Charles Schwab Corporation In Talks To Buy TD Ameritrade As Early As Today

Charles Schwab Corp. SCHW, -2.48% is in talks to buy TD Ameritrade AMTD, +18.41%, CNBC reported, citing an unnamed source. The initial CNBC report said a deal could be announced as early as today. The sector has been pressured of late by the move to no-fee commissions.

A deal between Schwab and TD Ameritrade would consolidate an industry that has been going through massive disruption. In recent months, all of the major brokerages have announced plans to go to zero commissions.

Shares of TD Ameritrade soared more than 22% in premarket trading on the report.

Schwab was the first of the major players to make the move, eliminating commissions in early October. Schwab’s competitors, including Fidelity and TD Ameritrade, were quick to follow.

TD Ameritrade shares were marked 22.5% higher in pre-market trading Thursday to indicate an opening bell price of $50.70 each, a move that would value the group at around $28 billion. Charles Schwab shares were seen 2.3% lower at $43.74 each. E*Trade Financial  shares edged 0.36% lower to $45.710 each.

Not charging for trades is a boon for consumers, but it’s left the brokerages scrambling to find ways to maintain profits. A deal between Schwab and TD Ameritrade would create a behemoth with $5 trillion in combined assets.

"Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path," CEO Walter Bettinger said at the time. "We're proud to provide clients with a full-service, modern investing experience that delivers on our no trade-offs combination of service, simplicity and superior value - backed by a satisfaction guarantee."

Schwab and TD Ameritrade are the two biggest publicly traded discount brokers. Schwab has a market capitalization of $57.5 billion, and Ameritrade has a $22.4 billion market cap. Other players include ETrade Financial and Interactive Brokers.

Schwab earns around 8% of it revenues from trading commissions compared to around 23% for TD Ameritrade with the bulk coming from the net interest margin it gleans from cash held in customer accounts. Its second quarter net interest margin was 2.5%, the company said earlier this summer, down 6 basis points from the previous three month period.