Bigger 4Q Assets, Profits at TD Ameritrade

TD Ameritrade Holding Corp. continued to grab client assets in its fourth quarter ending Sept. 30, the company said today, and quarterly trading revenue rose sharply. Net new assets last quarter were up a record $12.4 billion, more than double the year-ago period and up from $7.9 billion sequentially. At least some of that increase resulted from the attraction of financial advisors to TD Ameritrade’s custodial platform, although the company doesn’t break down net new assets according to existing and new advisors in its financials.

Chief Executive Fred Tomczyk said the Omaha, Neb.-based company’s pipeline of breakaway brokers “continues to be very full,” without elaborating. (In July, the company said it had recruited 260 breakaway brokers over the previous three quarters.) The recent market volatility doesn’t appear to be altering anyone’s plans for independence, he added—“I don’t think we saw any change in the quarter in their attitude or appetite to move to the RIA model.”

Like Charles Schwab Corp. and other brokerages, TD’s revenues last quarter benefited from market volatility. Commissions and transaction fees of $315.5 million were up 26.1 percent year over year and 12 percent sequentially. The company’s average client trades per day rose 12.4 percent sequentially to 415,739; Tomczyk told analysts on a conference call that four of the company’s top five trading days in history occurred during one week last quarter.

There’s two ways of looking at the transaction revenues, Morningstar analyst Gaston Ceron says. “Obviously in the short term it was good, because trading counts really spiked and that helped them,” he says. “The bigger question is what happens in the longer term. If we continue in a pattern of very volatile markets, there is some risk, especially to the longer term set…Folks might get a little spooked.”

Tomczyk alluded to that during the conference call. Long-term investors are taking a “wait and see” attitude, he said. “What’s at the top of our clients’ minds right now is Europe. They want to see where that goes and how that gets resolved, or not.”

TD Ameritrade reported net income of $164 million, or 29 cents a share, on net revenues of $703 million. For the comparable quarter a year earlier, it had net income of $114 million, or 20 cents a share, on net revenues of $609 million.

Volatile markets will pressure transaction-based revenues, said Standard & Poor’s equity analyst Royal Shepard, but that will be offset over the next few quarters by fee growth on asset-based revenues. “We’re favorably impressed because of their ability to grow assets in this type of environment,” Shepard said. “I think the growth will be more from the RIA and less from the traditional brokerage type accounts, just because of the volatility in the stock market. There’s a lot of individual investors out there who are pretty nervous.