January 20, 2009 / 12:56 PM / in 9 years

UPDATE 4-TD Ameritrade profit down, cuts view; shares fall

* EPS 31 cents, meets Street view

* Lowers 2009 forecast to between 90 cents and $1.15/share

* Raises 2009 trading outlook

* Attracts $7.8 billion net new assets in quarter

* Shares fall 3.7 percent (Recasts; Adds CEO interview, Wall Street view, updates shares)

By Jonathan Spicer

NEW YORK, Jan 20 (Reuters) - TD Ameritrade Holding Corp’s AMTD.O quarterly profit dropped 23 percent, meeting expectations, but a stormy economy spurred the online broker to lower its 2009 forecast.

The company’s shares fell 3.7 percent in a broadly lower market on Tuesday, even as Ameritrade’s results suggested it has lured financial advisers that abandoned full-service brokerages shaken by the credit crisis.

Ameritrade, the second-biggest U.S. discount broker, logged $7.8 billion in net new assets in the quarter, nearly triple what it attracted in the previous quarter. New advisers are a key source of new assets for online brokers.

Still, with interest rates near zero, Ameritrade’s ability to earn profits from assets were hampered, and the midpoint of its new earnings forecast lagged Wall Street expectations.

“While we did expect a difficult market when we gave our guidance last quarter, none of us envisioned the kind of economic and market environment we are now seeing,” Fred Tomczyk, the chief executive, said on a conference call.

The provider of Internet-based brokerage and financial services earned $184.4 million, or 31 cents per share, in its first quarter, down from $240.8 million, or 40 cents per share, a year earlier. The latest EPS results matched analysts’ estimates. Revenue fell 5 percent to $610.7 million.

Ameritrade, which warned the economy may not strengthen until 2010, said low interest rates have already forced it to waive fees on some money market funds.

The Omaha, Nebraska-based company now expects to earn between 90 cents and $1.15 per share this year, down from its forecast of $1.10 to $1.42 three months ago. Analysts polled by Reuters Estimates expected earnings of $1.09.

Fox-Pitt Kelton analyst David Trone wrote in a note the guidance “could be slightly disappointing ... but Ameritrade should still do better than the broader financial universe given its lack of credit exposure.”

Trading revenue in the quarter ended Dec. 31 jumped 10 percent, spurring the company to boost its 2009 outlook for daily average client trades. The latest quarter included the most volatile phase of last year’s market sell-off.

Ameritrade, which leads all peers in trading, said fee-generating trading declined about 15 percent from November to December, signaling what many industry analysts see as the beginning of an overall trading volume drop.

BENEFITING FROM TURMOIL

There are already signs that consolidation among big broker-dealers, such as Morgan Stanley MS.N and Citigroup Inc C.N, will drive business to discount brokers, which offer custodial services for investment advisers.

“It’s a good quarter with strong net new asset growth,” said Richard Repetto, an analyst at Sandler O‘Neill. “They look to be benefiting from the turmoil at the large investment banks.”

CEO Tomczyk said Ameritrade will continue to “take advantage of the current dislocation in the market,” but warned there could be a “lull” in the stream of advisers -- the breakaway brokers considering a move from full-service shops to discount brokerages such as Ameritrade.

“We’re talking to a lot of people, but I do think breakaway brokers are hesitating making the switch and putting up their own money to go independent,” the CEO told Reuters.

Ameritrade said it had $233.8 billion in total assets at year’s end, down 16 percent from the previous quarter and down 22 percent from a year ago, reflecting the damage caused by last year’s massive stock market sell-off.

Earlier this month, the company agreed to buy options specialist thinkorswim Group Inc for $606 million in a move to boost Ameritrade’s industry-leading trading business, but which does little to build assets. See: [ID:nN08522872]

Ameritrade has said it wants to rely less on trading and more on asset gathering, where larger online rival Charles Schwab Corp SCHW.O has a wide advantage.

Ameritrade’s shares dropped 47 cents to $12.18 on Nasdaq. They lost 29 percent in 2008, a year in which the credit meltdown rocked financial stocks.

Last week, Schwab reported a small quarterly profit rise, beating expectations See [ID:nN16278152]. Schwab’s shares were off 66 cents, or 4.5 percent, at $14.18 on Tuesday.

Toronto-Dominion Bank TD.TO is Ameritrade’s largest investor. (Editing by John Wallace, Maureen Bavdek and Jeffrey Benkoe)

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