E-Trade (ETFC) Won't Get Bought Out In 2009

BMO Capital Markets analyst Michael Vinciquerra said that TD Ameritrade (Nasdaq: AMTD) and Charles Schwab (Nasdaq: SCHW), potential suitors of E-Trade Financial, will likely wait until next year to make a bid for E-Trade. They likely want to wait out the company's credit problems before moving forward with a potential offer.

"TD Ameritrade would love to merge its brokerage business with E-Trade's franchise, but it wants nothing to do with the company's credit issues," said the BMO analyst.

BMO Capital lifted its rating on TD Ameritrade to outperform from market perform. The analyst likes the solid growth in new customers and client assets and the future benefits from its purchase of thinkorswim.

TD Ameritrade has more than $1 billion in cash and could generate almost $800 million in free cash flow during its 2010 fiscal year. Although it has $1.4 billion in long-term debt, the cash gives AMTD flexibility for opportunistic purchases, BMO said.

A combination of TD Ameritrade and E-Trade could generate $500 million to $600 million in cost synergies.

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