(Reuters) - TD Ameritrade Holding Corp (AMTD.O) posted a 5 percent increase in quarterly profits on Tuesday as higher fees from deposit accounts and investment products helped offset a drop in trading levels toward the end of the period as investors withdrew from the choppy markets.
The discount brokerage and financial services company reaffirmed its outlook for fiscal 2012, ending September 30, of $1.00 to $1.35 in earnings per share, but warned that, if the soft rate and trading environment persists, it could end up at the bottom of that range.
TD Ameritrade shares ended Tuesday down 1.78 percent at $16.01 in New York.
BMO Capital Markets analysts David Chiaverini lowered his full-year earnings estimate for TD Ameritrade to $1.05 from $1.15 following the earnings announcement.
TD Ameritrade's clients made around 318,000 trades a day in December, which was the slowest trading month for the firm since
September 2010. Trading has picked up so far in January, but only slightly, to around 345,000 trades a day.
"We would like to be running around 400,000 trades a day, so it's definitely off," Fred Tomczyk, chief executive of TD Ameritrade, said in an interview.
TD Ameritrade is the No. 1 U.S. discount broker by trading volume and its results are often seen as a proxy for the mood of Main Street investors. The company derives more than 40 percent of its annual revenue from trading fees and commissions.
Tomczyk said investors seem reluctant to enter the market following a bumpy year in which equities ultimately ended flat, but fluctuated greatly depending on the headlines coming out of Europe on any given day.
EARNINGS UP, REVENUES MISS EXPECTATIONS
The Omaha, Nebraska-based company earned $152 million, or 27 cents a diluted share, in its fiscal first quarter, ended December 31, up from $145 million, or 25 cents a share, a year earlier.
Analysts had been expecting earnings of 26 cents a diluted share. The company said the beat was due to a lower tax rate in the quarter that added about 1 cent a share to its earnings.
TD Ameritrade said its clients added a net $10.2 billion in new funds to their TD Ameritrade accounts in the quarter, for an annualized growth rate of 11 percent.
Total client assets rose 9 percent to $406.3 billion. Interest rate-sensitive assets rose 16 percent to $79 billion.
The company earned $205,042 on fees from insured deposit accounts, up from $178,471 a year earlier, while revenue from investment product fees rose to $43,487 from $40,697.
Revenue was nearly flat at $653.4 million, but it missed analysts' expectations of $671.5 million due to the fall in trading volumes and lower yields on client cash.
Tomczyk said the company was keeping a close eye on expenses to help counter the effects of the tough environment. He said 145 employees were laid off in the quarter, from across departments, resulting in about $7 million in severance fees.
The company repurchased 6.7 million shares of its common stock in the quarter at an average price of $15.91 per share, for around $107 million. Over the last year, it used $451 million to repurchase 26.8 million shares at an average $16.82 per share.
TD Ameritrade's largest shareholder is Toronto Dominion Bank, Canada's No. 2 lender, which holds a stake of around 45 percent in the company. TD Bank expects TD Ameritrade's fiscal first quarter earnings to contribute about C$56 million ($55 million) toward its fiscal 2012 Q1 income.
($1 = 1.0182 Canadian dollars)
(Reporting By John McCrank; editing by Derek Caney, Dave Zimmerman and Andre Grenon)