With interest rates near zero, optionsXpress' net interest revenue and fees dropped 66% to $4.2 million in the quarter.
The Chicago online brokerage's results also reflect a shift away from a surge in the trading of beaten-down financial stocks in late summer. That trend had boosted trades across the online brokerage industry, but activity in September shifted away from those names into more normal patterns, including options trading.
Overall, optionsXpress posted third-quarter earnings of $16.3 million, or 28 cents a share, down from $24 million, or 40 cents a share, a year earlier.
Revenue dropped 7% to $62.3 million.
However, results beat Wall Street estimates, as optionsXpress benefited from a higher average retail commission and the opening of 6,600 new accounts in the quarter, a 13% increase year-over-year.
Analysts polled by Thomson Reuters had expected, on average, earnings of 26 cents a share on revenue of $61.6 million.
OptionsXpress said its daily average revenue trades, or DARTs, a figure closely watched by analysts, fell 12% year-over-year to 42,000.
In an interview with Dow Jones Newswires, optionsXpress Chief Executive David Fisher said the company is seeing a pullback in the trading of low-priced financial stocks such as Citigroup Inc. (C), Fannie Mae (FNM) and Freddie Mac (FRE), which accounted for roughly 30% of the equities trading volumes in July.
Fisher said that while optionsXpress' equities DARTs were flat in September, the company's options trades increased 11% over the previous month.
During a conference call with analysts, Fisher said options as a percentage of total retail trades climbed to 58.5% from 56.6% in the second quarter and reached their highest level since the third quarter of 2008.
While options trading has picked up, Fisher said optionsXpress is "looking at a couple of difficult year-over-year comparisons" over the next couple of months given the surge in retail trading volumes during the panic of the financial crisis.
Fisher said the low interest-rate environment is "bad news" for optionsXpress and the online brokerage industry but added that "the good news is that they can't go any lower. So there's only upside from here, and we're likely to start seeing upside in 2010."
Fisher also said that optionsXpress plans to be active on the deal-making front as M&A activity picks up in the online brokerage space.
"I absolutely expect more deals. We are aggressively looking for deals and think it's a great use of the over $200 million in cash we have our balance sheet."
OptionsXpress' client assets increased 20% year-over-year to $6.3 billion, which Fisher said is the highest in the company's history.
The company is also beginning to see the benefits from its May acquisition of Optionetics, an investor-education firm.
"We are starting to see a steady stream of customers come from Optionetics, which is a great sign for the future," adding that those clients trade more options than the company's current customers.
Shares of optionsXpress recently traded up 47 cents, or 2.5%, at $18.74. The company's stock is down about 48% over the past year but has climbed about 22% in the past three months.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com
Source:
The Wall Street Journal
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