NEW YORK, Sept 10 TD Ameritrade Holding Corp
expects to report next month that new client assets
rose at a double-digit rate for the fifth consecutive year,
exclusive of market fluctuations, a senior executive said
That's significant for the online brokerage firm since its
return on client assets is expected to skyrocket once U.S.
interest rates begin rising. TD Ameritrade, whose fiscal year
ends on Sept. 30, had $94 billion of interest-rate sensitive
assets in fee-based and other customer accounts as of June 30.
The continuing inflow of new money, which TD Ameritrade
invests for itself until used by clients, also vindicates a
strategy put in place by Chief Executive Fred Tomczyk about four
years ago to supplement TD Ameritrade's long-time reliance on
commissions with fee-based accounts.
"Assets have been growing for years, and we see no signs of
that abating," Tomczyk said at a conference in New York
sponsored by Barclays.
The firm, the largest online U.S. broker as measured by
client trades, has previously said that it expects net new
assets to grow between 7 percent and 11 percent in its 2013
fiscal year, following an 11 percent rise in 2012 and a 12
percent jump in 2011.
Tomczyk conceded that asset growth gets harder as total
assets rise, but said after the presentation that the company's
business of selling services to investment advisers has helped
in the new-asset race. While new assets from retail clients who
invest directly with the firm are growing at a 5 percent-to-9
percent rate, those from clients of investment advisers are
going up at an 11 percent to 17 percent rate, he said.
The firm's combined net new asset growth rate as of June 30
was 11 percent.
The Omaha, Nebraska-based firm has hardly abandoned its
heritage of appealing to active traders who generate
commissions. TD Ameritrade also announced Tuesday that clients'
daily average trades in August rose 2 percent from July 2013 and
26 percent from August 2012, to 382,000 a day.
Investors tend to dismiss such good trading months as
unsustainable, Tomczyk said, but added that volume is likely to
rise even more when the Federal Reserve reverses its
quantitative easing policy, something expected to happen by
year-end. That is because active traders seize on volatility
that is likely to occur when the Fed unwinds its bond purchases.
A one percent rise in the federal funds rate should
translate to about a 32-cent rise in TD Ameritrade's earnings
per share in the first year after the rate rise - and to 54
cents a share by the end of the third year after such a rise -
according to the company.
TD Ameritrade is expected to earn $1.20 per share in fiscal
2013, according to the consensus estimate of 17 analysts
surveyed by Thomson I/B/E/S. It earned $1.06 a share in 2012.
Shares of TD Ameritrade have grown by 62.7 percent in the
past 12 months, including reinvested dividends. Some investors
at the Barclays conference said the stock appears fully valued,
with the market giving TD and other discount brokers credit for
the expected jump in interest rates.
Tomczyk said that TD Ameritrade has the lowest valuation
among its online brokerage peers.
Shares of TD Ameritrade were up 3.3 percent at $27.64 in
afternoon trading, compared with a 0.65 percent rise in the S&P
Shares of rival E*Trade Financial Corp were up by
about 3.9 percent as Macquarie Securities raised its
recommendation on E*Trade to "outperform." Regulators' decision
last week to let the company withdraw $100 million of capital
from its bank was a "significant" vote of confidence in
E*Trade's financial recovery plan, Macquarie analyst Sameer
Murukutla wrote in a note to investors.