TD Ameritrade Quarterly Profit Falls 18%, Schwab Posts 12% Gain

Two major online brokerages are facing selling pressure Tuesday after reporting mixed earnings results.

TD Ameritrade said second-quarter profit fell 18% from the year-ago period and warned full-year results would be lower than its previous forecast, hurt by reduced trading volume and weaker commissions. Charles Schwab , meanwhile, reported that its biggest asset growth in more than five years sparked a 12% profit gain.

TD Ameritrade said net income for the quarter ended March 31 fell to $141.1 million, or 23 cents a share, from $172.8 million, or 30 cents a share a year before. Revenues rose to $525 million from $497 million in the year-ago period. The Thomson Financial consensus was for a profit of 24 cents a share, with revenues of $534 million.

In the fiscal second quarter of last year, the brokerage, formed last year when Ameritrade Holding bought TD Waterhouse USA from Toronto-Dominion Bank, recorded a one-time gain from its investment in Knight Capital. Without that gain, profit in the year ago period would have been 22 cents a share.

TD Ameritrade expects earnings of 92 cents a share to $1.08 a share for the fiscal year ending in September. The midpoint of the company's prior expected earnings range was $1.10 a share. Analysts have on average expected full year earnings of $1.09, according to Reuters Estimates.

From the end of December through Monday, shares of TD Ameritrade had risen 4.26%, exceeding the 2.7% increase in the Amex Securities Broker-Dealer Index. But shares of TD Ameritrade appear to be erasing their gains for the year.

Rival Charles Schwab said first-quarter profit rose 12% as an influx of customer deposits helped the discount broker overcome recent market turbulence. Shares were largely flat early Tuesday.

The company said it earned $273 million, or 22 cents a share, for the three months of the year. That compared with net income of $243 million, or 19 cents a share, at the same time last year. The earnings matched the average estimate among analysts surveyed by Thomson Financial. Revenue for the period totaled $1.15 billion, a 9% improvement from $1.05 billion last year.

Schwab's new and existing customers added $33.5 billion to their accounts during the quarter, the most money to flow into the brokerage in a three-month stretch since the tail end of the dot-com trading frenzy during the third quarter of 2000. As more money pours in, Schwab has more opportunities to make money off account management fees and favorable spreads on interest rates.

As of March 31, Schwab's customer balances had swelled to a record $1.31 trillion, up 16% from a year ago. The gain included an additional $17.8 billion in customer balances picked up as part of Schwab's acquisition of a 401(k) management company.

The latest performance extended a recent stretch of robust earnings growth orchestrated by company founder Charles Schwab, who returned as chief executive in mid-2004 with the brokerage mired in a deep funk. Schwab steered the brokerage to its first $1 billion annual profit last year.