TD Ameritrade Beats Earnings Ests - Analyst Blog

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TD Ameritrade Holding Corporation ( AMTD ) reported its fiscal second-quarter 2013 (ended Mar 31, 2013) net income of 26 cents per share, marginally beating the Zacks Consensus Estimate of 24 cents. Net income also surpassed the prior-year quarter by a penny.

Better-than-expected results for the quarter reflected a rise in revenues and a decline in operating expenses. Further, an increase in total client assets was a positive. However, a decline in total daily average revenue trades (DARTs) was the downside.

TD Ameritrade reported fiscal first-quarter net income of $144 million, up 5% from $137 million in the prior-year quarter.

Performance in Detail

Net revenue inched up 1% year over year to $679 million in the quarter. This was due to a rise in total asset-based revenues and net interest revenue, partly offset by declines in transaction-based revenues. Further, the reported revenues outpaced the Zacks Consensus Estimate of $670.0 million.

DARTs for the reported quarter decreased 2% year over year to 378,096. Net new client assets were $12.9 billion, up 19% from $10.8 billion a year ago.

At the end of the quarter, TD Ameritrade reported $516.8 billion in total client assets, up 14% year over year. Moreover, average spread-based balance was $82.6 billion, up 11% from $74.1 billion in the prior-year quarter. Average fee-based balance was $110.9 billion, up 31% year over year.

Net interest revenue was $114.0 million, up 7% year over year.

Operating income rose 8% year over year to $237 million. The rise was due to an improvement in revenue and a decrease in expenses. Net interest margin in the quarter was 1.52%, down 17 basis points from 1.69% in the prior-year quarter.

Total operating expense moved down 3% year over year to $442.0 million. The decline was mainly attributable to lower professional services, advertising and other expenses. These were partially offset by a hike in employee compensation and benefits, clearing and execution costs, occupancy and equipment costs along with higher depreciation and amortization expenses.

Balance Sheet

As of Mar 31, 2013, TD Ameritrade's leverage ratio was 1.1, compared with 1.2 as of Mar 31, 2012. Cash and cash equivalents stood at $1.2 billion compared with $1.0 billion as of Mar 31, 2012.

Capital Deployment Update

Concurrent with its earnings, TD Ameritrade declared a quarterly dividend of 9 cents per share on its common stock. The dividend will be paid on May 15, 2013 to shareholders of record as of May 1.

Our Viewpoint

Innovations in online trading and long-term investing products and services, delivery of advanced customer service, creative as well as cost-effective marketing and sales, along with expense discipline can be considered as the key factors behind TD Ameritrade's strategy of boosting its trading and investing business.

Further, its association with The Toronto-Dominion Bank ( TD ) provides an opportunity to cross-sell its products, which is anticipated to be a significant growth driver of organic assets for the company.

Amid a volatile operating environment, TD Ameritrade witnessed a rise in organic client assets. However, the decline in trading volumes is a matter of concern for the company. Further, a low interest rate and stringent regulatory environment are expected to be the dampeners.

TD Ameritrade currently retains a Zacks Rank #3 (Hold).

Among other investment brokers E*TRADE Financial Corporation ( ETFC ) is scheduled to report its first-quarter 2013 earnings on Apr 18, whereas Evercore Partners Inc. ( EVR ) will report its earnings on Apr 24.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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