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Portfolio > Asset Managers

TD Ameritrade Trading Down, Profits Up: Q2 Earnings

By Emily Zulz

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TD Ameritrade (AMTD) announced on Tuesday morning its earnings for the quarter ended June 30 rose 21% from a year ago — reaching net income of $190 million, or $0.34 per share, meeting analysts’ projections.

Net revenues for this quarter exceeded analyst expectations at $763 million, up 5% year over year, and 56% of which were asset-based. Analysts polled by Thomson Reuters had projected earnings of 34 cents a share and revenue of $759 million.

The brokerage firm saw a decrease in average client trades per day; the activity rate declined 6.5% to 401,000 in the most-recent quarter, down from 491,000 in the prior quarter but up from year-ago daily trades of 399,000.

“Coming off our best trading quarter ending in March, this quarter went a little south,” said Bill Gerber, executive vice president and chief financial officer, during a conference call.

He added that while trading had pulled back from the last quarter, this most-recent quarter had delivered the best net new asset quarter in recent history.

Net new assets for the company’s fiscal second quarter increased to $13.4 billion from the first quarter, $12.2 billion, and 2013′s Q2 net new assets of $10.8 billion.

Overall client assets were $650 billion as of June 30, rising 5% in this quarter from $617 billion at the start of the period.

Commissions and transaction fees for the most recent period totaled $317 million vs. $374 million in the earlier quarter and $321 million a year earlier. Investment-product fees rose 22% from last year to $79 million.

Pretax profit margins rose to 40.6%, a slight decline from last year’s 41.1% but an increase from last quarter’s 39.8%.

Fred Tomczyk, president and CEO of TD Ameritrade, said in a statement that he believes the rising earnings are being “driven primarily by strong revenue growth.”

“We’re seeing strong demand for guidance-based solutions, increased adoption of mobile platforms and our distribution channels continue to perform well resulting in more than $40 billion in net new client assets, a 10% annualized growth rate,” Tomczyk said in a statement. “While the markets are experiencing low volatility and summer seasonality, retail investors have remained bullish. We have good momentum to finish out the year and we’re well positioned going forward.”

Gerber added in a statement that TD Ameritrade is “on pace for another solid year of asset growth.”

 “TD Ameritrade delivered strong results in the third quarter and we are on pace for another solid year of asset growth. “Year-to-date, revenue is $2.3 billion, up 13% year over year,” he said in a statement. “Investment product fees now account for 10% of revenues and fee-based investment balances were once again at a record high for the quarter.” 

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Check out ThinkAdvisor’s 2014 Q2 Earnings Calendar for the Finance Sector

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