TD Ameritrade said Tuesday that fiscal first-quarter net income grew 5 percent and revenue was almost unchanged as trading activity slowed amid worries about the economy.
The Omaha-based online brokerage posted $152 million in net income, or about 27 cents per share, in the October-December quarter. That's up from $145 million, or 25 cents per share in the same quarter of 2010. It topped the 26 cents per share profit that analysts surveyed by FactSet expected.
Revenue fell less than 1 percent to $653.4 million from $656.2 million. Analysts expected revenue to grow to $671.5 million.
One of the key drivers of Ameritrade's revenue is the fees it charges for transactions. Trading slipped during the last three months of 2011 due to growing worries about the European debt crisis. The average number of trades per day dipped to 367,479 from 371,916 in the same period a year earlier. The July-September quarter averaged 415,739 trades per day.
Average commissions and transaction fees per trade fell to $11.90 during the quarter from $12.39 in the last three months of 2010.
"While volumes have improved over December, clients continue to hesitate in their trading and investing in the face of all of the uncertainty in the markets right now," said Fred Tomczyk, Ameritrade's president and CEO, during a conference call with analysts. He said that while there are signs the U.S. economy is improving, it will be a slow recovery, and there remains a "cloud of uncertainty" regarding Europe's financial crisis.
Tomczyk said he thinks trading will improve if the situation in Europe stabilizes and the market starts to move consistently. The U.S. economy will also play a big role.
"What's really important is what happens in the first quarter for the U.S. economy," Tomczyk said in an interview with The Associated Press.
Ameritrade also makes money from fees based on clients' assets, but low interest rates limit what TD Ameritrade earns on client deposit accounts and other investment products.
Ameritrade said net new assets grew 11 percent to $10.2 billion from $9.7 billion. The total client assets Ameritrade holds grew 7 percent to $406.3 billion at the end of the quarter from $386.4 billion.
Credit Suisse analyst Howard Chen said in a research note that this was a more challenging quarter for Ameritrade, but the company is limiting expenses and managing capital well. Chen maintains a "Neutral" rating on Ameritrade's stock because of the interest-rate pressure and slower trading outlook.
Deutsche Bank analyst Michael Carrier said Ameritrade delivered a decent quarter in a difficult environment. Carrier rates the stock a "Buy" because Ameritrade continues to grow and will benefit when interest rates do eventually begin to rise.
Ameritrade laid off 145 people between October and December. Severance costs totaled $7 million. But the company also benefited from a lower-than-expected tax rate, so there was a net gain of one cent per share from those two factors.
Ameritrade said it spent about $107 million during the quarter to repurchase 6.7 million shares of its own stock. It plans to pay a dividend of 6 cents per share in February.
Ameritrade shares fell 29 cents to close at $16.01.
TD Ameritrade Holding Corp.: http://www.amtd.com