TD Ameritrade profits up on thinkorswim buy

TD Ameritrade Holding Corp. said Tuesday its second-quarter profit jumped 23 percent thanks to its latest acquisition. But the online brokerage lowered its outlook for the year because of low interest rates and less active trading. CEO Fred Tomczyk said the company is positioned to deliver better profits when interest rates rise because Ameritrade will earn more on fees and interest it charges on the money clients keep with the firm. "Although we are lowering our short-term guidance, we remain very optimistic about our ability to grow earnings and deliver solid returns to our shareholders over the longer term," Tomczyk said. The Omaha company said it earned $162.6 million, or 27 cents per share, in the quarter ended March 31. That's up from $132 million, or 23 cents per share, a year ago. Ameritrade says its most-recent results included a 4 cents per share boost from the resolution of income tax matters. Analysts surveyed by Thomson Reuters expected 24 cents a share excluding one-time items — a penny higher than the adjusted Ameritrade earnings figure. Revenue rose 21 percent to $635.4 million from $525.5 million a year ago and beat analysts' estimates of $631.7 million. Ameritrade lowered its profit outlook for 2010 to between 90 cents and $1.10 per share because it expects interest rates to remain low for at least six months and intraday trading activity has been less volatile. Ameritrade had previously predicted it would earn between $1.10 and $1.40 per share in fiscal 2010. Analysts expected earnings of $1.07 for the year. Its shares slipped 6 cents to $20 in trading ahead of the opening. Ameritrade's quarterly operating expenses soared 39 percent to $408 million mostly because of last year's acquisition of options-trading specialist thinkorswim. The Federal Reserve's decision to keep interest rates at record-low levels to spur economic growth restricts how much Ameritrade earns on its clients' deposit accounts and other investment products. Economists predict the Fed will continue to hold rates near the super-low levels it established in December 2008. The lower trading volatility Ameritrade reported makes it harder for the company to offset those lower rates. The company said it handled an average of 378,714 trades per day during the second quarter, which is about 50,000 higher than last year because of thinkorswim but almost identical to the number of trades Ameritrade handled in the first quarter.