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TD Ameritrade profit dips but beats forecast

Associated Press Modified: July 17, 2012 at 5:00 pm •  Published: July 17, 2012

OMAHA, Neb. (AP) — Online brokerage TD Ameritrade's net income slipped 2 percent as trading slowed in its fiscal third quarter, but the company beat Wall Street expectations because expenses were down and investors entrusted the firm with more money.

Ameritrade CEO Fred Tomczyk said Tuesday that the company's strategy is helping it weather the challenging conditions.

"Our balance sheet is strong, and we remain well positioned to deal with today's uncertain macroeconomic environment," he said.

But it doesn't appear likely that the economic worries or low interest rates will change anytime soon, so Tomczyk said the company will have to remain disciplined and patient.

"It's hard to see much changing until after the political election in the United States," Tomczyk said.

Ameritrade generates revenue from commissions it charges investors on trades and from asset-based fees and interest it gets on the assets it holds.

The Omaha-based company said its net income fell to $153.8 million, or 28 cents per share, in the quarter ended June 30. That's down from $157.4 million, or 27 cents per share, a year ago. It had 23,741 fewer shares outstanding this year.

On average, the analysts FactSet polled expected earnings of 26 cents per share.

Revenue declined nearly 3 percent to $667.3 million from $684.8 million last year. Analysts expected lower revenue of $659.8 million.

Its shares slipped 13 cents to close at $16.27 Tuesday. Its shares have recovered from a 52-week low of $13.34 in mid-September 2011. They peaked almost a year ago at $20.76.

Credit Suisse analyst Howard Chen said in a research note that Ameritrade has done a good job controlling its expenses, but he expects the economic challenges to get worse before they improve.

Chen cut his profit estimate for Ameritrade's fourth quarter to 25 cents per share from 27 cents per share because of the weaker trading.

Standard & Poor's Capital IQ analyst Kenneth Leon also reduced his earnings prediction for Ameritrade because of concerns about investor confidence and trading activity. Leon now predicts that Ameritrade will report earnings of $1.10 per share for its fiscal year instead of $1.15.

The average number of trades Ameritrade handled each day declined to 355,449 in the latest quarter as investors continued to worry about Europe's debt problems and the overall health of the economy. A year ago, Ameritrade handled 369,716 trades per day on average during the quarter.

The slower trading activity reduced trading revenue 5.5 percent to $266.1 million from $281.6 million.

Tomczyk said that Federal Reserve Chairman Ben Bernanke has done a good job managing monetary policy, but the economy needs political leadership and sound fiscal policy.

"In tough environments, leadership is paramount," Tomczyk said.

The current record-low interest rates limit how much Ameritrade can earn on its clients' deposit accounts and other investment products.

Ameritrade said that net new client assets grew 9 percent to $9.7 billion, and at the end of the quarter it held $445 billion in total client assets. A year ago, it held $413.7 billion in client assets.

Its asset-based revenue grew 2 percent to $378.7 million from $372.0 million.

Ameritrade's operating expenses declined 2 percent to $413 million.



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