A couple of days after Charles Schwab (Nasdaq: SCHW) posted healthy second-quarter results, rival TD AMERITRADE (Nasdaq: AMTD) is following suit with the "best quarter in company history."
OK, so that last part comes from the discount broker's chest-thumping press release, but it isn't really far from the mark. Revenue did come in essentially flat at $541.8 million for the period. And strength in money-market deposit account fees offset a slide in net interest revenue. However, earnings climbed 14% higher to $0.26 a share.
The margins widened even as the company suffered a decline in year-over-year trading activity, with a client-friendly dip in the average commission doled out.
As an investor who has worked through discount brokers exclusively since 1990, I love how this quarter is rewarding the leading firms despite the customer-friendly initiatives that skinflint critics would argue are bad for business. Schwab slashed account minimums and related fees. TD AMERITRADE commissions are weighing in lower. It's working, and everybody is walking away happy.
TD AMERITRADE's top- and bottom-line results came in ahead of where the Wall Street analysts were standing. The bar has now been raised for when the third discounting bellwether, E*Trade (Nasdaq: ETFC), posts earnings next week.
This quarter is ultimately shaping up to be better than where we were three months ago, when TD AMERITRADE and E*Trade each posted disappointing quarterly results. Market volatility and account inactivity were the culprits then. Trading activity hasn't necessarily picked up sequentially, though improving margins and ambitious share repurchases have helped boost results.
There are also signs that the frenetic sector consolidation, in which brokers such as E*Trade and TD AMERITRADE have been acquiring several smaller discounters, is coming to an end.
TD AMERITRADE CEO Joe Moglia said in this morning's press release that his company has an "absolute focus on organic growth." I'm sure the company wouldn't turn away the chance to buy a rival at an attractive price, but I think that with companies such as Schwab and TD AMERITRADE using their greenbacks to repurchase shares in recent months, the chances of opening an account with E*AmeriSchwab in the near future seem highly unlikely.
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Longtime Fool contributor Rick Munarriz believes in self-service gasoline pumps and self-service stock brokerages. He does not own shares in any of the companies in this story. He is also part of the
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