Charles Schwab Estimates TD Ameritrade Integration Costs to Be $1.6B

Charles Schwab has disclosed its 2020 annual financials with the US Securities and Exchange Commission (SEC), showing solid growth across key client and financial metrics. Yet, there was a slump in income, which is mostly due to the closure of its TD Ameritrade acquisition.

The US broker estimates that due to the TD Ameritrade acquisition, integration cost and capital expenditures will be around $1.6 billion.

Charles Schwab completed the acquisition last October, months after the $26 billion deal was cleared. He also announced its intentions to integrate the two brokerage services, which is expected to take 18 to 36 months.

“The Company is in the early stages of integration,” the submitted Form-10 K stated, adding “our estimates of the nature, amounts, and timing of recognition of acquisition and integration-related costs are subject to change based on a number of factors, including the expected duration and complexity of the integration process and the heightened uncertainty of the current economic environment.”

Client Activities Soared

Coming to Charles Schwab’s numbers, the US brokerage added 18.62 million new brokerage accounts last year, which include 14.5 million accounts from TD Ameritrade and another 1.1 million new brokerage accounts from the USAA-IMCO acquisition.

With this, the total client assets on the platform at the year-end jumped by 66 percent to more than $6.69 trillion.

While the total net revenue of the brokerage company increased by 9 percent from the previous year, the pre-tax income went down by 11 percent to $3.3 billion.

With the acquisition of TD Ameritrade, Charles Schwab has become a massive brokerage company. At the time of the deal closure, TD Ameritrade had total revenue of approximately $1.7 billion with $943 million in expenses.

Charles Schwab detailed that the integration cost will include professional fees, employee compensations and benefits as well as technology costs.

“Acquisition and integration-related costs, which includes related exit costs, for all of our acquisitions completed in 2020 totaled $442 million,” the parent broker added.

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