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Jan 21 (Reuters) - TD Ameritrade Holding Corp, the largest U.S. discount brokerage by client trading activity, said Tuesday its fiscal first quarter profit rose 30.6 percent from a year earlier on fees from growing client assets and renewed investor interest in trading securities.
TD Ameritrade shares rose more than 7 percent to $34.77 in early trading.
Earnings per share of 35 cents beat analysts' consensus estimates of 33 cents as compiled by Thomson Reuters I/B/E/S and its record net revenue of $752 million also exceeded estimates of $735.9 million. Excluding amortization of certain assets, earnings per share would have been 37 cents, the company said.
"The retail investor re-engaged with the market," TD Ameritrade Chief Executive Fred Tomczyk said in a conference call with analysts. "With less uncertainty in Washington and an improving macro environment and fed tapering, retail investors made their way back to the market, leaving us a lot to feel good about it."
Like rival Charles Schwab Corp that last week reported a double-digit profit gain on asset gathering and fees, TD Ameritrade has nevertheless been seeking to diversify away from pure trading income. The company, whose largest shareholder is TD Bank Group, said its client assets rose 24 percent to $596 billion as of Dec. 31, with fee revenue of $72 million, up 29 percent from the year-earlier quarter.
Trading activity was at its highest level in more than two years last quarter, and continued to rise this month as clients take on more risk and increasingly use mobile devices. "Virtually every metric we measure is trending in the right direction," Tomczyk said. "People who use mobile trade more frequently than people who don't."
Options and futures trading, a sign of risk taking, comprised a record 41 percent of daily average trading revenue in the first quarter. Trading on mobile devices hit a record 12 percent of average daily volume, helping TD Ameritrade avoid the typical holiday slowdown as "people traded anywhere, anytime," Tomczyk said.
Shares of TD Ameritrade have gained 81.8 percent in the past 12 months. Investors expect that with large amounts of client cash to invest, discount brokers' profit will soar when the Federal Reserve raises interest rates.
Tomczyk said the company's profit margin should rise along with rates but warned that it will "take some time" for rate rises to show up in earnings. He cautioned that after a near-30 percent rise in the S&P 500 index last year, he wouldn't be surprised to see a stock market correction that could temporarily lower trading volume.
Though profit in the fiscal first quarter ended on Dec. 31, 2013 was up from a year ago, it fell 4 percent from the previous three months when the company booked a one-time gain from its investment in Knight Securities.
Expenses rose on higher compensation and advertising costs. TD Ameritrade, a sponsor of the Winter Olympics, will spend about $95 million on ads this quarter but kept its estimate of annual ad spending unchanged, chief financial officer Bill Gerber said on the analyst call.
Earlier Tuesday, TD Bank group said it expects to book a first-quarter gain of about C$68 million from TD Ameritrade's contribution to its net income.
Reporting By Jed Horowitz; Editing by Nick Zieminski