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Stock of the Day
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TD Ameritrade Holding Corp. (AMTD)
TD Ameritrade Holding Corp. Profit Declines Despite Higher Trading Volumes
Many investors traded more actively as the market improved and underwent the biggest rally in U.S. stocks since the 1930s. In fact, TD Ameritrade Holding Corp. (AMTD: Charts, News, Offers), the Omaha, Nebraska-based online brokerage firm, said that its trading-based business was strong with average trades per day up 35 percent, and its trading-based revenue jumped almost 38 percent. These numbers were helped by its $748.6 million purchase of options-trading specialist, Thinkorswim Group Inc., earlier this year. The acquisition enabled it to deliver record trading and revenue numbers. Despite the fact, TD Ameritrade profit for the quarter ended September 30 fell 8.8% at $156.7 million or 26 cents a share, beating analysts' estimate of 23 cents a share, but down from $172 million or 29 cents a share from a year earlier. What is wrong with this picture? Why does TD Ameritrade profit continue to fall despite higher trading volumes?
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While the brokerage industry has benefited from higher trading volumes, it remains hindered by low interest rates. TD Ameritrade faced lower interest margin as a result of the Federal Reserve slashing its benchmark interest rate to near zero in attempt to turn the economy around. Moreover, it was forced to waive $20 million in fees on some money-market funds to prevent client's yields from becoming negative. Overall, TD Ameritrade said low interest rates drove its asset-based revenue down 29 percent. The net effect was a slight revenue increase of 1.3 percent to $657.9 million. Similarly, rival Charles Schwab Corp. (SCHW: Charts, News, Offers) reported earlier this month, a drop in profit and revenue because of the lower interest rates. Unfortunately, it appears that TD Ameritrade and its peers will be facing lower interest income for the foreseeable future, with the Federal Open Market Committee recently reiterated its pledge to keep the benchmark lending rate at around zero for an extended period to assist the recovery.
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Despite the interest rates and other external conditions, the company appears to be on the right track toward recovery. TD Ameritrade reported $302 billion in client assets in the quarter, up 8.6% from a year earlier and 14% from the prior quarter. Net new client assets almost doubled on the year to $5.4 billion. Beside its acquisition of Thinkorswim Group, Inc., Chief Executive Officer, Fred Tomczyk attributed the higher trading volumes to "enhanced education programs, risk-management tools, new product alternatives for traders and quality execution..." Overall, the online brokerage's shares have more than doubled in value since a three-year low in November 2008, and are up nearly 37% so far this year. TD Ameritrade also released guidance for its 2010 fiscal year, saying it expects to earn between $1.10 and $1.40 a share.
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Other Stuff Related to TD Ameritrade:
Judge denies lawsuit deal over TD Ameritrade breach -- There is no settlement yet. The saga started by hacker infiltration of TD Ameritrade's database in 2007 continues.
TD Ameritrade Customers Track Positions in Real Time -- TD Ameritrade continues to strengthen its online leadership with new charting software that automatically tracks live positions in real time.
Almost half of TD AMERITRADE clients believes it's good time to invest -- 45 percent of TD Ameritrade's clients surveyed agreed that it is a good time to invest.
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More Stocks in the News:
Daimler Targets Profit Following Savings-Led Rebound -- Daimler AG (DAI: Charts, News, Offers) is doing better after it's divorce from Chrysler on strengths of its E-Class sedan and spending cuts.
Carl Icahn entices small CIT bondholders to reject bond plan -- Billionaire investor, Carl Icahn, opposed CIT Group Inc.'s (CIT: Charts, News, Offers) restructuring plans, rallied small debtholders, and offered $6 billion in loan.
U.S. Steel, AK Steel shares fall on latest results -- Steel makers continue to suffer. United States Steep Corp. (X: Charts, News, Offers) reports third-quarter profit loss, and AK Steel Holding Corp.'s (AKS: Charts, News, Offers) profit fell.
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Profile |
Click here to view a detailed profile of TD Ameritrade Holding Corp..
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