April 16, 2013 / 3:10 PM / 4 years ago

UPDATE 1-TD Ameritrade profit rises 5 pct on asset gathering

By Jed Horowitz

April 16 (Reuters) - TD Ameritrade Holding Corp, the biggest U.S. discount brokerage by client trading volume, said on Tuesday that continued double-digit growth in client assets helped its quarterly profit rise 5.1 percent.

The Omaha, Nebraska-based company reported net income of $144 million, or 26 cents a share, for the fiscal second quarter ended March 31, up from $137 million, or 25 cents a share, a year earlier.

The results were down 2.7 percent from its fiscal first quarter but were in line with the average forecast of analysts surveyed by Thomson Reuters I/B/E/S.

Like its rival Charles Schwab Corp, which on Monday reported a 6 percent gain in quarterly earnings, TD Ameritrade attracted assets from clients at a torrid pace, generating strong fee revenue and helping to offset a continuing decline in trading revenue.

Net new client assets were up $13 billion, an annualized growth rate of 11 percent. 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, Alex Kramm, an analyst at UBS, said in a note to clients.

Shares of TD Ameritrade were down 0.7 percent at $19.31 in morning trading.

Average client trades per day totaled about 378,000 in the quarter, down 2.4 percent from a year earlier but up 13.2 percent from the previous quarter.

"On the trading side, it's improved but remains tepid as a lot of retail investors were cautious," TD Ameritrade Chief Executive Fred Tomczyk said in an interview.

Active traders and investment advisers are increasingly investing in the markets, but long-term retail investors remain quite cautious, he said.

Retail brokerage firms have been focused on selling fee-based accounts and products to customers that generate revenue regardless of whether they trade.

TD Ameritrade reported net revenue of $679 million for the quarter, 55 percent of which came from asset-based fees. Revenue inched up from $673 million in the year-earlier period but was below analysts' average forecast of $677.1 million, according to Thomson Reuters I/B/E/S.

TD Bank Group, which owns a stake of around 45 percent in TD Ameritrade, said the broker's earnings will add C$53 million ($51.90 million) to the bank's quarterly income.

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