Discount brokerage TD Waterhouse has posted a Q3 loss of $21.8 million.
TD Waterhouse, the New York-based brokerage arm of Toronto Dominion Bank, has reported a Q3 loss of $21.8 million, compared with a profit of $34.5 million during the same period last year. The market is primarily to blame for the poor results, with uncertain market conditions and a marked decline in investment activity, and restructuring charges have cost the company dearly. Excluding goodwill and restructuring charges, TD Waterhouse earned $10.9 million during the same period.
Market conditions are currently poor, and dotcoms and brokerages around the world are struggling. For those companies whose business proposition relies on a mix of the two, such as eBrokers, times are extremely difficult. However, TD Waterhouse should be better off than many of its rivals. Investors increasingly value choice in terms of where and how they trade, and TD Waterhouse is the only discount broker with a branch presence in every US state. This is an advantage that should be exploited to the full.
The firm did experience a growth in the number of accounts held, with 105,500 new accounts being opened during the third quarter. While this in itself is a positive trend, growth in accounts held is slowing down compared to last year. Furthermore, a cost of $154 per new account means customers must actually trade significant volumes to turn subscribers into profits. The number of daily trades, however, is declining, down from 124,000 in the second quarter to 101,700 in the third quarter. Compared with last year, trading volumes are down 35%.
The most important things TD Waterhouse has going for it are its branch network in the US, its large customer base and extensive product range. While a sustained bear market is necessarily a threat to TD Waterhouse (as well as to other discount brokers), TD Waterhouse is in a strong position to face future challenges, especially in North America. In Europe, meanwhile, the company should consider looking for possible branch presence partners or acquisitions to boost its profile.
