| NEW YORK, July 22
NEW YORK, July 22 TD Ameritrade Holding Corp,
the biggest online stockbroker as measured by client trading,
said quarterly net income rose 3 percent from a year earlier
despite higher expenses, continuing low interest rates and a
drop in client trades and commissions.
The discount broker on Tuesday reported profit of $190
million, or 34 cents a share, in its third fiscal quarter ended
June 30. It said the improvement came on a 24 percent rise in
new assets to $13.4 billion, a surge of business with
independent investment advisers whose clients open TD Ameritrade
accounts and sales of fee-based products.
But clients who trade heavily hoping to glean small gains
from stock volatility have been stymied by unusually calm
markets, TD Ameritrade executives said. Between April 1
and July 17, the S&P 500 stock index has not moved up and down
more than 1 percent on a single day, its longest stretch of
relative quiet since 1994.
Chief Executive Officer Fred Tomczyk said on a conference
call that the lack of volatility was surprising, given
market-shaking geopolitical events such as the Ukraine plane
crisis and Middle East hostilities.
Daily average trades by TD Ameritrade clients fell to
401,000 in the just-ended quarter from a record 492,000 in the
first quarter, and are down to 396,000 thus far in July. Fee
revenue, however, jumped 22 percent to $79 million.
Like competitor Charles Schwab Corp, TD Ameritrade,
has battled the lower trading by seeking money from wealthier
investors who often pay fees based on assets kept at the firms.
Many customers are referred by independent investment
advisers who keep clients more fully invested in markets than do
retail clients who invest on their own, Tomczyk said.
"If we can maintain our asset gathering through the fourth
(fiscal) quarter, a sixth consecutive year of double-digit asset
gathering is possible," Tomczyk said.
In an interview with Reuters, Tomczyk said brokerage
accounts remained TD Ameritrade's core product, and that asset
gathering ultimately leads people to trade more in their
accounts, borrow against those accounts and add cash to accounts
that the firm can invest for its own profit.
Discount brokers thrive when the spread between short-term
and long-term interest rates widen so that they can invest
client cash at higher rates than they pay for the cash. Interest
revenue inched up 1 percent last quarter.
Tomczyk said he is fairly confident short-term rates will
rise late this year or early next year.
Expenses jumped 8 percent from the 2013 quarter to $447
million, largely due to higher costs to execute individual stock
option trades, investments in technology and one-time consulting
costs related to advertising. The company said costs should
return to a more normal range of $390 to $400 million this
quarter. Net revenue grew 5 percent to $763 million.
Shares of TD Ameritrade were off 0.2 percent to $31.08 in
early afternoon trading.
(Editing by Jeffrey Benkoe)