Online brokerage TD Ameritrade Holding Corp. said Tuesday its third-quarter net income fell nearly 17 percent as low interest rates continued to restrict its revenue, but the results exceeded Wall Street expectations.
TD Ameritrade said the low interest-rate environment reduced the amount of interest revenue the company collects even though trading figures remained strong.
The Omaha-based company said it generated $170.5 million in net income, or 30 cents per share, in the quarter that ended June 30. A year ago, Ameritrade reported $204.4 million in net income, or 34 cents per share.
Without unusual items, TD Ameritrade would have earned 33 cents per share. The company said the unusual items included a special regulatory assessment paid to the FDIC, a payment on its $606 million acquisition of options-trading specialist thinkorswim and a write-off of some software-development costs. The thinkorswim acquisition was completed during the quarter.
Analysts surveyed by Thomson Reuters expected TD Ameritrade to report earnings per share of 29 cents on $580.5 million in revenue.
Ameritrade said it generated $613.8 million in revenue. That's down about 2 percent from $623.6 million last year.
Ameritrade says it handled an average of 391,506 trades per day in the quarter, up from 287,349 trades per day a year ago. That drove transaction-based revenue up 36 percent to $338.5 million in the third quarter.
But the Federal Reserve's interest-rate cuts drove a 28 percent drop in TD Ameritrade's asset-based revenue, which fell to $262.8 million.
On Monday, TD Ameritrade agreed to purchase $456 million in auction-rate securities from investors as part of a settlement with government investigators.
The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as once a week. They were sold as being as safe as cash, but the market for them fell apart in early 2008 amid the downturn in the credit markets.
TD Ameritrade said Tuesday it expects those buybacks to depress its fiscal fourth-quarter earnings per share by 5-to-10 cents. But in the long run, CFO Bill Gerber said he does not expect the securities to affect the company earnings materially.