Online brokerage TD Ameritrade said Tuesday that growth in asset-based revenue helped it post a 6 percent increase in first-quarter profit, but the company benefited from a lower tax rate and trading activity declined.
Ameritrade generates revenue from commissions it charges investors on trades and from asset-based fees and interest it generates on the assets it holds. About 51 percent of its revenue in the first quarter came from asset-based fees and interest.
"We continue to deliver strong organic growth and have proven the resilience of our strategy in a difficult, but slowly improving macroeconomic environment," CEO Fred Tomczyk said in a statement.
Credit Suisse analyst Howard Chen said in a research note that Ameritrade appears to be off to a strong start to 2011, but he thinks the company's results are already reflected in the stock price. Chen said he's advising investors to consider cashing in on the recent run-up in Ameritrade's stock price although he maintained a "neutral" rating on the stock.
Its shares slipped 16 cents to $20.49 in morning trading Tuesday. Ameritrade's stock has been climbing steadily since Nov. 30 when it sold for $16.73.
The Omaha-based company reported net income of $145 million, or 25 cents per share, in the three months ended Dec. 31. That's up from last year's $136 million, or 23 cents per share.
Officials said a lower-than-expected tax rate accounted for about 1 cent of its quarterly profit.
Revenue grew 5 percent to $656 million as it attracted more investor assets. That's up from $625 million last year.
The average trades per day Ameritrade handled declined 2 percent from last year to 372,000. But that figure is 17 percent higher than the 318,000 trades per day Ameritrade handled in the fourth quarter of its fiscal 2010.
Analysts surveyed by Thomson Reuters expected quarterly earnings per share of 25 cents on revenue of $647.8 million.
The current record-low interest rates limit how much TD Ameritrade earns on its clients' deposit accounts and other investment products, but company officials said the rate gap between short-term and long-term bonds, known as the yield curve, improved during the quarter.
Tomczyk sounded optimistic as he told analysts about the improving economic environment that should help Ameritrade generate bigger profits in the future as interest rates improve and stock trading activity increases.
"The retail investor is back, but they are not all the way back yet," Tomczyk said. "And some long-term investors are still taking a conservative approach, waiting to see further evidence that this improving economy is for real."
Ameritrade said it acquired $9.7 billion of net new assets, which is 11 percent higher than a year ago. And at the end of December, Ameritrade held $386.4 billion of client assets.
Ameritrade said it plans to pay a dividend of 5 cents per share during the first quarter. The company initiated its dividend in the fourth quarter of 2010.
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