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TD Bank's Waterhouse Works on Closing Gap With Schwab (Update1)
TD Bank's Waterhouse Works on Closing Gap With Schwab (Update1) (Adds Schwab's comments.)
Toronto, Feb. 18 (Bloomberg) -- Waterhouse Investor Services Inc., the No. 2 online broker, is working on closing the gap between itself and rival Charles Schwab Corp., President and Chief Executive Frank Petrilli said.
Waterhouse, wholly owned by Toronto-Dominion Bank, surpassed E*Trade Group Inc. to become No. 2 behind Schwab in the fourth quarter, according to a Credit Suisse First Boston Corp. report. ''We have all the products and services of a Schwab and, although we were late in the game with online trading, we've closed the gap and our 150 branches across the country give us a very good advantage,'' Petrilli said on a conference call after TD released its fiscal first-quarter earnings.
Revenue for the quarter ended Jan. 31 from Toronto-based TD Bank's global discount brokerage rose 87 percent, or C$111 million (US$75 million), of which Waterhouse contributed C$97 million. TD Bank said it would decide if it would take part of its global discount brokerage business public this quarter.
Trading volumes at Waterhouse are up 180 percent from a year ago, although the average commission per trade is about 30 percent lower as more customers used less costly electronic trading services.
Petrilli said, in the last eight quarters, Waterhouse spent an average of US$68 per customer on marketing, while Schwab spent US$112 per customer.
Advertising
In the fourth quarter, Waterhouse spent US$8.9 million on advertising, while Schwab spent US$53 million, Petrilli said. By comparison, Ameritrade Holding Corp. spent US$9.6 million on advertising, a figure it plans to roughly double in the current quarter, and E*Trade Group Inc. spent US$40.9 million on ads in the fourth quarter. ''We're not spending indiscriminately here, just throwing money out the door acquiring accounts,'' Petrilli said.
Schwab has 5.6 million accounts; Waterhouse has 1.6 million, he said. Waterhouse averaged 81,000 trades in the first quarter, up from 29,000 in the same period in 1997. In January, it averaged 100,000 trades a day. ''We're delighted to be in this situation but obviously, it's challenging,'' he said.
Schwab this week said it averaged 153,000 online trades a day in January. San Francisco-based Schwab wouldn't comment on its advertising and marketing costs, or TD's figures. ''We spend significantly to maintain our market share,'' Dan Hubbard, a spokesman said.
According to Credit Suisse's report, Waterhouse added 1.9 percentage points to its market share to reach 12.4 percent of average daily trades in the quarter ended Dec. 31. By comparison, Schwab lost 2.9 percentage points, finishing with 27.4 percent.
Brian H.
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