April 16, 2013

TD Ameritrade Profits Rise 5.1% as Client Revenue Offsets Fall in Trading

As quarterly earnings continue to roll in, BlackRock and Goldman Sachs also see a rise in profits

Fred Tomczyk, president and CEO of TD Ameritrade. Fred Tomczyk, president and CEO of TD Ameritrade.

TD Ameritrade (AMTD) reported a 5.1% rise in profits Tuesday to $144 million from $137 million a year ago, citing 11% client asset growth for the second fiscal quarter. Net new client assets were $12.9 billion versus $10.8 billion a year ago.

However, the Omaha-based discount brokerage reported that profits dipped 2% versus the prior quarter to $144 million from $147 million. Net new assets totaled $15.6 billion last quarter, 21% higher than this quarter. The results were in line with analysts’ expectations. Earnings per share were $0.26 at quarter end, compared with $0.27 last quarter and $0.25 a year ago.

In other earnings news, asset management giant BlackRock (BLK) reported a 10% rise in first-quarter profits. Net income of $632 million, or $3.62 a share, beat analysts’ estimate for EPS of $3.58. BlackRock’s profits last year totaled $572 million, or EPS of $3.14. Goldman Sachs (GS) also reported a first-quarter profit increase, with $2.26 billion in profits, 7.2% higher than last year’s $2.11 billion.

TD Ameritrade saw record market fee-based revenue, of $62 million, up 38% year over year, as well as record client assets of approximately $517 billion. The company reported net second-quarter revenues of $679 million, 55% of which were asset-based, versus $651 million last quarter and $673 million a year ago. Average investor client trades per day totaled approximately 378,000, versus 334,035 last quarter and 387,571 a year ago.

"While retail investor sentiment has improved, a large number of investors remain cautious in this environment, and yet we continue to execute well against our strategy and on the items we can control,” said Fred Tomczyk, president and CEO, in a statement.

The growth in assets positions TD Ameritrade well for when the macro environment improves, but the company still faces near-term pressure from low interest rates and softness in trading volumes, Reuters reported Alex Kramm, an analyst at UBS, as saying in a note to clients.

AMTD shares fell Tuesday and were trading at $19.42 at midday, down 0.10% from the previous close of $19.42, after opening the trading day at $19.71.

TD Ameritrade doesn’t separately break out the Institutional and Retail channel assets in its financial reports. But during the morning earnings call on Tuesday, Tomczyk said the quarterly results were due to the ongoing success of sales and service efforts in both the retail and institutional channels.

Within the Institutional channel, over the quarter TD Ameritrade Institutional (TDAI) brought on 94 new breakaway brokers, bringing the year-to-date number to 204, for an average of about two new breakaway brokers joining the platform each business day. Existing RIAs continued to grow their businesses, which also contributed significantly to results, Tomczyk said.

On Monday, TDAI announced it is looking to bring more young financial planners into the industry with its TD Ameritrade Institutional Next Gen Scholarship and Financial Education Grant Program. TD Ameritrade Institutional will provide individual scholarships valued at $5,000 each to 10 talented students enrolled in undergraduate financial planning programs. A $50,000 grant will go to a university that best demonstrates a commitment to educating the industry’s future financial professionals, TDAI said.

In the Retail channel, TD Ameritrade’s new retirement accounts are up 8% year over year, and year to date, and the average balance of a new, funded account is up 17% from the same period last year, Tomczyk said.

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Check out AdvisorOne's Q1 Earnings Calendar for the Finance Sector.

 


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