TD Ameritrade's Q3 EPS of 20 Cents Disappoint Expectations

Transaction-based revenues dropped, but total asset-based revenues up for full fiscal year

TD Ameritrade (AMTD) on Tuesday said its third-quarter net income dropped to $113.96 million versus $179.44 million in the second quarter, or $0.20 earnings per share versus EPS of $0.31 in the prior quarter.

Analysts surveyed by Thomson Reuters had expected EPS of $0.23 for the quarter ended Sept. 30.

The Omaha, Neb.-based holding corporation, which is 45% owned by Canada's Toronto-Dominion Bank, said in its Q3 2010 earnings release that it maintained industry-leading daily average revenue trades and grew interest-rate-sensitive assets to a record $66 billion despite a continued challenging economic environment.

Transaction-based revenues dropped substantially in the quarter, to $250.02 million of commissions and transaction fees compared to $333.08 million in the second quarter ended June 30. For the fiscal year, transaction-based revenues stood at $1.19 billion on Sept. 30, 2010 versus $1.25 billion on Sept. 30, 2009.

However, total asset-based revenues for the full fiscal year were up, at $1.23 billion versus $1.10 billion a year ago. For the quarter-on-quarter results, those revenues were down slightly, at $324.08 million at Sept. 30 versus $324.65 million at June 30.

Net revenues were down sequentially to $608.84 million at Sept. 30 versus $691.80 million at June 30. Net profits also were down to $113.96 million versus $179.44 million.

Taking the long view, TD Ameritrade President and CEO Fred Tomczyk said he was proud of how the company has executed business over the last two years.

"I can't think of another company that has delivered the kind of organic growth we have, and received a credit ratings upgrade, refinanced their debt through a successful public offering, bought back 9% of their outstanding stock, made an acquisition and introduced a dividend, all within a 24-month period that included the deepest and longest recession since the Great Depression,” Tomczyk said in a statement.

The company will continue to focus on “further enhancing the client experience,” cross-selling, and building out its retail and institutional channels to maintain growth trends and remain opportunistic in 2011 and beyond, he added.

As for TD Ameritrade’s key metrics performance in third-quarter 2010, net new assets were up for the year, at $6.0 million versus $5.4 million in the prior-year quarter, though they were down compared to $8.9 million at June 30.

Total quarterly trades stood at $20.3 million versus $26.0 million in June, leaving them flat for the fiscal year at $93.3 million.

Client account and client asset metrics showed a decline in new accounts opened to 125,000 versus 175,000 in the last quarter, with full fiscal year new accounts at 667,000 as of Sept. 30, 2010 versus 737,000 as of Sept. 30, 2009. Total accounts were $7.95 billion compared to $7.89 billion in the prior quarter, with overall client assets including new accounts at $323.8 million versus $341.5 million in the prior quarter.

Read about TD Ameritrade’s Q2 2010 earnings at AdvisorOne.com.

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