By Jed Horowitz
April 16 TD Ameritrade Holding Corp, the biggest U.S. discount brokerage by client trading volume, said on Tuesday that continued double-digit growth in client assets helped its quarterly profit rise 5.1 percent.
The Omaha, Nebraska-based company reported net income of $144 million, or 26 cents a share, for the fiscal second quarter ended March 31, up from $137 million, or 25 cents a share, a year earlier.
The results were down 2.7 percent from its fiscal first quarter but were in line with the average forecast of analysts surveyed by Thomson Reuters I/B/E/S.
Like its rival Charles Schwab Corp, which on Monday reported a 6 percent gain in quarterly earnings, TD Ameritrade attracted assets from clients at a torrid pace, generating strong fee revenue and helping to offset a continuing decline in trading revenue.
Net new client assets were up $13 billion, an annualized growth rate of 11 percent. The growth in assets positions TD Ameritrade well for when the macro environment improves, but the company still faces near-term pressure from low interest rates and softness in trading volumes, Alex Kramm, an analyst at UBS, said in a note to clients.
Shares of TD Ameritrade were down 0.7 percent at $19.31 in morning trading.
Average client trades per day totaled about 378,000 in the quarter, down 2.4 percent from a year earlier but up 13.2 percent from the previous quarter.
"On the trading side, it's improved but remains tepid as a lot of retail investors were cautious," TD Ameritrade Chief Executive Fred Tomczyk said in an interview.
Active traders and investment advisers are increasingly investing in the markets, but long-term retail investors remain quite cautious, he said.
Retail brokerage firms have been focused on selling fee-based accounts and products to customers that generate revenue regardless of whether they trade.
TD Ameritrade reported net revenue of $679 million for the quarter, 55 percent of which came from asset-based fees. Revenue inched up from $673 million in the year-earlier period but was below analysts' average forecast of $677.1 million, according to Thomson Reuters I/B/E/S.
TD Bank Group, which owns a stake of around 45 percent in TD Ameritrade, said the broker's earnings will add C$53 million ($51.90 million) to the bank's quarterly income.