UPDATE 2-Penson Worldwide Q2 profit beats market view

(Recasts, adds details, analysts' comments)

By Supantha Mukherjee

BANGALORE, July 23 (Reuters) - Penson Worldwide Inc (PNSN.O), a trading and clearing services provider, reported a lower quarterly profit, hurt by a decline in the federal funds rate, but higher clearing and commission fees and new correspondents helped it beat market expectations.

The company's revenue was based on the number of transactions and due to its mix of trade it was able to earn higher commissions despite the volumes coming down a bit from first quarter, Sterne Agee & Leech analyst Ada Lee said.

Dallas-based Penson posted a second-quarter net income of $5.9 million, or 23 cents a share, compared with $7.6 million, or 28 cents a share, a year ago.

Net revenue rose 16 percent to $74.6 million. Revenue from clearing and commission fees increased 33 percent to $37.3 million.

Analysts had expected earnings of 17 cents a share, before special items, on revenue of $66.4 million, according to Reuters Estimates.

Analyst Lee was not concerned about the lower earnings and said last year was an extraordinary year in many respects and companies were not able to recreate 2007 results in either banking or trading.

Federal funds rate declined 60 percent year over year, the company said in a statement.

"During the quarter, our conversion of new securities correspondents and futures introducing brokers was faster than originally anticipated, benefitting clearing and commission fees," Chief Executive Philip Pendergraft said.

REVENUE GENERATORS

"Paramount to their performance lately has been the reacceleration of new correspondent growth that really began in the fourth quarter last year," David Scharf, analyst at JMP Securities, said.

Penson, which added 11 new revenue generating correspondents in the latest second quarter, also said it had signed 26 new securities correspondents that are likely to begin contributing to revenue in the second half of 2008.

"The company is poised for a very strong second half and 2009 based on the degree of new correspondent growth and any increase of short term rates sometime in the future will only going to accentuate that growth," Scharf said.

Lee has a "buy" rating on the stock and Scharf rated the stock at "market outperform."

Shares of the company closed at $12.81 Wednesday on Nasdaq. The shares have gained 28 percent in the last three months. (Editing by Gopakumar Warrier)