July 20, 2010 / 11:54 AM / 7 years ago

UPDATE 3-TD Ameritrade profit beats Street; details buyback

* Record trading boosts 5 pct profit rise

* EPS of 30 cents in fiscal Q3; Street view 28 cents

* Revenue climbed 13 pct to a record $691.8 mln

* Shares down 3.3 pct in falling market; rates still low (Adds CEO and analyst comments, share movement, byline)

By Jonathan Spicer

NEW YORK, July 20 (Reuters) - TD Ameritrade Holding Corp (AMTD.O) posted a better-than-expected 5 percent jump in quarterly profit on the back of record trading, and the online brokerage detailed a long-awaited share buyback that took advantage of its recently depressed shares.

Record revenue helped overshadow low U.S. interest rates that have plagued the broker and fund manager. Management expects no short term rate relief, stressing the company’s strong asset gathering and deep pocket of cash will see it through the difficult period.

TD Ameritrade bought back 15 million shares mostly in the quarter at an average share price of $17.25. Its shares are currently trading at $15.30, down from a high of $20.44 at the beginning of May.

The company used its cash for the buyback rather than a dividend or a possible acquisition, the other options it considered.

The broker’s shares slid 3.3 percent in early trade, in line with rivals in a slumping overall market. The shares are down about 25 percent from a May high, reflecting doubt the U.S. Federal Reserve will raise rates this year in the face of a likely economic slowdown. [ID:nLAG006339]

“We could see rates stay at this level for another year,” Chief Executive Fred Tomczyk said. “Consequently an extended period of low interest rates is more likely today than it was three months ago.”

The Omaha, Nebraska-based company has suffered as rates remained rock bottom, and more recently on fears the U.S. economic recovery is losing steam. However a spike in May market volatility and trading volumes provided a strong, albeit brief, boost in the quarter.

Daily average revenue trading rose 5 percent in the quarter, helped by the brief May “flash crash” and overall market volatility as Europe’s debt woes sparked fears of a double-dip recession.

But trading volumes plunged 30 percent from May to June, and dropped further in July, while worries have grown that whipsawed investors could retreat, clouding the outlook for volumes. [ID:nN12238251]

For a graphic on volume and volatility, click on link.reuters.com/feq56m.

SINGLE-QUARTER BOOST?

TD Ameritrade earned $179.4 million in the third quarter ended June 30, up from $170.5 million a year earlier. Earnings per share were flat at 30 cents on a higher share count.

Revenue climbed 13 percent to a record $691.8 million. Analysts on average expected TD Ameritrade to earn 28 cents per share on $682.0 million in revenue, according to Thomson Reuters I/B/E/S.

Interest-based revenue rose 11 percent in the quarter, despite TD Ameritrade’s inability to fully capitalize on client investments.

Total assets tumbled to $323.8 billion through the quarter as markets cratered. However TD Ameritrade logged a 29 percent rise from last year in net new assets, which analysts cheered.

“I think people will like the share repurchase, I think people will like the strong asset growth rate,” said Patrick O‘Shaughnessy, analyst at Raymond James and Associates.

O‘Shaughnessy added it is unlikely that trading volumes the current quarter will come in anywhere near the record last quarter. “It stands to reason that we’ll see a slight dip in the earnings next quarter,” he said.

TD Ameritrade runs the top U.S. retail trading platform. Its results benefited in part from last year’s acquisition of options focused broker thinkorswim Inc.

Rival Charles Schwab Corp (SCHW.N) kicked off the industry earnings season last week with better-than-expected results that strongly lifted its shares. [ID:nN14125973]

Toronto-Dominion Bank (TD.TO), TD Ameritrade’s largest shareholder at slightly more than 45 percent, said the results would add C$62 million ($59 million) to its wealth management unit’s quarterly income. (Reporting by Jonathan Spicer; Editing by Derek Caney and Lisa Von Ahn)

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