* EPS 23 cents; Street view 26 cents
* Revenue up 2.3 percent at $624.6 million
* Shares jump 4.3 pct to $19.10 (Recasts first paragraph to add share movement, management comment; adds background, byline)
By Jonathan Spicer
NEW YORK, Jan 19 (Reuters) - TD Ameritrade Holding Corp's (AMTD.O) earnings fell 26 percent, short of Wall Street expectations, but its shares rose as the online brokerage reported a 61 percent jump in new assets, and management said it would capitalize when interest rates finally rise.
Shares of the second-biggest U.S. discount broker were up 4.3 percent at midday Tuesday after its chief executive said trading activity, which plunged in November and December, bounced back strongly in the new year.
"It seemed that toward the middle of November (clients) all decided to lock their positions, protect themselves, and take a break," CEO Fred Tomczyk said on a conference call. "They've certainly come back since January and re-engaged in the market."
Surprisingly lower commissions, near-zero interest rates, and costs from both a new advertising campaign and the June acquisition of options-focused brokerage thinkorswim Inc weighed on TD Ameritrade's results.
The company, which rarely misses analysts' expectations, earned $136.2 million, or 23 cents per share, in its fiscal first quarter, ended Dec. 31, down from $184.4 million, or 31 cents per share, a year earlier.
Revenue rose 2.3 percent to $624.6 million.
Analysts on average expected the Omaha, Nebraska-based company to earn 26 cents per share on revenue of $634.0 million, according to Thomson Reuters I/B/E/S.
"Despite the earnings miss, there were several positive data points, including strong account and net new asset growth," Raymond James analyst Patrick O'Shaughnessy wrote in a note.
TD Ameritrade's $8.7 billion in net new assets was boosted partly by new registered independent advisers, or RIAs. Tomczyk said the movement of brokers from full service brokerages to work under TD Ameritrade's umbrella was "still fairly high."
Low interest rates forced TD Ameritrade to waive some $20 million in fees on its money market funds. It said it forfeited about $200 million in revenue in the quarter due to the rates, adding revenues would get a significant boost when they rise.
Many expect U.S. rates to remain low to boost the economy until 2011.
TD Ameritrade said daily average revenue trades, or DARTS, dropped 8 percent from the previous quarter and were down 7 percent from November to December.
Analysts said a more than 4 percent drop in trading commissions, as well as a 40 percent jump in advertising, were surprising. The new ad campaign -- "Time for fresh thinking, time for TD Ameritrade" -- comes as the industry battles for clients in the wake of the recession.
Starting Tuesday, larger rival Charles Schwab Corp SCHW.O lowered fees for its less active traders by about $4 per trade, a move analysts said could spark a pricing war after about five years of relative stability. [ID:nN07178752]
TD Ameritrade said the move has not affected its clients, and repeated it has no current plans to adjust its prices.
Clients are "insensitive to differences of $1 to $3 dollars, and in the past you saw much bigger changes," Tomczyk said in an interview. "We're all within $2 to $3 of each other so that's why I don't see this as a pricing war... and there's relative stability within that range."
Meanwhile, Tomczyk said the company is still mulling an acquisition, share buyback or dividend -- a plan it detailed three months ago. Tomczyk told Reuters in November the company would consider a deal involving smaller rival E*Trade Financial Corp. [ID:nN18130774]
Richard Repetto, an analyst at Sandler O'Neill, said the company will soon need to explain what it will do with its $903.9 million in cash and equivalents, following a November debt restructuring. "That's definitely a question," he said.
TD Ameritrade shares climbed 78 cents to $19.10 on the Nasdaq, outperforming peers. Charles Schwab, whose shares were up 2 percent, reports quarterly results later on Tuesday.
Toronto-Dominion Bank (TD.TO), TD Ameritrade's largest shareholder, said it expected the brokerage to add C$43 million ($42 million) to the bank's first-quarter net income. (Reporting by Jonathan Spicer; Editing by Derek Caney, John Wallace, Tim Dobbyn)