SAN FRANCISCO TD Ameritrade Holding Corp (AMTD.O) reported strong quarterly results but its shares tumbled after Standard & Poor's cut the credit outlook for the United States, potentially hurting the online broker's clients.
TD Ameritrade shares were down 3.7 percent amid a slump in U.S. stocks as the S&P move added to worries about the global economy after China curbed liquidity.
Stocks of online brokers are especially sensitive to macroeconomic news because their clients may be disproportionately affected, Sandler O'Neill analyst Richard Repetto said.
"They move more on market concerns because it could impact their customers more than the average company out there," he said.
Shares of Charles Schwab Corp (SCHW.N), which had been up 8.8 percent year to date, were down 4.2 percent, and E*Trade Financial Corp (ETFC.O) was off 2.5 percent.
TD Ameritrade said net income increased 5.6 percent to $171.7 million, or 30 cents per share, in the second quarter that ended on March 31, from $162.6 million, or 27 cents per share, a year earlier.
Analysts on average were expecting 29 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 13 percent to $718.2 million, beating Wall Street estimates of $703.6 million.
Omaha, Nebraska-based TD Ameritrade said clients added a net $11.5 billion in new funds in the quarter, an increase of 13 percent from a year earlier. Clients made an average of 439,158 trades per day, compared with 378,714 a year earlier.
Total client assets stood at about $412 billion, up 21 percent, the company said.
Commission revenue jumped nearly 16 percent from the first quarter as trading picked up.
Like bigger rival Charles Schwab, which reported better-than-expected results on Friday, TD Ameritrade benefited from rising equities markets that boosted stock investing by clients. U.S. stock markets rose about 5 percent in the January-March quarter.
TD Ameritrade is 46 percent-owned by Canada's Toronto-Dominion Bank (TD.TO), which said on Monday it expects TD Ameritrade earnings to contribute C$57 million to second-quarter profit for its wealth management segment.
TD Ameritrade shares were up more than 16 percent this year before Monday's earnings report, compared with a 4.9 percent increase in the Standard & Poor's 500 index .SPX.
Chief Executive Officer Fred Tomczyk told analysts on a conference call after the earnings announcement that trading in April has been "range-bound."
"People are waiting to see one or more of the uncertainties clear, between inflation in China and India and I'd say the Middle East and the price of oil and what's going on in Japan," Tomczyk said.
When some of those uncertainties are resolved, he added, "I think trading will continue to be fairly healthy."
Tomczyk said the company had no specific acquisition targets on the horizon.
"We don't feel strategically compelled to do a deal right now," he said. "It has to make strategic and financial sense, and we certainly have the cash and the debt capacity to do something."
TD Ameritrade's last major acquisition was in June 2009, when it bought online broker thinkorswim Group Inc for $600 million to target the growing options trading market.
Tomczyk said in an interview following the earnings report that TD Ameritrade continues to waive fees on money market mutual funds to protect clients against negative returns amid record-low interest rates. TD Ameritrade is waiving about $10 million per quarter in such fees, he said.
Charles Schwab said that last year it waived $433 million in money market mutual fund fees, and it waived another $112 million in the first quarter.
"If you look at the economists' consensus, it's not going to change for another year," and TD Ameritrade expects to keep waiving the fees for as long as money market interest rates remain at their current near-zero levels, Tomczyk said.
(Reporting by Philipp Gollner; Editing by Derek Caney, Lisa Von Ahn and John Wallace)