expects the earnings will contribute C$59-million to its own third quarter net income. This was up from C$55-million a year earlier, but down from C$63-million in the second quarter, Desjardins Securities analyst Michael Goldberg said in a note.

He says TD’s internal allocation of more debt against its Ameritrade investment and a weaker U.S. dollar are to blame. As a result, he thinks Ameritrade’s overall performance was positive.

“AMTD now moves on to the third leg of benefits from its acquisition and integration of Waterhouse, development of the longer term investor business,” Mr. Goldberg said. He has a “top pick” rating and C$79 price target on TD, which reports third quarter results on Aug. 23.

Brad Smith at Blackmont Capital maintained his C$73 price target and "hold" rating on TD, while agreeing that the results were solid. However, he considers news that more investment spending will likely be required to retain Ameritrade's existing client asset base a signal that margin pressures remain a concern.