In spite of increased client trading, TD Ameritrade Holding Corp.’s fiscal second-quarter profit fell 29.2% from a year earlier, to $132 million, on plummeting net interest revenue, the company said today.
The Omaha, Neb.-based company, which is also a large custodian for registered investment advisers, said its earnings translated to 23 cents a share, down 28.3% and in line with expectations of analysts’ forecasts. Revenue fell almost 16% to $525.5 million.
Net new assets from retail investors and advisers moderated somewhat in the three months ending March 31, after a sharp jump at the end of 2008. They fell 17.9% to $6.4 billion, from $7.8 billion in the December quarter, and were off 7.2% from a year earlier.
The results in many ways followed a pattern reported last week by TD competitor Charles Schwab Corp., which said its earnings for the first three months of 2009 fell 29% to $218 million, while total net new assets were down 39% from a year earlier. Schwab’s net new assets of $25.3 billion, however, were up 17% from last year’s fourth quarter.
TD Ameritrade, unlike Schwab, does not break out specific asset metrics for its adviser custody business. In a sign of the first quarter’s continuing stock market slide and rock-bottom interest rates, TD’s total client assets were off 26.5% at the end of March from a year earlier to $224.9 billion. Three months earlier they stood at $233.8 billion.
The firm’s average fee-based balances swooned 16.8%, to $58.9 billion, during the just-ended quarter, while average interest-earning assets were off 26% to $7.3 billion, from $9.9 billion, in its fiscal 2008 second quarter.
Discount brokers have been winning accounts over the past year from troubled full-service brokerage firms, but the rate of new account openings appears to be slowing. TD Ameritrade said it opened 194,000 new accounts in the first three months of 2009, down from 217,000 three months earlier and 214,000 a year ago.
San Francisco-based Schwab, whose new brokerage accounts fell 16% in the first quarter from a year earlier, to 207,000, said its adviser services sector last quarter attracted $9.6 billion of new assets. That was down 52% from a year earlier and off 18% from the last three months of 2008.
TD Ameritrade reaffirmed that its earlier forecast that full-year fiscal earnings are likely to range between 90 cents and $1.15 a share. In fiscal 2008, ending on Sept. 30, the company had net income of $1.37 a share.
In a conference call with investors, chief executive Fred Tomczyk said plunging margin loan activities and interest-based fees continued to hurt the company’s bottom line. Despite the continuing difficult environment, he said the firm continues to be well-funded and will invest to position itself for “the other side of the cycle.” The company later this year expects to complete its acquisition of Sink or Swim, an options trading and investor education firm.
The company also continues to work on resolving issues related to auction rate securities that investors have been unable to redeem since the market froze more than a year ago. It had about $500 million of retail auction rate client assets as of the end of March, an executive said during the conference call.
Shares of TD Ameritrade, about 45% of which are held by Toronto-based TD Financial Group, were up around 2.3%, or 35 cents a share, in midmorning trading after the earnings report was released.
The Associated Press contributed to this report.
