* Q2 earnings 23 cents per share, meets Street
* Revenue $525.5 million, down 16 percent
* Shares up 6.4 percent
* Sees thinkorswim deal closing this quarter (Adds comments from conference call, analyst comments, updates share movement, adds details on thinkorswim)
By Jonathan Spicer
NEW YORK, April 21 (Reuters) - TD Ameritrade Holding Corp (AMTD.O) reported better-than-expected quarterly revenue driven by near-record trading volumes in March, lifting its shares, but low interest rates continued to pinch earnings.
The second-biggest U.S. discount brokerage, which needs small investors to stay active in the markets, reported a 29 percent profit drop in the latest quarter, in line with expectations.
The company’s management acknowledged it faces “challenging headwinds” from the ongoing recession, but declared that even more robust volumes so far in April show that experienced clients are not intimidated by market volatility.
“There’s so much information for people to trade off,” Chief Executive Fred Tomczyk said on a conference call. “We could see an unusual period here because there is so much news coming out, whether from the administration in Washington, or companies, and a lot more surprises.”
The company’s shares advanced 5.4 percent, better than peers in an overall mixed stock market.
Trading revenue rose 8 percent from a year ago. However, interest-based revenue from its managed assets tumbled 51 percent, reflecting damage from the market contraction. Tomczyk called near-zero interest rates the “single biggest challenge.”
Low rates in a slumping economy hamper TD Ameritrade’s ability to earn interest from assets. The company repeated a less-optimistic earnings forecast it gave three months ago, noting it continues “to plan for an economic environment that does not improve” this year.
Still, the company managed to attract $6.4 billion in net new assets last quarter, suggesting it continues to snap up investment advisers and clients amid the global recession.
TD Ameritrade earned $132.0 million, or 23 cents per share, in its fiscal second quarter, matching the average expectations of analysts polled by Reuters Estimates. The earnings were down from $186.7 million, or 31 cents per share, a year earlier.
Revenue fell 16 percent to $525.5 million. Analysts expected the Omaha, Nebraska-based company to report $514.5 million in revenue.
“It’s a little stronger than expected on revenues,” said Patrick O‘Shaughnessy, analyst at Raymond James and Associates. “There were really strong trading volumes in March and it looks to be even stronger in April so that bodes well for trading throughout 2009.”
Fee-generating trading jumped 17 percent from February to March -- its second-best month which included the lowest point so far in the current market sell-off, as well as a strong rebound.
Clients have “seen tough markets and are confident and experienced enough to continue to trade even during the down times,” Tomczyk said, adding that exchange-traded funds now represent 20 percent of trading volumes, up from about 10 percent two years ago.
Money market funds have yielded little with interest rates so low. The company, which also provides banking and financial advice, began waiving fees in January.
The company leads all peers in trading but trails Charles Schwab SCHW.O by a wide margin in assets under management. It agreed this year to buy options specialist thinkorswim SWIM.O, which would solidify its trading business but add little to assets.
TD Ameritrade had $225 billion in total assets at the end of March, down about 4 percent from the previous quarter.
Management said it expects to close the thinkorswim deal by the end of this quarter, and have it fully integrated by the end of next year. It sees an EPS boost of up to 7 percent from the acquisition in 2010, and up to 15 percent in 2011.
Shares of the online broker were up 97 cents or 6.4 percent at $16.12 on the Nasdaq on Tuesday.
The earnings will contribute C$48 million to the second-quarter net income of Toronto-Dominion Bank (TD.TO), Canada’s No. 2 bank, which owns about 45 percent of TD Ameritrade after raising its stake from 40 percent in January. (Reporting by Jonathan Spicer, editing by Maureen Bavdek and Matthew Lewis)