OMAHA, Neb. — TD Ameritrade Holding Corp. said Tuesday investors kept its online trading operations busy in its latest quarter as the markets improved but lower interest rates and rising expenses sent its profit down 9 percent compared with a year ago.
Ameritrade said it handled 35 percent more trades per day on average and its trading-based revenue soared almost 38 percent in its fourth fiscal quarter.
The company's acquisition earlier this year of options-trading specialist thinkorswim helped it top trading numbers from last fall's panicked selling during the turmoil around the bankruptcy of Lehman Brothers. And retail traders stayed engaged in the improving market.
The average number of trades it handled soared to an average of 410,576 trades per day in the quarter.
But Ameritrade said low interest rates drove its asset-based revenue, which includes money earned on its customers' deposit accounts and various investment products, down 29 percent. The net effect was a slim 1 percent increase in overall revenue.
It said higher expenses — mostly associated with the thinkorswim acquisition — also hurt its profit.
Ameritrade earned $156.7 million, or 26 cents per share, in the quarter that ended Sept. 30, down from $172 million, or 29 cents per share, a year ago. Revenue edged up to $657.9 million from $649.2 million a year ago.
Analysts surveyed by Thomson Reuters expected earnings of 22 cents a share on $630.48 million in revenue.
Its shares slipped 21 cents, or 1.1 percent, to close at $19.27 Tuesday. Its shares are still closer to the high end of their 52-week range of $9.34 to $20.93.
Over the past year, Ameritrade has tried to limit its costs, boosted advertising to attract more business and acquired thinkorswim.
"We couldn't control the markets and we couldn't control interest rates, so we focused on the things we could control," said Fred Tomczyk, Ameritrade's CEO and president.
The Omaha-based company expects to earn between $1.10 and $1.40 per share in fiscal 2010. Analysts are looking for $1.29 a share.
Credit Suisse analyst Howard Chen said in a research note that he thinks Ameritrade has performed well, but he expects a pullback in trading activity that will hurt the company's prospects.
"Management has executed soundly and fundamentals have remained strong for the AMTD franchise in a difficult operating environment," Chen wrote.
Tomczyk said when the Federal Reserve does begin increasing interest rates, Ameritrade is likely to benefit significantly because it will generate more revenue on its asset-based fees. The company estimates that for every quarter-point increase in the federal funds rate, Ameritrade's earnings per share will increase by 7 cents.
Tomczyk said he is cautiously optimistic about the economy, but he thinks any significant bad news could still send the stock market down.
"I think any recovery here is going to be slow and over a long period of time," Tomczyk said in an interview. "I don't expect us to rocket back here."
Ameritrade continues to hold onto a substantial amount of cash and other liquid assets to help it weather the recession. The company had about $1.1 billion on hand at the end of September.
Company officials said between $260 million and $320 million of that cash will be used to purchase auction-rate securities from investors as part of a previously announced settlement with government investigators.
The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions. They were sold as being as safe as cash, but the market for them fell apart in early 2008.
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The Source:
The Associated Press
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