TD Ameritrade profit down 17%

The worst of the recession has passed, TD Ameritrade officials said Tuesday, and their customers have continued to be “very active and engaged in the market” throughout the economic downturn.

The Omaha-based online brokerage reported a record number of trades per day for the third quarter, 392,000, an increase of 36 percent from the same period last year.

The company also reported opening 586,000 new accounts during the first nine months of 2009, making it the strongest nine-month growth period in the past nine years, said President and CEO Fred Tomczyk.

Bill Gerber, executive vice president and chief financial officer, said that trend of strong organic growth is one on which the company hopes to build.
Advertising

“This quarter is a continuation of the themes we've been discussing for the past nine months,” he said.

In its third-quarter earnings announcement Tuesday, the company said near-zero interest rates and the uncertain investment environment hurt profit, which declined by nearly 17 percent to $170.5 million. That compares to last year's figure of $204.4 million.

Per-share earnings were 30 cents, compared to 34 cents in 2008.

The results, however, exceeded analysts' expectations.

Analysts surveyed by Thomson Reuters expected TD Ameritrade to report earnings per share of 29 cents on $580.5 million revenue.

Ameritrade said it generated $613.8 million in revenue. That's down about 2 percent from $623.6 million last year.

Earnings would have been 33 cents per share if not for three unusual items: a special regulatory assessment; a $225 million payment toward the $660 million acquisition of options-trading company thinkorswim GROUP Inc.; and a write-off on software development costs.

Tomczyk said the acquisition of thinkorswim in the quarter was a “capability acquisition rather than a scale acquisition,” meaning it will give current investors access to improved trading technology rather than dramatically enlarging TD Ameritrade's footprint.

The acquisition will have limited impact on the company's fourth-quarter earnings, Tomcyzk said, because the trading technology of thinkorswim GROUP will not be fully implemented until December 2010.

Monday's announcement that TD Ameritrade had reached a settlement with the New York Attorney General's Office on the sale of auction-rate securities will affect fourth-quarter earnings, company officials said.

Auction-rate securities are long-term bonds issued by municipalities, corporations and student loan companies and “perpetual equity instruments” of closed-end mutual funds. They allegedly were sold to investors as liquid investments offering interest rates greater than money-market funds.

TD Ameritrade will commit $456 million to buy back the securities from investors. The company expects to take a hit of 5 to 10 cents per share in the fourth quarter as a result of the decision, officials said.

“As the issuers refinance or redeem these securities, we expect our ultimate loss on these positions to be immaterial,” Gerber said.

TD Ameritrade also has settled with the Securities and Exchange Commission over its investigation of the auction-rate securities case. Terms of that settlement were the same as the agreement with the New York Attorney General's Office. Among other things, the SEC said TD Ameritrade did not tell customers about the complexity and risks of the securities, including that they were dependent on successful auctions for liquidity.

Gerber said the company has completed the first phase of transitioning many of its sweep funds into an FDIC-insured money market deposit account. Sweep funds are where investors' money from the sale of securities or dividends are held on a short-term basis.

The transition was ordered earlier this year after the Primary Fund, one fund used by TD Ameritrade as a sweep vehicle, dropped in value last September to 97 cents, 3 cents below the targeted $1 per share. The Primary Fund now is in the process of being liquidated, officals said.

Gerber said the company has moved $7.4 billion of the $10 billion to $14 billion held in sweep funds.

TD Ameritrade remains No. 1 in market share against E*Trade Financial, Fidelity Investments, optionsXpressand and Charles Schwab, officials said.

Tomczyk said the company has taken advantage of the recession by aggressively pursuing new business while competitors have “pulled in a bit.”

TD Ameritrade's stock-value increased 54 cents Tuesday to $18.69 per share. Over the past year prices have ranged from $9.34 to $23.49.

Source

Another interesting article about Online Stock Market Trading. To get more updates on Online stock market Trading news, stock market charts, stock market investing, futures trading or options trading, subscribe to Online Stock Market Trading now!