TD Ameritrade affirms outlook for year after commission cut
Posted 12:23 p.m. Wednesday
OMAHA, Neb. — Online brokerage TD Ameritrade is maintaining its earnings forecast for is current fiscal year, despite cutting the fee it charges on customer's trades.
The Omaha, Nebraska-based company said Wednesday that higher interest rates and growth in the assets it holds for clients will more than offset cutting its trading commission to $6.95 from $9.95.
Profits might be higher this year if the company were not investing in future growth and planning to acquire rival Scottrade.
TD Ameritrade CEO Tim Hockey said that his company is prepared if the commission war escalates further, but he also believes Ameritrade's trading platform is worth more. Major competitors Charles Schwab and Fidelity both went to $4.95 trading commissions.
"Even if commission rates went to zero tomorrow, we'd still be profitable," Hockey said.
TD Ameritrade affirmed its forecast between $1.50 per share and $1.80 per share for its fiscal year ending in September. Analysts polled by FactSet are expecting $1.65 a share on average.
The company's profits might have been slightly higher this year, but TD Ameritrade expects to spend about $30 million getting ready to acquire Scottrade in the fall. TD Ameritrade is also investing in improving its trading platforms and increasing advertising spending by $10 million.
TD Ameritrade reported quarterly earnings Wednesday of $214 million, or 40 cents per share. That's up 4 percent over last year's fiscal second quarter profit of $205 million, or 38 cents per share.
The latest quarterly results fell short of the 41 cents per share revenue analysts surveyed by FactSet expected.
During the quarter, asset-based revenue grew to $526 million over last year's $470 million. The company benefits when the Federal Reserve increases interest rates because its charges some asset-based fees.
Total revenue grew to $904 million from $846 million in the quarter. That's higher than the $884 million analysts expected.
TD Ameritrade handled an average of 516,994 trades per day during the quarter. That was up from 509,120 a year earlier.
The company said 111,000 trades per day were made on mobile devices. That figure continues to increase over time.