TD Ameritrade warns about weak earnings as rates stay low

By Josh Funk

AP Business Writer

OMAHA, Neb. (AP) - Online brokerage TD Ameritrade predicts its 2015 profits will be weak because regulators appear likely to keep interest rates low longer than expected.

TD Ameritrade CEO Fred Tomczyk said Tuesday that its annual profit per share will likely be in the lower half of its predicted range between $1.45 and $1.70 because the Federal Reserve hasn't yet raised rates. And the company said its fiscal second-quarter net income slipped 3 percent.

"The tailwinds of higher rates that we were expecting in the latter half of the year appear to have been delayed," Tomczyk said.

Ameritrade makes money from trading commissions and generates revenue from assets it holds for clients and fees for advice.

The current low interest rates limit Ameritrade's asset-based revenue. Tomczyk said the company went into the year expecting the Federal Reserve to begin raising interest rates in June. Now, most economists predict that won't happen until fall at the earliest.

Shares of TD Ameritrade declined 68 cents, or 1.9 percent, to $35.75 in afternoon trading Tuesday.

TD Ameritrade said Tuesday it earned $189 million, or 35 cents per share, in its fiscal second quarter. That's down from $194 million, or 35 cents per share, a year ago when the company had more shares outstanding. Revenue slipped to $803 million from $812 million.

The analysts surveyed by FactSet expected the company to report earnings per share of 35 cents on revenue of $819 million.

Nomura analyst Steven Chubak said in a research note that TD Ameritrade was helped by a lower-than-expected tax rate that added 2 cents per share to earnings, so investors will likely be disappointed with the results.

TD Ameritrade says the average number of trades per day in the quarter slowed 3 percent to 476,590.

Tomczyk said the trading numbers didn't disappoint him because last year's second quarter was the busiest ever for the company with 491,963 trades per day on average.

TD Ameritrade's quarterly expenses grew to $507 million from last year's $489 million because of incentive pay and hiring related to the company's growth plans.

During the quarter, Ameritrade attracted $16.3 billion in net new client assets as its total client assets grew to $695.3 billion.

Tomczyk said he expects trading to increase when the Federal Reserve does increase rates because there will be volatility when the government starts to reduce the amount of money it is pumping into the economy. When that happens Omaha-based Ameritrade will benefit both from more trading commissions and higher interest revenue.

Published: Thu, Apr 23, 2015