Charles Schwab (NYSE:SCHW) completed its $22 billion
all-stock acquisition of one of its major competitors, TD Ameritrade, on Oct.
6, creating one of the largest brokerage firms in the world.
The combined company will have a total of $6 trillion in
client assets, 28 million brokerage accounts, and more than 5 million daily
average trades. TD Ameritrade is bringing about $1.3 trillion in client assets
and 12 million client accounts.
The integration of operations will take place over the next
18 to 36 months. Until then, Schwab and TD Ameritrade will operate separate
broker-dealers to serve their respective clients with products, services, and
delivery channels remaining largely unchanged.
The company believes the added scale will lower operating
expenses as a percentage of client assets (EOCA). The merger is expected to
result in $1.8 billion to $2 billion in expense synergies and be 10% to 15%
accretive to generally accepted accounting principles (GAAP) earnings per share
in year three.
Also, it will also allow the company to provide a broader
and more extensive range of services to clients, including individual investors
and registered investment advisors (RIAs). For example, Schwab has already
announced plans to integrate TD Ameritrade's thinkorswim and thinkpipes trading
platforms into its trader offerings for retail and independent advisor clients
as well as TD Ameritrade Institutional's iRebal portfolio-rebalancing solution.
Schwab President and CEO Walt Bettinger had this to say
about the company's plans:
“Looking forward, we intend to quickly and efficiently
harness our complementary strengths in order to break down even more barriers
for investors. In doing so, we intend to deliver a winning combination of low
costs, great service and industry-leading technology to support our clients,
and the advisors who serve them, across every phase of their financial journey.”
Effective Jan. 1, 2021, the company will move its corporate
headquarters from San Francisco to its new campus in Westlake, Texas.
This is Schwab's fourth acquisition this year. It purchased
the brokerage assets of USAA Investment Management as well as fixed-income,
separate-account manager Wasmer, Schroeder & Company. It also acquired
fintech provider Motif.
The market didn't have much of a reaction as the stock price
was down in early trading. The financial firm's stock price is down about 23%
year to date.
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